Money, Income and Employment in India

Project submitted to

Prof. Hanumant Yadav

Project submitted by

Sourav Singh Tomar

(Section-B, Roll No. 154, Sem. -V)

HIDAYATULLAH NATIONAL LAW

UNIVERSITY

RAIPUR, C.G.

ACKNOWLEDGEMENTS

The successful completion of any task would be, but incomplete, without the mention of people

who made it possible and whose constant guidance and encouragement crowned my effort with

success.

I would like to thank my course teacher Prof. Hanumant Yadav for providing me the topic of my

interest.

Also I would like to thank our Vice Chancellor for providing the best possible facilities of I.T

and library in the university.

I would also like to extend my warm and sincere thanks to all my colleagues, who contributed in

innumerable ways in the accomplishment of this project.

Sourav Singh Tomar

Roll No.154

Semester V

Table of Contents

Topic Page No.

Research Methodology 4

Quantity theory of money 5

Money market

Indian money market

Weakness of Indian market

Growth of money market in India

Function of money market in India

National income 9

Meaning of national income

Importance of concept

Measurement of national income

Method of calculation of national income

Advance estimate of national income 2013-2014

Employment 15

Types of employment

Unorganized sector employment

Unemployment rate

Employment growth in organized and unorganized sector

Employment in organized sector

Conclusion 24

Bibliography 25

objectives

o To study money market in India

o To study income and its measuring method

o To study employment trend in India

Research Methodology

The methodology adopted for the project report is descriptive and analytical. Careful analysis of

collected relevant data has been done. Type of data used is secondary data..

Method used is exploratory research method with:Secondary Data Analysis.

Analytical Tools:- Tables

Nature Of data:- Secondary data.

Review of Literature

Literature Review is the documentation of a comprehensive review of the published and

unpublished work from secondary sources of data in the areas of specific interest to the researcher. It is an extensive survey of all available past studies relevant to the field of investigation. It gives

us knowledge about what others have found out in the related field of study and how they have

done so. After an extensive survey of available past studies relevant to the field of investigation. It

has been tried to accumulate the knowledge about what others have found out in the related field of

study and how they have done so. They have helped immensely in gaining background knowledge

of the research topic, in identifying the concepts relating to it, potential relationships between them

and identifying appropriate methodology, research design, methods of measuring concepts and

techniques of analysis. And also in identifying data sources used by other researchers.

Thus, the following literature has been reviewed:

Kaushal, Savita. Patra, PROSPECTS OF EMPLOYEMENT IN NON AGRICULTURE SECTOR pg.02

Sinha ANP, Article, Times of India, pg.06, (2012)

Government of India, Problem of non agriculture sector,pg.42,(2012)

Singh, Neelima. Organized sector employment, Jun 3, 2009

QUANTITY THEORY OF MONEY:

The quantity theory of money states that there is a direct relationship between the quantity of

money in an economy and the level of prices of goods and services sold. According to QTM, if

the amount of money in an economy doubles, price levels also double, causing inflation (the

percentage rate at which the level of prices is rising in an economy). Another way to understand

this theory is to recognize that money is like any other commodity: increases in its supply

decrease marginal value (the buying capacity of one unit of currency). So an increase in money

supply causes prices to rise as they compensate for the decrease in money's marginal value.1

Money Market:

Money must be accepted as a unit of account and a means of exchange or payment, be durable,

scarce, easily dividable and stable in value. Money that is on account of the Central Bank is the

Real Money. All other forms for e.g. the account balances with Commercial Banks even cash

(check out the note by the RBI governor on Indian currency note) are promises to pay money but

not real money. Like individuals Banks and large institutions also transact amongst each other

lending and borrowing huge amounts of money. In these transactions cash is not involved, real

money kept in accounts with the Central Bank will be transacted.

