Productive Job Creation- The driver for economy?

The Indian economy was primarily known to be an agrarian economy with majority of GDP coming from Agriculture and majority workforce dependent on Agriculture. Over the years, with gradual policy formations and opening up of the economy, the GDP contribution of Agriculture has reduced from over 50% during 1947 to 17% in 2012. On the contrary if we see the workforce dependent on agriculture we see majority to a extent of nearly 52% is dependent on agriculture. In order to improve the growth (keeping in mind the huge population of the nation), India needs to focus on an agenda to create productive jobs out of agriculture. We are still one of the few examples left in the world depicting the fact of an enormous population largely dependent on agriculture.

Modern Economic Development needed in India

We need to ensure that the process of modern economic development is taken at a faster pace so that the shift in the population away from agriculture towards industry and services in towns and cities could be facilitated faster. If we see the statistical data we find that the countries undergoing the modern economic development has reduced their dependency on agriculture to a level of less than 5 to 10%. It is economically seen that the share of population dependent on agriculture is considered as a yardstick for economy’s development.

The problem with the Indian economy is the sluggish pace of productive jobs outside the agriculture sector. The unavailability of jobs is preventing/impeding the faster pace of transformation in India. If we see the magical years of development in India’s economy (year 2004-05/09-10), the faster and rapid economic growth in the country had little impact on transformation and share of agriculture in employment reduced from 57% to 53% over the period. People previously employed with agriculture sector migrated from rural India to urban or semi-urban area, but the same population was not absorbed fully by the manufacturing and services sector.

The slowdown in global economy created a huge impact on the Indian economy particularly the manufacturing and services sector and over 5 million job cut was seen in manufacturing sector, with merely 3.5 million work force addition in services sector.

As a matter of fact we see that the growth of an economy is measured with the rate of employment generation per unit of GDP, which is called employment elasticity. For India, the indicator has been declining ever since 2000 from 0.44 to near zero level in 2004-05. Further the indicator changed from a near-zero level in 2004-05 to 0.01 in 2009-10. Thus we can say the growth of economy was a jobless growth.

Productive Employment

When the rate of growth for the economy during the twelfth five-year plan has reduced further to a level of 5%, it is expected that if the expansion is not employment intensive, the problem will become much worse in years to come. It is seen that the declining GDP is a cause of translating few job opportunities for people who move to city/towns in search of Job. A sluggish growth in the organized sector, finally results in the problem for the low paying unorganized or informal sector including self-employment. The trickle down effect results in a severe problem for those who are working in unorganized sector where the work conditions outside the pale of trade unionism or labor legislation.

Read about 12th Five Year Plan – Its implications on Economic Growth and Investor Sentiment.

Limited productive employment outside the agriculture sector is a serious concern for the economy as we see a tremendous amount of informal non agriculture jobs being created. Migration of person from informal agriculture sector to informal non-agricultural sector is doing no good to the economy and only the movement of personnel is taking place if not more.

It is now the need of the hour to understand the trend of requirement of workers by the industry and services sector. This will help in forecasting the amount of workers to be absorbed in the sectors and the requirement of workers in the sector given the rate of growth continues, as seen historically. Manufacturing and services must become the engine of employment growth, so that modern economic development takes place. In order to help the mission, it is important that the government call the skill development plan on a huge scale and also improve Labor laws to encourage greater flexibility while providing a safety.