Explained: India’s unique jobs crisis

Source: The post is based on the article “Explained: India’s unique jobs crisis” published in Indian Express on 1st August 2022.

What is the News?

There are fewer people employed in agriculture today, but the transformation has been weak. Those moving out of farms are working more in construction sites and the informal economy than in factories.

The decline in the agriculture workforce in India

In 1993-94, agriculture accounted for close to 62% of the country’s employed labour force. 

Between 1993-94 and 2018-19, agriculture’s share in India’s workforce came down from 61.9% to 41.4%. In other words, roughly a third in 25 years. 

Still, this isn’t significant because compared with the average for other countries in the same income bracket – India’s farm sector should be employing 33-34% of the total workforce.

Is this a structural transformation?

The movement of workforce from agriculture that India has witnessed over the past three decades or more does not qualify as what economists call “structural transformation”. 

Such transformation would involve the transfer of labour from farming to sectors – particularly manufacturing and modern services – where productivity, value-addition and average incomes are higher.

However, the share of manufacturing (and mining) in total employment has actually fallen along with that of agriculture. The surplus labour pulled out from the farms is being largely absorbed in construction and services.

Hence, simply put, the structural transformation process in India has been weak and deficient.

What is the impact of this weak structural transformation?

Weak structural transformation and persistence of informality explain the tendency, especially by rural families for pursuing multiple livelihoods. 

Many of them cling on to their small plots of land even while earning incomes wholly or predominantly from non-farm sources. 

What was the impact of Covid-19 on the agriculture workforce?

There has been a reversal of the trend in the last two years which has seen the share of those employed in agriculture rise to 44-45%. This has primarily to do with the Covid-induced economic disruptions. 

However, surveys have called this reverse migration of people back to the farms as a temporary phase.