E.g.: IDBI Bank needs to pay SBI Rs.10 Crores balancing figure at the end of the day. This

transaction happens by requesting RBI to increase the account balance of SBI by 10 Crores and

corresponding decrease in the account balance of IDBI. Now with this the balances or total

money with IDBI reduces. But it might be requiring that money for transactions with its other

customers. This means a party (IDBI) which wants to borrow money now. There might be

another institution that might be having surplus money that it does not require in the near future,

say ICICI Bank having surplus money for 15 days (the same duration that IDBI wants it for). So

we have ICICI loaning IDBI Rs.10 Crores for 15 days at an agreed rate. This is a Money

Market transaction.2

1 http://www.investopedia.com/articles/05/010705.asp 2 http://mutual-funds.indianmoney.com/36-money-market-funds/250-money-market/Read-Article.html

INDIAN MONEY MARKET

The Indian market can be classified into organized and unorganized sectors. The unorganized

sector consists of money lenders, chit funds, and indigenous bankers. These people satisfy the

credit requirement of a large section of the rural masses. The organized part comprises

commercial banks in India both public sector and private sector banks and foreign banks. The

Reserve bank of India the apex bank is the regulator of the money market in India. It regulates

the flow of the credit and money in the economy. To influence the liquidity in the system the

RBI intervenes in the money market from time to time either to augment or reduce the supply of

credit. The open market operation of the RBI provides signals for other segments of the financial

system regarding the future monetary and credit policy of the apex bank.3

Weakness of Indian market:

The indigenous bankers and money lenders are still dominating the semi-urban and rural areas in

India. In India the organized and unorganized money markets exist side by side. This is a major

weakness to the Indian money market. The unorganized money markets follow its own rules and

regulation of banking and finance so it does not come into the purview of RBI rules and

regulations. In the recent days there are large number of Non-bank Financial companies (NBFC)

have come up raising deposits from the public. These NBFC’s perform functions like lending,

investing, hire purchase etc. these institutions are not effectively controlled by the RBI.4

There is an absence of a well-organized banking system. Though developed to some extent in the

recent years their presence is insignificant in rural areas even today. The absence of banking

facilities to the rural masses due to slow branch expansion in the country is a matter of concern.

3 http://safefuture.hpage.co.in/indian-money-market_19594402.html 4 ibid

MAJOR PLAYERS IN MONEY MARKET

PLAYER ROLE

Central Bank Intermediary

Government Barrowers/Issuers

Bank Barrowers/Issuers

0Discount Houses Market markets

FI’s Barrowers/Issuers

MF’s Lenders/Investors

FII’s Investors

Dealers Intermediaries

Corporates Issuers

Growth of Money Market in India:

While the need for long term financing is met by the capital or financial markets, money market

is a mechanism which deals with lending and borrowing of short term funds. Post reforms age in

India has witnessed marvelous increase of the Indian money markets. Banks and other

financial institutions have been able to meet the high opportunity of short term financial support

of important sectors like the industry, services and agriculture. It performs under the regulation

and control of the Reserve Bank of India (RBI). The Indian money markets have also exhibit the

required maturity and flexibility over the past two decades. Decision of the government to permit

the private sector banks to operate has provided much needed healthy competition in the money

markets resulting in fair amount of improvement in their performance.

Money markets denote inter-bank market where the banks borrow and lend between themselves

to meet the short term credit and deposit needs of the economy.Short term normally covers the

time period up to one year. The money market operation help the banks rush over the provisional

mismatch of funds with them. In case a particular bank needs funds for a few days it can lend

from another bank by paying the strong-minded interest rate. The lending bank also gains as it is

able to earn interest on the funds lying idle with it.

Functions of Money Market in India:

Money markets are one of the most significant mechanisms of any developing financial system.

In its place of just ensure that the money market in India regulate the flow of credit and credit

rates, this instrument has emerge as one of the significant policy tools with the government and

the RBI to control the financial policy, money supply, credit creation and control, inflation rate

and overall economic policy of the State. Therefore the first and the leading function of the

money market mechanism are regulatory in nature. While determining the total volume of credit

plan for the six monthly periods, the credit policy also aims at directing the flow of credit as per

the priorities fixed by the government according to the requirements of the economy. Credit

policy as an instrument is important to ensure the availability of the credit in sufficient volumes;

it also caters to the credit needs of various sectors of the economy. The RBI assist the

government to realize its policies related to the credit plans throughout its statutory control over

the banking system of the country.5

Financial policy on the other hand, has longer term perspective and aims at correcting the

imbalances in the economy. Credit policy and the financial policy both balance each other to

achieve the long term goals strong-minded by the government. It not only maintains total control

over the credit creation by the banks, but also keeps a close watch over it. The instruments

of financial policy counting the repo rate cash reserve ratio and bank rate are used by the Central

Bank of the country to give the necessary direction to the monetary policy.

