India has to move higher up the value chain of manufacturing and scale up to absorb workers
While it is true that India was growing strongly in the 11th plan period with a growth average of 8%, data from the national sample survey indicates that in the period 2004-05 to 2009-10, total employment only increased from 457.7million to 460.2 million. While in some respects employment has grown, we need to be clear about what we mean by jobless growth. Here we are looking at the net effect of growth and the relationship, elasticity of employment and GDP stood at a very low figure of 0.01 (number of jobs created for the same amount of economic growth). During that period there have been transitions in the labour market. There has been fall in agriculture employment in the country during the period 2004-05 to 2009-10. While agriculture employment fell, employment in construction increased by 18.1 million. While there has been a movement or people from rural areas to urban areas, the story is not good.
The period wasn’t characterised by large numbers of people moving into better jobs or decent jobs in the way ILO defines it. The ILO defines good employment as ones that have a contract, rights at work and access to benefits and social protection. While it seems that jobs were being created, they were characterised by poor working conditions and were not well-paid or protected jobs. Policy makers need to unpack this phenomenon more closely and in greater detail.
In India, the data during this period suggests that while employment was not growing strongly , there is evidence to suggest that the labour force was shrinking during that period. This is partly explained by the fact that people were staying on longer with education.
Participation of women in the workforce has been falling and it is a much more complex scenario. There are many socio-cultural factors behind this trend of low participation of women. The dynamics of the labour market in India, therefore, is much more complex than it appears.
The employment in the manufacturing sector during that period has stayed more or less constant at 11%. Manufacturing has not been the main driver of the economy or job creation. There were more jobs created in manufacturing between 1999-00 and 2004-05, but the number of jobs created in this sector fell after that period. The 12th plan has included a renewed focus on manufacturing. Manufacturing in India has never been large scale like it has been in other economies like China. In China, you have factories like the one run by Foxconn which has 200,000 employees. Now this sort of factories and scale do not exist here in India. Manufacturing is more capital intensive in India compared to China. The vast majority of the manufacturing sector in India belongs to the unorganized sector and small enterprises employing less than 10 people.
Infrastructure, demographic issues, and the historical legacy of how business and manufacturing are done in India that can be possible causes of low growth. India has to find a niche of how to move higher up the value chain of manufacturing and scale up to absorb workers. The answer, therefore, lies to more broad-based industrialisation. Infrastructure advancement should also be supplemented by how rural areas can benefit from modernisation.