Economy watchers and commentators have long lamented the lack of employment growth and have often used the term ‘jobless growth’ for the post liberalisation period. Their main contention has been the very negligible aggregate growth in employment ranging less than 1 per cent over the years especially after the great recession. Over the five-year period between FY’11 and FY’16, aggregate employment growth has been just 0.6 per cent. Capital intensive manufacturing, automation, artificial intelligence, labour laws and inadequate government incentives are loosely held responsible for the current state of affairs. Some commentators have even gone ahead to call for a review of market oriented economic policies pursued during the second phase of liberalisation initiated since the turn of the millennium.

However, such analysis does not take into account the employment trends in agriculture, which still accounts for a significant chunk of total employment. It should be noted that in spite of the fact that liberalisation policies were pursued since 1991 and farm mechanisation has been continuous, labour intensity of agriculture continued to increase, albeit at a slower pace till 2004-05. It is only after this peak that farm jobs have been reducing steadily, at an average rate of 2.2 per cent (Exhibit 1). The trend has accelerated during the latest five-year period for which data is available at an average of 3.6 per cent. Considering the huge direct employment in agriculture of around 257 million people in 2004-05, a 2 to 3 per cent de-growth results in a movement of about 5 million people annually from this activity to the rest of the economy.

At the same time, non-farm employment during the period 2004-05 to 2016 has grown at a CAGR of 3.3 per cent. In the most recent five-year period, it has averaged a very respectable 3.4 per cent thereby reflecting the strong undercurrent of employment generation. A break-up of these numbers indicates that growth has been stupendous in the electrical and optical equipment category with 12.2 per cent; a decent 8.5 per cent in Business Services and 4.8 per cent in Financial Services. Even manufacturing has delivered a respectable 3.3 per cent average growth in the previous five years (Exhibit 2). In most sectors, vis., services, machinery, construction, manufacturing, tourism and finance, growth has been very supportive.

The non-farm economy therefore is absorbing close to 15 million people annually, which is not a mean achievement. This has also come in the wake of progressive shrinkage of jobs in public administration and defence segments. Absolute public sector employment has been declining since 2000-01 coinciding with the first divestment drive of the central government. With its many flaws, our industrial policies are slowly but steadily making way for more productive employment opportunities than the primary activities of agriculture and fishing. It also implies that our reading of employment data needs to be comprehensive to prescribe relevant policy changes. Creating a sense of despondency among youth with respect to joblessness is not advisable.

Sidharth Sonawat and Shashwati Ghosh

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