Job-less Growth in India
Various Literatures have argued that by economic reform introduction, flexible norms in labour markets are applied through several de facto measures, such as contractual employment, outsourcing, and intentional ignorance of labour standards etc.. By allowing capital goods of huge size and nature that displace labour in vast amounts, it led to a massive change in the structure of industries in favour of capital intensive industries (Singh, 1993; Papola, 1994). Efficiency and competition became the key words. In the name of cost rationalisation, voluntary retirement schemes are introduced and labourers are sent out with golden handshake. Appointment of part-time and casual employees is taking place in large number. Due to privatization policy, public sector began to withdraw from several areas for which public sector employment has declined by more than one and half million jobs since 1991. Faced with the process of internal liberalisation and of globalisation even in the private sector, industrial units started shedding excess labour and to compete with foreign players, new technology was increasingly introduced, resulting in loss of jobs. The new liberal economic policy regime marked by an increased competition on the one hand, greatly improved access to foreign technology and imported capital goods on the others created among the industrial firms a drive towards the adoption of advance technology which led to increasing capital intensity of production and reduces the employment growth. As a result the employment as a whole has come down after liberalisation period. Thereby, reform process resulted in acceleration of GDP growth without a commensurate increase in employment [Visaria and Minhas (1991), Deshpande (1992), Mundle (1993), Bhatacharya and Mitra (1993), Ghose (1994), Kundu (1997), Datt (1994, 1999), Bhattacharya and Sakthivel (2004) and many more].
Even the latest employment data released by NSS 61st round of ‘Employment and Unemployment Situation India’ suggests that creation of employment opportunity has come down from 1.95 percent in pre-reform period (i.e. 1983 to 1993-94) to 1.27 percent during post-reform period (i.e. 1993-94 to 2009-10). Such deceleration of employment growth has occurred due to a massive fall in employment growth (i.e. 0.02) in medium term phase i.e. 2004-05 to 2009-10, despite a higher output growth from 6 percent to 8.6 percent in the Indian economy in the same year.
In a sectoral approach, Indian agriculture has undergone a substantial change in the institutional setting over the period. The post 1991 economic reforms, however, did not target agriculture directly, but nonetheless, it received the impact indirectly from the macroeconomic policy and other institutional reforms [Chand, Raju and Pandey (2007)]. The deflationary policies aimed at reducing aggregate demand and fiscal deficit led to slowing down of public investment in agriculture (Chand 2005), reduced the availability of institutional credit (Shetty 2006), reduced the subsidies and market support. This is increased cost of production, deteriorating terms of trade (Rao and Gulati 2005), leading to increased indebtedness and market risk. The net effect is a marked slow down in the agricultural growth rate and rapid decline of its share in GDP. As a result, output growth during the post-reforms has declined to 2.68 per cent from to 3.41 per cent during pre-reform period. This declining growth also adversely affects the employment creation in the agricultural field, where growth of workforce has come down from 1.34 percent in pre-reform to -0.05 percent in post-reform.
Though industrial sector reform took place before the economic reform but a concrete shift in the policy towards liberalisation, abolition of licensing, near complete import liberalisation (barring agricultural products), rationalisation of tariff structure, opening up major sectors for foreign direct investment, capital market reforms, exchange rate reforms, and financial sector reforms comprised completely a comprehensive framework to mark a shift towards a new industrial policy. The performance of industry in the new changed policy regime after 1991 reforms has shown more than 7 per cent during post-reform period over 5.56 per cent during pre-reform period. Among the sub-sector of industrial sector, it is the construction sector that performed a higher growth in post-reform period followed by manufacturing sector. But the employment creation in industry suggests that construction sector shows a higher employment growth, where manufacturing sector grew at a declining rate (due to higher capital-labour ratio that displace more labour). It can be said that industrial sector employment has gone up due to high and significant contribution from construction sector, but the quality of employment in that sector may not be good.
The turn around in service sector as an engine of growth in the India’s growth process is noted to have occurring since as early as late seventies [Balakrishnan (2005)]. The recent trend also suggests that services sector has also grown rapidly. More interestingly, its growth has, in fact, been higher than the growth in other commodity-producing sectors such as agriculture and manufacturing sectors. The growth of services sector has grown up by 8.66 percent in post-reform from 6.45 percent in pre-reform period. The remarkable sectoral performance of the services sector as a whole has been reflected in the select lead indicators of the services sector i.e. transport, storage and communication and trade, hotel and restaurant. Despite a higher growth I services output, employment creation has not yet significantly gone up during post-reform. The trend suggests that there is a declining growth of 1.02 percentage point in post-reform from re-reform phase. It is due to a massive fall in growth of community, social and personal services.
On a whole, with the introduction of liberalisation, privatization and globalization that leads to raises the output growth which has shown a declining employment growth in post-reform period in the economy at an aggregate as well as disaggregates level. In light of these results, it appears that the jobless growth has now become a serious problem in the Indian economy despite the continuous efforts that have been made to fulfill the employment led growth objectives. Therefore, the new employment creation will depend on the nature of the employment, technology and structure of the economy.
Deepak Kumar Behera
Assistant Faculty,
Entrepreneurship Development Institute of India