5 ibid

NATIONAL INCOME

Measurement of national income in an economy is very important because it gives an estimation

of the welfare of the economy. National income is the total of the value of the goods and the

services which are produced in an economy. The basic measures of national income include

GDP, GNP, GNI, NNP and NNI. There are three approaches through which national income can

be calculated including; output approach, income approach and expenditure approach. All of

these approaches give the same value of the national income. 6

Meaning of National Income

National income refers to the amount of goods produced by the people of a country during the

course of a year. It represents annual addition to the wealth of the nation. National income is also

known as national dividend. National income is expressed usually in terms of money.

Sometimes, national income is defined as a “collection of goods and services reduced to a

common basis by being measured in terms of money.”

Importance of the Concept

National income is a very useful concept in economics. For it is the one single figure that tells us

many things about the economy of a country. From the national income of a country, we can tell

whether the country is rich or poor. Not only that, it is the measure of the economic welfare of

people in a country. That, it wants to do by increasing the national income of the country during

every plan period. For instance, one of the main from the rate of increase in the national income,

we can find out whether there has been any economic growth. Again, national income is the

source from which all factors of production (land, labor, capital and organization) are rewarded

in the form of rent, wages, interest and profits.7

The method for calculating National Income by Output

The output method, which is the combined value of the new and final output produced in all

sectors of the economy, including manufacturing, financial services, transport, leisure and

agriculture. GDP at market price = Value of Output in a year - Intermediate consumption

6 http://en.wikipedia.org/wiki/Measures_of_national_income_and_output . Iton 27 Aug 2014 07:13:58 GMT 7 http://www.economist.com/debate/days/view/501/print/all

The measurement of National Income by Value Added Method

The expenditure method, which adds up all spending in the economy by households and firms on

new and final goods and services by households and firms.

NNP at factor cost = GDP at market price - Depreciation + NFIA - Net Indirect Taxes

The measurement of National Income by Income Method

The income method, which adds up all incomes received by the factors of production generated

in the economy during a year. This includes wages from employment and self-employment,

profits to firms, interest to lenders of capital and rents to owners of land.

NDP at factor cost = compensation + operating surplus + Mixed income of self employee

National Income = NDP at factor cost + NFIA (net factor income from abroad)

GDP = C + I + G + (X - M)

Where:

C = personal consumption expenditure

I=Gross investment

G=Government consumption

X= Gross exports

M = Gross imports

MEASUREMENT OF NATIONAL INCOME

There are three main methods of measuring national income. They are:

Output Method

Incomes Received Method

Consumption and Investment Method

The output method measures the value of all commodities and services that are produced in a

country during a given period, say, a year. This total is called the Gross National Product (GNP).

But the whole of the GNP will not be available for distribution. Some of that has to be kept aside

for replacing worn out capital and so on. This should be deducted from the GNP. The resulting

figure is known as Net National Product. The incomes received method measures the national

income after it has been distributed. In this method, we include even the income of government

and undistributed profits of companies. The third method of measuring national income is to

measure consumption plus investment. Consumption gives the total amount of money spent on

consumer goods. Investment refers to that part of wealth devoted to further production of wealth.

So consumption plus investment should equal national product.8

Methods Of Calculation Of National Income Of A Country

1. Product Method:

In this method, national income is measured as a flow of goods and services. We calculate

money value of all final goods and services produced in an economy during a year. Final goods

here refer to those goods which are directly consumed and not used in further production

process. Goods which are further used in production process are called intermediate goods. In the

value of final goods, value of intermediate goods included therefore we do not count value of

intermediate goods in national income otherwise there will be double counting of value of goods.

