Letting jobless growth worsen is way too risky

Source: This post is created based on the article “Letting jobless growth worsen is way too risky”, published in Live Mint on 4^th August, 2022.

Syllabus: GS Paper 3, Indian Economy, Employment and development

Context: In an emerging country, like India, the path to productivity and growth must lead workers away from farms towards jobs in factories and offices. However, India had limited success in this transition.

Some estimates say India need to create 90 million jobs by 2030 to absorb new entrants to the workforce.

As per Periodic Labour Force Survey, the proportion of Indians employed in agriculture was falling for decades, but this process flattened some years ago and reversed by the Covid crisis. That farms support around 43% of our workforce.

What are the factors hindering worker’s movement from farm to factories in India?

First, in the absence of a robust manufacturing sector, those who move out of farming mostly find themselves in low-paying construction work and informal services.

Second, in contrast to Bangladesh, we have not had an export boom of low-skill, labour-intensive products. India’s economic growth has been largely services led in contrast. A leap from the primary to the tertiary sector can’t absorb workers in the volumes we need.

Third, India’s growth elasticity of employment is on decline. It is a measure of how output expansion generates jobs. A 10% growth in gross domestic product is associated with only a 1% rise in employment.

Fourth, government has made efforts; like production-linked incentive schemes and efforts to grab the business flite from China. However, the efforts are hindered by legacy issues of poor infrastructure, complex and variable rules, skill deficiencies, hidden costs and more.

Lastly, K-shaped recovery from the covid pandemic has only worsened inequality.