Growth of Employment in India

The below-mentioned article provides an essay on growth of employment in India.

Introduction:

We want to caution the readers that they should not think that unemployment prevailing in India is mainly Keynesian cyclical unemployment.

The unemployment in developing countries like India is of quite different nature. The main cause of unemployment and underemployment prevailing in the developing countries such as India is deficiency of the stock of physical capital with which to employ the growing labour force. Due to the lack of physical capital, it has not been possible to absorb the growing labour force in productive employment.

The result has been the emergence of long-term-or chronic unemployment. Apart from the relative low rate of capital formation as compared to the growth in labour force, the use of capital-intensive techniques in the industries mostly imported from the Western developed countries is another important factor causing unemployment in developing countries like India.

Besides, in agriculture, despite the existence of surplus labour reckless mechanization of various agricultural operations has reduced the employment opportunities in agriculture. Another important reason of rural unemployment prevailing in the developing countries like India is extremely unequal distribution of land so that many agricultural households have no adequate access to land for production and self-employment in agriculture.

Lack of infrastructure such as roads, power, telecommunications, highways, Irrigation facilities in agriculture is also responsible for the existence of huge unemployment in India. Inadequate availability of infrastructure is a great obstacle for the generation of opportunities for productive employment.

Growth of Employment in India: A Case of Jobless Growth:

An important objective of planning in India has been to generate enough employment opportunities not only to provide jobs to the backlog of unemployed but also to the new annual additions to the labour force. The new economic reforms initiated in India in 1991 visualized that acceleration of economic growth would also lead to rapid growth of employment opportunities.

The total growth rate of employment (on usual principal status) which was 2 per cent per annum in the period 1983-94, fell to about 1.57 per cent annum during the post-reform period, 1993-94 to 1999-2000. However, it recorded a higher growth rate of 2.48 per cent per annum in 1999-2000 to 2004-05.

The organized sector employment which grew 1.2 per cent per annum during 1983-94 recorded much less growth (0.05 per cent) during the post-reform period (1994-2008). However, growth rate of GDP accelerated from 5.4 per cent in 1983-1994 to 7.2 per cent in 1994-2011. Thus, higher output growth failed to generate higher employment in the nineties and in the first decade of the present century 1994-2011.

During 1994 to 2004-08 there was a negative growth in employment in the organised public sector (-0.65 per cent per annum), whereas in the organised private sector employment increased at the rate of 1.75 per cent per annum. Thus, in the organised private sector, the growth in employment was not sufficient to make up for the loss of jobs in the public sector.

As a result, there was a decline in employment (-0.05 per cent per annum) in the organised sector in 1999-2000 to 2004-08 despite a quite high growth of output in it. The much lower growth of employment opportunities is due to the fact that the employment elasticity of output growth in the organised private sector has sharply declined in the recent years as a result of increase in capital intensity. It means fewer people have been able to participate in and benefit from the growth process in the organised sector in the post-reform period.

It may however be noted that despite higher growth in employment in the 10th plan period (though in the unorganized sector), unemployment rate on usual principal status (UPS) basis was higher at 3.06 per cent of the labour force in 2004-05 compared to 2.78 in 1999-2000. Besides, average daily status unemployment rate also increased from 7.3% in 1999-2000 to 8.3 per cent in 1999-2000.

According to Approach to the 11th plan, worsening of unemployment situation was due to faster growth in labour force. However, in our opinion, the fact that there was decline in increase in employment in the organised sector despite of higher growth in GDP shows the ulter failure of the strategy of employment generation. Employment growth in the organised sector (both public and private combined) increased during the post-reform period 1994-2008 at the rate of only 0.05 per cent per annum as against 1.20 per cent during 1983-94 (see Table 2.3).

In the recent years employment growth in the organised sector (both public and private sector) increased by 1.0 percent in 2011/2010 as against 1.9 percent in 2010/2009. The annual growth in employment in the private sector was 5.6 per cent 2011/2010 whereas that in the public sector it was negative (-1.8%). The share of women in organised sector employment was around 20.5 per cent during 2009-11 and has remained nearly constant in recent years.

That there has been jobless growth is revealed by Report of 68th round of NSSO, especially conducted by the government in 2011-12, after the regularly five yearly survey carried out in 2009-2010 showed a dramatic dip in employment creation. According to this special unemployment survey in 2011-12, overall employment rate in the Indian economy on the basis of usual status (both principal and subsidiary), has fallen to 38.6 per cent of population in 2011-12 from 39.2 per cent of population in 2009-10.

In 2004-05 the employment rate was 42 per cent of population. The number of unemployed persons rose to 10.8 million in January 2012 from 9.8 in million January 2010, that is, one million increase in unemployment in just 2 years.

The data of 68th round of NSSO showed that just 2.7 million jobs were created in the five years period between 2004-05 and 2009-10 despite 8 per cent plus growth in GDP per annum during this period as against 60 million jobs created in the previous five years period (1999-2000 to 2004-05).

Blaming the global financial crisis and its consequent global slowdown in 2008-09 and 2009-10 the government thought that it was due to drought conditions in 2009-10 and economic slowdown that unemployment survey in 2009-10 did not show better conditions regarding employment, it decided to conduct special employment- unemployment survey for 2011-12. But 2011-12 survey shows that situation regarding employment and unemployment worsened in the two year period between 2009-10 and 2011 -12.

The usual status unemployment rate (principal status) went up from 2.5 per cent of labour force in 2009-10 to 2.7 per cent in 2011-12. An important finding of 2011-12 survey is that labour force participation rate declined to 39.5 per cent of population in 2011-12 from 40 per cent in 2009-10 suggesting the lack of job opportunities forcing people to study longer or drop out of labour force.

However, unemployment rate on current daily status basis which was increasing before 2004-05 fell sharply from 8.2 per cent in 2004-05 to 6.6 per cent in 2009-10 and further to 5.6 per cent in 2011-12. This implies that in terms of man-days employment increased at a higher rate both between 2004-05 and 2009-10 and between 2009-10 and 2011 -12. This has been explained by the fall in labour force participation rate because the relatively more young population has opted for getting more education rather than participation in labour force.

However, in our view, this is only a part of the story. Under the newly started MGNREA scheme, a large number of man-days of employment has been created resulting in the persons in rural households getting relatively full employment (i.e., more man days of employment). But employment generated under MGNREA scheme is neither stable nor creating any durable assets which can sustain further growth of employment.

This lower rate of growth of employment in the organised sector has been there even in the post-reform period despite the fact that there has been very high rate of growth of output, both in the organised industrial and services sector. Obviously, this is bound to increase the problem of unemployment in the country.