2. Income Method:

Under this method, national income is measured as a flow of factor incomes. There are generally

four factors of production labour, capital, land and entrepreneurship. Labour gets wages and

salaries, capital gets interest, land gets rent and entrepreneurship gets profit as their

remuneration. Besides, there are some self-employed persons who employ their own labour and

capital such as doctors, advocates, CAs, etc. Their income is called mixed income. The sum-total

of all these factor incomes is called NDP at factor costs.

3. Expenditure Method:

8 http://en.wikipedia.org/wiki/Measures_of_national_income_and_output . on 27 Aug 2014 07:13:58 GMT

In this method, national income is measured as a flow of expenditure. GDP is sum-total of

private consumption expenditure. Government consumption expenditure, gross capital formation

(Government and private) and net exports (Export-Import).

ADVANCE ESTIMATES OF NATIONAL INCOME, 2013-14

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation

have released the advance estimates of national income for the financial year 2013-14.

Gross Domestic Product: GDP at factor cost at current prices in the year 2013-14 is likely to

attain a level of `105.4 lakh crore, showing a growth rate of 12.3 per cent over the First Revised

Estimate of GDP for the year 2012-13 of `93.9 lakh crore.9

National Income: The NNI at factor cost at current prices is anticipated to be `92.4 lakh crore

during 2013-14, as compared to `82.6 lakh crore during 2012-13, showing a rise of 11.9 per cent.

Per Capita Income: The per capita income at current prices during 2013-14 is estimated to

be `74,920 as compared to `67,839 during 2012-13, showing a rise of 10.4 per cent.10

PROVISIONAL ESTIMATES OF ANNUAL NATIONAL INCOME, 2013-14 AND

QUARTERLY ESTIMATES OF GROSS DOMESTIC PRODUCT, 2013-14

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, has

released the provisional estimates of national income for the financial year 2013-14 and the

quarterly estimates of Gross Domestic Product (GDP) for the fourth quarter (January-March) of

2013-14, both at constant (2004-05) and current prices.

The CSO has also released the corresponding annual and quarterly estimates of Expenditure

components of the GDP in current and constant (2004-05) prices, namely the private final 9 http://pib.nic.in/newsite/PrintRelease.aspx?relid=103248 10 http://www.indiainfoline.com/news-listing/printnews?NewsId=5865553386

consumption expenditure, government final consumption expenditure, gross fixed capital

formation, change in stocks, valuables, and net exports.11

GDP growth rates for 2013-14 and Q1, Q2, Q3 and Q4 of 2013-14 at constant (2004-05) and

current prices are given below:

CONSTANT PRICES CURRENT PRICES

At Factor cost Market price At Factor cost Market price

ANNUAL 2013-14 4.7 5.0 11.5 12.3

Q1 2013-14(April-June) 4.7 4.2 10.6 10.3

Q2 2013-14(July-Sep) 5.2 5.2 12.7 13.6

Q3 2013-14(Oct-Dec) 4.6 4.4 12.8 13.0

Q4 2013-14 (Jan-Mar) 4.6 6.1 10.2 12.2

Estimates including growth rates for Q1,Q2 and Q3 released earlier have been revised according

to the revision policy of this Ministry.

PROVISIONAL ESTIMATES OF NATIONAL INCOME, 2013-14

The advance estimates of national income for the year 2013-14 were released on 7th February,

2014. These estimates have now been revised incorporating latest estimates of agricultural

production, index of industrial production and performance of key sectors like,

railways, transport other than railways, communication, banking, insurance and government

expenditure.

11 http://mospi.nic.in/mospi_new/upload/mospi_press_releases.html

ESTIMATES OF GDP AT MARKET PRICES, 2013-14

GDP at current market price is estimated at 113.55 lakh crore in the year 2013-14 (113.20 lakh

crore in advance estimates) as against 101.13 lakh crore in the year 2012-13 showing an increase

of 12.3 per cent. At constant (2004-05) prices, the GDP at market price is estimated at ` 61.96

lakh crore in the year 2013-14 (61.74 lakh crore in the advance estimates) as against 59.0 lakh

crore in 2012-13 showing an increase of 5.0 percent over the previous year. The estimates of

GDP at market prices are derived at by adding net indirect taxes( indirect taxes – subsidies) to

