India needs 55 million additional jobs by 2015

CRISIL Research, India’s largest independent and integrated research house, finds that India needs at least 55 million additional jobs by 2015 to maintain the current ratio of employed people to total population at 39 per cent. This would be nearly twice the jobs created during 2005-2010. If we factor in the number of people retiring or losing their jobs by 2015, new jobhires will have to exceed 55 million. Achieving this will pose an overwhelming challenge without appropriate policy support. The CRISIL Research study is based on recently released National Sample Survey Organisation (NSSO) data on employment in India.

Total employment is the sum of people in jobs and self-employed. Between 2005 and 2010, the net addition in jobs was 27.7 million but the number of self-employed people decreased by 25.5 million. This restricted the increase in number of employed people to 2 million. This increase has been misinterpreted by many as the number of jobs created. Even at 27.7 million, the job creation leaves much to be desired.

“Job creation has clearly not kept pace with GDP growth. The GDP growth increased to 8.6 percent during 2005-10 from 6 per cent during 2000-05, but the net addition to jobs remained almost flat at around 27 million during the two time periods. Combined with a decline in the number of self-employed persons, this sharply reduced the employment intensity (number of employed persons per lakh of real GDP) to 1 during 2005-10 from 1.7 in the preceding five years,” Dharmakirti Joshi, Chief Economist, CRISIL said.

The employment potential emanating from faster growth manufacturing and services could not be fully exploited due to lack of policy support. For instance, in manufacturing–a crucial source of jobs for relatively low-skilled labour–employment declined by 7 per cent, despite a faster growth in manufacturing output. In services, employment growth slowed in financial intermediation and business services–a key source of jobs. In contrast, employment grew by almost 70 per cent in the construction sector, but it was mainly in casual jobs.

The trends and pattern of employment offers two specific insights to policymakers for accelerating job creation in the Indian economy. First, high economic growth alone is not sufficient for creating jobs as was evident in the last decade. Second, appropriate policies will have to complement high growth for facilitating the required job creation in the manufacturing and services. The role of policy assumes greater importance now since the weak growth in advanced countries is likely to hurt job growth in export oriented sectors in India. “Policy gridlock in labour reforms remains the primary cause of insufficient labour demand in manufacturing. Contrastingly, in financial intermediation and business services, labour supply has not kept pace with growing demand, given a shortage of highly educated skilled labour. Easing demand constraints in manufacturing through labour reforms and supply constraints in services by fast fast-tracking reforms in higher education will lead to faster job growth,” Vidya Mahambare, Senior Economist, CRISIL added.