It is a feature that sullies a pretty picture. Growth in post-reform India accelerates, but fails to deliver adequate jobs for its citizens. As is widely acknowledged, the large sample surveys of employment by the National Sample Survey Organisation (NSSO) undertaken once in five years provide the most exhaustive data on employment trends and conditions in India. The NSSO has just released the leading indicators yielded by the latest such survey on this subject – the 66th Round, covering 2009-10. This helps to assess the impact on employment of growth during the reform years, and especially after 2003-04 when GDP growth accelerated to touch 8-9 per cent.
The results suggest that while the deceleration of employment growth recorded during 1993-94 to 1999-2000 had been partially reversed in the period 1999-2000 to 2004-05, the record over the five years after 2004-05 is even worse than it was during the 1990s. To summarise, the rate of growth of employment (on a usual, principal and subsidiary, status basis), which rose from 1.07 and 2.62 per cent in rural and urban areas respectively during 1983 to 1987-88, to 2.55 and 4.08 per cent during 1987-88 to 1993-94, fell to 0.80 and 2.73 per cent during 1993-94 to 1999-2000. The scepticism about the dynamism unleashed by reform that this generated was dismissed once the results of the 2004-05 survey were announced that showed that rural employment growth had actually risen to 2.41 per cent in rural areas and 4.22 per cent in urban areas over 1999-2000 to 2004-05. Based on the results of the 2004-05 survey, some like the Chairman of the Prime Minister’s Economic Advisory Council C. Rangarajan argued that “with a sustained growth of 9% per annum by 2012, unemployment will be totally eliminated.” The challenge was to achieve and sustain high growth rather than to generate employment, since “accelerating growth is central to expanding employment opportunities” (Times of India, March 15, 2006).
Since then, India seems to have managed to achieve and sustain high growth, except for the brief downturn during the global crisis. Yet the recently released results from the 2009-10 (66th Round) NSSO survey are disconcerting. Over the five-year period 2004-05 to 2009-10 employment declined at an annual rate of -0.34 per cent in rural areas, and rose at the rate of just 1.36 per cent in urban area. In the aggregate, the volume of principal and subsidiary status employment rose by a negligible 0.1 per cent. In the days to come there will be much discussion on how robust these numbers are and how they should be interpreted. But the broad conclusion that high growth is doing little to deliver the employment that the large mass of the unemployed and underemployed in India need would stand up to scrutiny.
This is significant for at least two reasons. The first is that it indicates that the pattern of growth that India is experiencing is woefully inadequate to provide incomes and livelihoods and the dignity that comes from work to a substantial number of those seeking it. It seems to be time to shift from an obsessive and single-minded devotion to growth and focus more on employment. The second is that the picture of near-jobless growth changes the whole notion of “inclusiveness”. If the trajectory continues, India’s poor and marginalised would have to be “included” not by integrating them into the development process through employment, but through special programmes that reek of state patronage and are dependent on government prerogative. The right to a decent life is not ensured but merely assured.
The implications of this scenario where increments in GDP are not accompanied by anywhere-near-adequate increments in employment are many. One is that the growth process India is experiencing is such that the new activities that displace old and traditional ones deliver much fewer new jobs relative to the number they displace. The second is that in a whole set of new activities that are “additional” to what existed before, “value creation” is far less dependent on leveraging “work” and based more on intangible notions of meeting felt needs and offering quality. The corollary is that the value created goes less to finance an expanding wage bill and more to enhancing surplus incomes in the form of profit, rent and interest. Not surprisingly, there are clear signs of an increase in inequality and a worsening of income distribution in recent years.
This is indeed surprising given the kind of new activities that India’s recent growth has been partly based on. Of the cumulative increase in GDP since 1990, close to 60 percent was accounted for by services. This should have had implications for employment growth in the organised sector. Given the technological trajectory, it should be expected that the potential for increases in productivity is far greater in industry than in services. Hence, when services dominate growth, the expectation is that employment growth would be more responsive to output growth. However, in practice, despite the expansion of services, the growth of employment in this sector has been limited. Tertiary sector employment in 2004-05 amounted to only 25 per cent of the work force despite the fact that more than 50 per cent of GDP came from this sector. Moreover, between 1999-00 and 2004-05, employment in the tertiary sector increased by only 22 per cent, whereas GDP at constant prices contributed by the service sector expanded by 44 per cent. This was possibly because GDP growth came from those kinds of services (such as ICT services and financial services) that delivered substantially in terms of revenues but little in terms of employment.
Thus, the evidence points to the need to have a close look at the growth strategy and make corrections to ensure higher employment growth. This would require measures to rebalance demand, change the composition of output and alter technology choice to ensure a higher rate of growth of employment. Even if this involves some trade off between GDP growth and employment growth at the margin, a case can be made in its favour. Unfortunately, the government seems disinclined to move in this direction. Rather, senior government economists have chosen to launch an attack on the NSSO, which has a much-deserved reputation and an excellent track record, for what they perceive to be shoddy statistical work. The presumption is that these officials in high places knew the numbers even before they were collected. That may sound absurd, but it only reflects the new ethos: when faced with evidence that calls for a policy rethink, the tendency is to trash the evidence (or to manipulate it) and pretend the problem does not exist.