GDP at factor cost. 12

ANNUAL ESTIMATES OF EXPENDITURES ON GDP, 2013-14

Along with the Provisional Estimates of GDP by economic activity, the CSO is also releasing the

estimates of expenditures of the GDP at current and constant (2004-05) prices. These estimates

have been compiled using the data on indicators available from the same sources as those used

for compiling GDP estimates by economic activity, detailed data available on merchandise trade

in respect of imports and exports, balance of payments, and monthly expenditure of Central

Government. As various components of expenditure on gross domestic product, namely,

consumption expenditure and capital formation, are normally measured at market prices, the

discussion in the following paragraphs is in terms of market prices only.13

12 http://netindian.in/news/2014/05/31/00029258/ indias -gdp-growth-rate-2013-14-revised-downwards-47 13 http://indiainbusiness.nic.in/newdesign/upload/Publications/Monthly/2014/May_monthly.pdf.

MEANING OF EMPLOYMENT

It is important at the outset to be clear about the meaning of unemployment. Full employment

implies that all who wish to work at the existing level of wage rates are employed. There are, to

be sure, potential workers who choose not to seek employment because wage rates are too low.

But such persons are said to be voluntarily unemployed, and the theory of employment is not

concerned with them; rather, it is concerned with involuntary unemployment—with a situation in

which there are workers who would be willing to take employment at prevailing wages but

cannot find it.

Types of employment14

Full-time permanent work is regular and ongoing work of between 35 to 45 hours (full-time

employees are paid a weekly wage and yearly salary) which includes non-wage entitlements and

benefits like paid holiday leave, sick leave and long-service leave.

Part-time permanent work is regular and ongoing, involves fewer hours than full-time work

and usually set days or set hours. Non-wage benefits and entitlements (sick leave, annual leave

and holiday pay) are received by part-time employees on a pro-rata basis. Sick leave is based on

the hours worked over two weeks and annual leave on hours worked over four weeks.

Casual work is ongoing and involves irregular hours and hourly pay. Casual workers often work

on an 'as needs' basis, meaning you work when you are required; if you don't work you don't get

paid. There are no non-wage entitlements in casual work (no holiday pay, sick leave and annual

leave), as those entitlements are factored into 20 per cent of the higher hourly rate that casuals

receive. Casuals usually receive hourly rates of pay based on a minimum 15% loading of normal

or applicable hourly rates of pay. This is to compensate casuals for the unpredictability of their

work and their lack of non-wage entitlements.

Self-employed workers are also known as independent contractors or sub-contractors. These

people work for themselves, so they control the hours and amount of work they do. Many

14 http://www.skwirk.com/types-of-employment.

tradespeople, for example, are self-employed or are sub-contracted by businesses like real estate

agents. There are certain taxation benefits for self-employed workers to compensate for the risks

of not finding work. Self-employed workers are reliant on the availability of work in their

particular field.

Fixed term employment (also known as contract work) is used for single projects or to replace

workers on leave. It is common for fixed term employees to not receive entitlements like paid

sick leave.

Commission-based employment is pay based on reaching sales targets. A commission is

usually a percentage rate of pay per item sold. A 'commission and retainer' employment includes

a base pay rate plus commissions, which work like bonuses.

Probationary employment is a standard requirement for employees commencing full-time or

part-time work. It involves an initial period of employment, usually one to six months, where

employers assess whether an employee is capable of fulfilling the requirements of a job. If this is

the case, employment is usually then confirmed permanent part-time or permanent full-time.

Unorganized sector employment

The unorganized sector consists of casual workers; self employed persons in un-organized sector

and private households; and others employed in organized and unorganized enterprises that do

not receive fixed or regular wages, are not eligible either for paid, sick or annual leave or for any

social security benefits given by the employer. Their terms of employment render them liable to

be terminated at any time. The major portion of workforce in India is employed in unorganized

sector.

