GS-3, Indian Economy, Uncategorized

Jobs & Economic Growth

Asia-Pacific Human Development Report just released by UNDP says that by 2050 more than 280 million people will enter the jobs market in India, a 33 per cent increase from current levels—but let us have a look at the numbers:

  • 5 million New non-agricultural jobs were created annually between 1999-2000 and 2004-2005
  • An additional 7.5 million new industrial and service sector jobs were created annually between 2004-2005 and 2011-2012.
  • But only about 7 million have been added to the labour force annually since 2005—
    • Declining population growth rate
    • Rising educational levels


CARE Report: Points out that despite the economy growing at a good pace, employment seems to have grown meagrely, at 4.1 per cent and 0.3 per cent respectively in FY14 and FY15

Underemployment— Only 60.5 per cent of persons aged 15 and above who were available for work for all the 12 months were able to get work during that year (that is, earning below acceptable or sustainable levels)

Open Unemployment Rate: Looms larger over the 7 million young people who are joining the labour force (10 times higher than that for those 30 years and above)

Unemployment for (in 2013)

  • 15- to 17-year-olds is 10.2 per cent
  • For 18- to 29-year-olds is 9.4 per cent
  • Over- 30-year-olds is 0.8 per cent

Core physical sectors such as manufacturing, mining, construction and non-financial services had negative employment growth ranging from minus 3.8 per cent to minus 17.4 per cent in FY15


Creation of Jobs:

  • Growth in industrial and service sector jobs is of utmost importance for the demographic dividend to exist positively & profitably
  • Inter-related:
    • As jobs grow, incomes rise and so do savings.
    • Based on higher savings, the investment rate to GDP grows, resulting in faster GDP growth
  • Creation of new non-agricultural jobs: Job growth leads to an increase in consumer demand which has the effect of sustaining GDP growth and reducing volatility in the output growth rate.


Increase in infrastructure investment

  • Became the most important sources of increased consumer demand
  • 11th Five Year Plan: Infrastructure investment in the public and private sector together grew by $475 billion—
    • Employment in construction jumped from 26 to 51 million in 2011-12
    • Real wages increased
    • A consumer demand booming in both rural and urban areas
    • The combined demand and supply effects of investment plus job growth resulted in sustained economic growth at a rate unprecedented in India’s economic history

Present: 1.35 lakh jobs were created in 2015 (lowest figure since 2008)

Slow pace of job growth

  1. While the share of organised sector jobs is increasing, most of the job increases are still taking place in the unorganised segment of industry and services, and in informal jobs
  1. While construction had been booming from 2000 to 2012, its growth dipped since 2012, and has begun to revive only since late 2015 as infrastructure investment revived. Since 2004-2005, for the first time in Indian history, 5 million agricultural workers have been leaving agriculture per annum, being mostly absorbed in low-skilled construction employment. With infrastructure investment tapering off during the fiscal years 2012-2013, 2013-2014 and 2014-2015, construction employment growth is likely to have fallen sharply, compounding the already greater rural distress caused by drought in 2014 and 2015.
  1. Education enrolment levels of youth joining the labour force have been increasing every year since 2010 or so. As a result, secondary gross enrolment ratio has increased from 62 to 79 per cent between 2010 and 2014. The educated youth are unlikely to join agriculture and will look for non-agricultural jobs in urban areas. The revolution in rising expectations is already causing social movements (the Patel and Jat agitations in Gujarat and Haryana, for instance).




Ministry of Labour is finalising the scheme to offer to pay 8.33 per cent of the salary as contribution for a pension scheme for new employees getting formal sector jobs. The scheme will be applicable to those with salary up to Rs.15,000 per month

Ministry of Commerce is customising incentives for labour-intensive export sectors

  • Has already initiated an Interest Equalisation Scheme and the Merchandise Exports from India Scheme to support declining exports, given that exports have been declining for 15 months
  • In the Budget, the government also announced that 100 per cent FDI in food retail will be permitted on the condition that the goods have to be manufactured in India

Stand-Up India scheme

  • Scheduled Castes, Scheduled Tribes and women entrepreneurs will get support such as free pre-loan training and facilitating loan and marketing.
  • There will be a Rs.10,000 crore refinance window to the Small Industries Development Bank of India (SIDBI)
  • The National Credit Guarantee Trustee Company will create a corpus of Rs.5,000 crore.
  • SIDBI will engage with the Dalit Indian Chamber of Commerce and Industry and other institutions to take the scheme forward.

Way Forward:

  • Single-minded focus: Make livelihood creation central to development strategies— the leadership must bring rozgaar and employment to centre-stage in all their plans, achievements and articulations
  • Organised manufacturing is no longer the answer to generate large-scale employment:
    • Limited opportunities due to increased mechanisation and productivity
    • Specialised skills needed for select process areas
  • Encouraging people’s entrepreneurial instincts— Once the concept of ‘Start-up’ is more comprehensive, delivery of results under the Startup India or Stand-up India missions — will generate sustainable outcomes
  • Data consciousness needs to arise as close to 90 per cent of youngsters completing engineering or management studies are actually unemployable.
    • Lack of a comprehensive and practical education leading to a gap in ‘right-skilling’ vis-à-vis the true needs of the economy
    • Requirement of a separate ‘Ministry of manpower’- where training and end-user needs for human resources are truly convergent
  • Agro Subsidy-nama Need to appreciate and encourage double incomes based on output and intellect, and not through subsidies
    • Government may be able to leverage returns through its own spending on creating agri-related infrastructure
    • Distribution and logistics-based infrastructure initiatives—be given a financial boost
    • Aggregation of land parcels through pragmatic policy
  • Profitable Staple crops: Requires improved quality of seeds and better irrigation (will boost up outputs & farm incomes)
  • Massive expansion in fruit and vegetable output & a vibrant food processing industry will help in balancing out seasonal spikes and improve the longevity of produce while reducing its national waste
  • Industrial policy- Ease of doing business improvement and infrastructure investment increases should improve the economic environment— International evidence is that when consumer demand grows consistently, whether from domestic or international markets, that is when jobs grow

Connecting the Dots:

  • Does there exist potential for the government schemes to create the required number of jobs? Critically examine.
  • Discuss the idea of providing incentives to employers for creating jobs.



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