[Answered] “Trend of ‘jobless growth’ that was till recently confined largely, to the organised sector has now spread to other sectors of the economy”. Discuss in the context of latest Periodic Labour Force Survey (2017-18). What should be done to ensure inclusive growth?

The findings of the latest employment survey, called the Periodic Labour Force Survey (2017-18), are a cause for concern. The two biggest issues reported are: the shrinking share of the labour force; and the rising unemployment.

Findings of the survey:

• The labour force participation rate (% of people working or seeking work in the above-15 years age category) in the earlier survey of 2012 was 55.5%. This has shrunk to 49.7% in 2018. There is an absolute decline in the number of workers from 467.7 million in 2012 to 461.5 million in 2018.
• The figure for the overall unemployment rate at 6.1% is 2.77 times the same figure for 2012. The rise in overall unemployment has both locational and gender dimensions. The unemployment rate is-
  • Urban women- 10.8%
  • Urban men- 7.1%
  • Rural men- 5.8%
  • Rural women- 3.8%.
• There is severe unemployment among men at 6.2% which is higher than among women at 5.7%. However, given the sharp decline in women’s labour force participation rate, due to the double whammy of exclusion from the labour force and an inability to access employment when included in the labour force. The decline in women’s labour force participation from 31% to 24% means that India is among the countries with the lowest participation of women in the labour force.
• The issue of educated unemployment, given its link with not just growth but also with transformative development, has never been as acute as at present. Defined as unemployment among those with at least a secondary school certificate, it is at 11.4% compared to the previous survey’s figure of 4.9%.
• But what is significant is that the unemployment rates go up as levels of education go up. Among those with secondary school education, it is 5.7% but jumps to 10.3% when those with higher secondary-level education are considered. The highest rate is among the diploma and certificate holders (19.8%); followed by graduates (17.2); and postgraduates (14.6%).
• Among the educated, women face a more unfavourable situation than men despite a low labour force participation rate. Compared to the earlier 2012 survey, unemployment of educated men has more than doubled in both rural and urban areas and in the case of women, the rate has nearly doubled. However, it is important to remember is that the rate was higher for educated women, when compared to educated men, in both the periods.
• Youth unemployment rate (unemployment among those in the 15-29 years age category) has reached a high 17.8%. Even here, the women stand more disadvantaged than the men, especially urban women.

Solutions for inclusive growth:

1. Infrastructure: India needs to invest an additional 3-4% of GDP on infrastructure to sustain current levels of growth and to equalise its benefits. Although this will clearly require a government role, the relative roles of the government and private sector need to be defined. Infrastructure is important to equalise growth as investments raise productivity and farmer incomes in agriculture, infrastructure help in creating jobs, as well as the infrastructure is needed to connect rural India with the benefits of a growing economy.
2. Labor regulations: India’s restrictive labor regulations have constrained the growth of the formal manufacturing sector. Better designed regulations can attract more labor-intensive investment and improve the job prospects for India’s unemployed millions, those trapped in poor quality jobs, and the 80 million new entrants who are expected to join the work force over the next decade.
3. Financial sector: Problems in accessing finance are a major impediment to the performance of small and medium size businesses in India. Improving financial intermediation and ensuring broader access to financial services is critical for equalising growth. Inclusive growth needs financial institutions to be strong and efficient. The experience with cooperative banks under dual regulation, and deposit taking NBFCs with poor governance, points out the challenges in ensuring effective regulation and supervision of entities allowed to access public deposits.
4. Agriculture and the rural economy: Agriculture is the largest contributor to India’s employment sector. Ensuring sustainable and profitable agriculture would ensure inclusive growth. Raising agricultural productivity requires a return to investments in agricultural technology and infrastructure. Getting the rural economy moving will also require facilitating rural-non farm entrepreneurship.
5. Lagging states: Faster economic growth has seen rising inter-state disparities. Lagging states need to bring more jobs to their people by creating an attractive investment destination. Reforming cumbersome regulatory procedures, improving rural connectivity, establishing law and order, creating a stable platform for natural resource investment that balances business interests with social concerns, and providing rural finance are important. Good understanding and coordination between the government machinery is essential for development and inclusive growth.
6. Empowerment and opportunity: In order to achieve inclusive growth, policy reforms should focus on empowerment and opportunity, enabling all Indian citizens to engage with the emerging economy on fair terms. Expanding rural infrastructure is good, but without complementary investments in empowerment and opportunity will not be enough. Increased access to rural finance can be important, but only if embedded with other reforms to make the rural economy work for the poor.
7. Accountability of reforms: Outlays do not necessarily mean outcomes. The people of the country are concerned with outcome. Emphasis should be laid on the need to improve the quality of implementation and enhance the efficiency and accountability of the delivery mechanism. The fruits of reforms are now being enjoyed by the rich and to some extent by the middle class and they are not reaching the poor. Hence, efforts should be made in this direction.
8. Land reforms: While raising agricultural productivity is a must to cope with the shrinkage of agricultural land, the very slow growth of non-farm opportunities for employment (The rising demand for industrialisation, including SEZs, and for housing in expanding urban areas) and livelihoods and social security for small holders poses a challenge and argue for a careful and calibrated approach for land acquisition.
9. Inclusive governance: Governance has to be viewed and shaped in the context of ongoing social change through the functioning of our democratic system. Experience has amply demonstrated that anticipatory or inclusive governance is indispensable for achieving inclusive growth. Creation of legal entitlements for an individual’s right to work has added to resilience and dynamism in our rural economy. The right to information and the right to education are effective tools of empowerment for removing social imbalances.

The trend of ‘jobless growth’ that was till recently confined largely, to the organised sector has now spread to other sectors of the economy, making it more generalised. This calls for a thorough re-examination of the missing linkages between growth and employment. Inclusive growth is a wider connotation encompassing social, economic and political factors. Socially, lack of inclusive growth leads to unrest among many people. The measures which raise equity also promote economic growth.