The issue of inadequate creation of more productive forms of non-farm employment has been at the heart of India’s development story. The State of Working India 2023 report had pointed towards the weak link between long run GDP and non-farm employment growth.
Amidst growing concerns over inadequate employment opportunities despite the economy growing at a fast clip, new estimates from the RBI suggest a pick up in job growth. As per the central bank’s KLEMS database, employment in the country grew by 4.67 crore in 2023-24. However, these are provisional estimates and they do not provide the disaggregated sector-wise job numbers for the latest year. In recent years for which the disaggregated data is available (2017-18 to 2022-23), however, much of the increase in employment has occurred in agriculture, followed by construction and trade — sectors marked by low levels of productivity. As per the database, value added per worker, a measure of labour productivity, is the lowest in the case of agriculture, and in the case of construction and trade is substantially lower than in the most productive sectors of the economy. This low level of productivity has implications for workers’ wages.
In recent years there has been a sharp pick up in the labour force participation rate as seen in data from the periodic labour force surveys. Much of this increase was driven by women joining the labour market in greater numbers. Worryingly, a sizable number of these new entrants are engaged in self-employment, as helpers in household enterprises. This indicates the absence of more productive, more remunerative jobs. Alongside, data from the recently conducted survey of unincorporated sector enterprises affirms that a sizable section of the labour force continues to be engaged in a low productive informal sector. In 2022-23, the number of unincorporated enterprises or informal sector firms stood at 6.5 crore and roughly 11 crore workers continue to be engaged in these establishments. In such firms, value added per worker is only a fraction of that in the larger formal firms.
The issue of inadequate creation of more productive forms of non-farm employment has been at the heart of India’s development story. The State of Working India 2023 report had pointed towards the weak link between long run GDP and non-farm employment growth. While successive governments have taken steps to facilitate job creation, progress has been patchy. With growing capital intensity of production, even in the labour intensive sectors, this will become even more challenging. The India Employment Report 2024 had noted that “the production process has increasingly become capital-intensive and labour-saving”. It had also pointed out that the skill intensity of employment had increased, “which was contrary to the labour market needs of the country”. Ensuring that growth translates to more productive job opportunities is the foremost challenge before the government.
