India is facing a decline in the total number of employed persons in the economy. According to a Periodic Labour Force Survey (PLFS) report, India’s total workforce - the sum of persons in employment - fell from 42 crore to 37.3 crore between 2011-12 and 2017-18. More women compared to men say it is difficult to get jobs, pointing to the persistent gender imbalances in the Indian labour market. Another matter of concern is that this decline in employment is happening with the rise in the education level. The Labour Bureau’s data on rural wages show the average annual growth during the last four years at just over 4.5% in nominal terms and a mere 0.5% in real terms after netting out inflation. A February 2018 survey shows that the unemployment rate among the educated is not only higher compared to the uneducated, it also increases with higher levels of education.
Dr. Rajat Acharyya, Director (Additional Charge), UGC-HRDC, Professor of Economics, Jadavpur University, informed BE, “In the present era of globalisation, job opportunities are created more for the highly skilled labour force rather than for unskilled and semi-skilled workers. On the one hand, due to increased competition from technologically advanced and cost efficient foreign firms, formal sector jobs for unskilled and semi-skilled workers are dwindling. With large scale destruction of jobs in the formal import competing industries, these workers are pushed to the informal sectors with low wages and job insecurity. This is reflected in the recent unemployment figures published by the Centre for Monitoring Indian Economy (CMIE), which was about 7.2% in February 2019, the highest since September 2016. On the other hand, in tune with changing world demand, our export composition is shifting towards skill intensive services (like ITeS, financial services) and manufacturing goods (like software, scientific instruments, and pharmaceuticals), generating demand and employment for only the skilled workforce. As such, unskilled and semi-skilled workers losing jobs in formal import competing industries cannot be relocated to these export oriented industries.”
Unusual years in economy
Both 2016–17 and 2017–18 were watershed years for the Indian economy, with demonetisation and the Goods and Services Tax (GST) adversely impacting informal economic activities. These policies left informal sector workers with no option but to accept more government regulations, often on terms that proved detrimental to their enterprises.
Employment and manufacturing
Addressing a recent media event in New Delhi, American economist and Nobel laureate Paul Krugman said, “Lack of manufacturing could be a major hurdle as India doesn’t have the jobs.” According to him, another concern for the Indian economic growth is the high level of inequality in economy during the growth phase resulting in uneven distribution of wealth across the country.”
In India, there is a large disconnect between output and employment across the formal and informal sectors (the informal sector comprises establishments with 10 workers or less that use electricity, or 20 workers or less without electricity).
The formal sector accounts for over 80% of India’s manufacturing output, while the informal sector accounts for over 80% and 99% of Indian manufacturing employment and establishments, respectively. This is also a reason for the low employment rate in the manufacturing sector. The manufacturing sector, which recorded declining employment elasticity in the organised sector, will not be able to mend the gap between growth and employment, if the sector does not get extra boost from government. Slowing down of manufacturing sector is leading to falling growth numbers and mass unemployment for Indian economy.
Employment and Services
The services sector is the largest sector in India. Gross Value Added (GVA) at current prices for this sector is estimated at `92.26 lakh crore in 2018-19. The contribution of the service sector towards GDP was 61.5% in 2017. But the striking point is that the share of the services sector in total employment has been low and despite the expansion of services, the growth of employment in this sector has been limited. In 2017, the share of the sector in total employment was 33.48%. An examination of the sectorial composition of the workforce across the quinquennial surveys of the National Sample Survey Organisation reveals that the share of services in employment increased by far less than the huge increase in its share in GDP.
According to The Economic Survey 2016-17, “Among the top 15 services producer countries, the services sector accounts for more than two-thirds of total employment in 2016 in most of them except India, China and Mexico where the shares are low. India has the lowest share.”
Employment and Agriculture
With agricultural production of $375.61 billion, India is the second largest producer of agricultural products. India accounts for 7.39% of total global agricultural output. In 2017, the contribution of agricultural sector to GDP was 15.4%. But the workforce participation percentage in agriculture has been declining. It was 53.68% in 2007, but in 2017 the same figure is 42.74%. Demonetisation aggravated the agricultural sector’s existing stress by creating new choke points within the supply-chain.
The government has come up with initiatives such as ‘Make in India’, ‘Skill India’ and ‘Start-up India’ to promote employment. But the 2015–16 Annual Employment and Unemployment Survey found that the labour force participation rate (LFPR) nationally was only 50.3%. The LFPR is much lower for females than for males. The survey shows sluggish employment growth and the growth varied across sectors. In this alarming situation, instead of focusing just on the GDP, the government should pay serious attention to employment.