Jobless Growth in India
The average rate of growth of India’s national income in the past two decades works out to an annual rate of 6% - high by world standards. However, this has not been accompanied by expansion of employment. Agriculture contributes 22% of India’s GDP and accounts for 60% of employment.
The average annual rate of growth in agriculture is currently at 2% and this is mostly due to higher productivity rather than higher employment. The service sector accounts for 51% of the GDP. This has been growing at a rate of 8% per year but employment in this sector has been growing a rate of less than 1% per year. Industry accounts for 27% of India’s GDP and has been growing at an annual rate of 6% in the past decade. But employment has been declining in the organized manufacturing sector in the past decade and the total employment in unorganized and organized sector has grown at a rate of just 1% per year only.
The labour force of India continues to grow at a rate of 2% per year and the rate will remain so for next 25 years. This amounts about 8 million new workers looking for jobs every year. By 2010, there will be 40 million more workers added to the current 410 million strong labour force. Contrary to what many may think, information technology sector can’t solve India’s unemployment problem. IT-related output of India is currently 1% of GDP. This sector employs less than 1 million people and most optimistic scenario puts the employment to grow to 2 million by 2010. This sector needs a high-skill work force. Since only 5% of India’s relevant age group children receive college education, the rate of growth of IT sector may even be constrained by a shortage of a skilled labour force.
India has invested heavily in the past 40 years in industry, especially in capital-intensive heavy industry. In this period, industry’s share of India’s GDP has grown from 20% to only 27%. With a very low level of productivity in agriculture and with heavy industry not giving rise to a proliferation of light industry, new investment has been directed towards the service sector where profitability has been high. The experience of other economies suggests that 51% of the economy in a service sector can’t be sustained with 49% of the economy in the productive sector, especially because the level of productivity is so low. What is not produced cannot be serviced after all! World Bank economists are arguing that in view of the rising labour costs in China and other Asian economies, India could expand its employment base if it embarked on a path of export-oriented growth of light industry and agro-industries through an infusion of foreign investment to these sectors.
These would have to be accompanied by changes to labour laws to remove any employment protection provisions and also doing away with small-scale industry reservations. In the coming months, it is expected that the new economic policies will be presented by the left-of-center New Delhi government in the guise of being “good for the workers” and for employment. Broad sections of workers will be affected by these policies and the scope for broadening movement against liberalization and privatization program will be very high.
The average annual rate of growth in agriculture is currently at 2% and this is mostly due to higher productivity rather than higher employment. The service sector accounts for 51% of the GDP. This has been growing at a rate of 8% per year but employment in this sector has been growing a rate of less than 1% per year. Industry accounts for 27% of India’s GDP and has been growing at an annual rate of 6% in the past decade. But employment has been declining in the organized manufacturing sector in the past decade and the total employment in unorganized and organized sector has grown at a rate of just 1% per year only.
The labour force of India continues to grow at a rate of 2% per year and the rate will remain so for next 25 years. This amounts about 8 million new workers looking for jobs every year. By 2010, there will be 40 million more workers added to the current 410 million strong labour force. Contrary to what many may think, information technology sector can’t solve India’s unemployment problem. IT-related output of India is currently 1% of GDP. This sector employs less than 1 million people and most optimistic scenario puts the employment to grow to 2 million by 2010. This sector needs a high-skill work force. Since only 5% of India’s relevant age group children receive college education, the rate of growth of IT sector may even be constrained by a shortage of a skilled labour force.
India has invested heavily in the past 40 years in industry, especially in capital-intensive heavy industry. In this period, industry’s share of India’s GDP has grown from 20% to only 27%. With a very low level of productivity in agriculture and with heavy industry not giving rise to a proliferation of light industry, new investment has been directed towards the service sector where profitability has been high. The experience of other economies suggests that 51% of the economy in a service sector can’t be sustained with 49% of the economy in the productive sector, especially because the level of productivity is so low. What is not produced cannot be serviced after all! World Bank economists are arguing that in view of the rising labour costs in China and other Asian economies, India could expand its employment base if it embarked on a path of export-oriented growth of light industry and agro-industries through an infusion of foreign investment to these sectors.
These would have to be accompanied by changes to labour laws to remove any employment protection provisions and also doing away with small-scale industry reservations. In the coming months, it is expected that the new economic policies will be presented by the left-of-center New Delhi government in the guise of being “good for the workers” and for employment. Broad sections of workers will be affected by these policies and the scope for broadening movement against liberalization and privatization program will be very high.
posted by charcha-editor at 01:14
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