Editorial: Need for deep structural changes in the Indian economy
The 66th round National Sample Survey Organisation (NSSO) data on employment paints a gloomy picture of the Indian economy: Limited creation of jobs during the periods 2004-05 and 2009-10, a decline in the labour force and slow growth of employment in the non-agricultural sector.
While Gross Domestic Product (GDP) growth increased to 8.6 per cent during 2005-2010 from 6 per cent during 2000-2005, a report from CRISIL (Employment in India: Uneven and Weak) estimates that the net addition to jobs remained almost flat around 27 million during the two periods. The report was based on data from NSSO and Central Statistics Office. How do we explain a decline in the labour force at a time when population and GDP were growing strongly?
Migration of workers from agriculture to construction, reduction of self-employment, withdrawal of women from the workforce, increase in productivity in industry and agriculture, rising wages were some of the contributors to this situation. But, the real issue is the magnitude of the problem going forward.
The number of jobs that the economy needs to generate to match the demand of the youth entering the workforce, an estimated 12 million people, is roughly 60 million between 2010 and 2015. That is more than two times the number of job additions of 27 million that was generated between 2005 and 2010, years where the economy grew on an average of 8.6 per cent per annum. We are already in 2013-14 and our growth has declined since 2011.
The Indian economy needs to undergo a deep structural change in order to generate employment on a sustained basis and avoid a demographic nightmare. This change implies reforms of policy and investment ecosystem that generate employment in the right sectors and encourage job creation across the country. The same CRISIL report suggests that both easing demand constraints in manufacturing through labour reforms and supply constraints in services through fast-track reforms in higher education will be the key for future job growth, but they need to happen parallely and soon.
This issue’s cover story, ‘Jobless Growth’, is a reflection on what the data is showing, an attempt to explain the underlying causes and to ponder on the potential solutions ahead. We look forward to your opinions on this contentious topic and to your ideas and solutions.
Esther Martinez Hernandez