Organized sector consists of workers in private or public sector that receive regular salaries,

emoluments and other benefits including leaves and social security in the form of provident

funds and gratuity. They work under fixed terms of employment and cannot be terminated in a

casual manner without notice.15

15 http://www.meritnation.com/

The First Indian National Commission on Labour (1966-69) defined ‘unorganised sector

workforce’ as –

“those workers who have not been able to organize themselves in pursuit of their common

interest dues to certain constraints like casual nature of employment, ignorance and illiteracy,

small and scattered size of establishments”.16

Informal employment includes:

Own-account workers working in their own informal enterprise

Own-account worker producing goods exclusively for own final use by their household.

Contributing family workers, irrespective of whether they work in formal or informal

sector enterprises

Members of informal producers’ cooperatives

Employees holding informal jobs, whether employed by formal sector enterprises,

informal sector enterprises or as domestic worker employed by households and

Segment of informal economy

Wage work for informal enterprises

Domestic work without a regular contract

Casual day labour without a fixed employer

Unregistered or undeclared work for formal or informal firms

Temporary and part-time work for formal firms

EXAMPLES (total = 106 activities):

Agriculture: landless labourers, small farmers, traditional artisans, animal

husbandry

Industry: workers in brick-kilns, construction, beedi-making, incense stick

Services: workers in local transport, shops, domestic servants, community

services like street cleaning, street vendors, garbage collectors

Small Workshops: shoe makers, garment makers and embroiderers

At Home: garment workers artisans or craft producers

On Rivers, Ponds, Lakes, and Oceans: fishermen, shippers

Employees are considered in informal employment when

their employment relationship, in law or practice, is not subject to:

16 http://www.wageindicator.org/documents/wwwmeetingjune06/informalindia

National labour legislation

Income taxation

Social protection or

Entitlement to certain employment benefits, e.g. paid annual leave, sick leave, etc.

Estimates of Employment in India

Industrial Category No. of persons (in millions)

Formal Sector Informal Sector

Agriculture 1.39 238.87

Non-Agriculture 26.68 131.5

Mining & Quarrying 1.01 1.25

Manufacturing 6.71 37.07

Electricity, Gas And Water 1 0.04

Construction 1.17 16.36

Trade, Hotels And Restaurants 0.49 40.37

Transport, Storage & Comm. 3.15 11.48

Financial Services 1.65 3.29

Community Services 11.49 21.64

All Sectors 28.07 (93%) 370.37

Labour Force Characteristics:

Urban Share (in percentage)

Male Female Total

1. Employed 51.8 13.9 33.7

2. Unemployed 2.4 0.8 1.6

3. Labour Force

(1+2) 54.2 14.7 35.3

4. Not counted in

the labour force 32.8 71.7 51.4

5. Working age

population (3+4) 87 86.4 86.7

6. Non-working age

population 13 13.6 13.3

7. Population (5+6) 100 100 100

Rural Share (in percentage)

Male Female Total

1. Employed 53.1 29.9 41.9

2. Unemployed 0.9 0.3 0.6

3. Labour Force

(1+2) 54 30.2 42.5

4. Not counted in the

Labour force 30.3 53.9 41.7

5. Working age

population (3+4) 84.3 84.1 84.2

6. Non-working age

population 15.7 15.9 15.8

7. Population (5+6) 100 100 100

India’s Unemployment Rate

Unemployment Rate in India decreased to 5.20 percent in 2012 from 6.30 percent in 2011.

Unemployment Rate in India averaged 7.58 Percent from 1983 until 2012, reaching an all-time

high of 9.40 Percent in 2009 and a record low of 5.20 Percent in 2012. Unemployment Rate in

India is reported by the Ministry of Labour and Employment, India.

Employment Growth in the Organised and Unorganised Segments: The Policy Context

and the Concerns

The unorganised non-farm sector has, in fact, been the only segment to record respectable rates

of employment growth. Indian agriculture, on the other hand, has virtually ceased to employ

more labour, and the average annual employment contribution of the organised non-farm sector

has dwindled to similarly low levels. These two segments together accounted for close to 70 per

cent of all persons employed in India in 1999-2000,4but for only 7 ½ per cent of all new jobs.

Thus, in recent years, the burden of providing additional employment to the growing Indian

labour force has fallen upon the unorganized non-farm sector, which accounts for only 30 per

0

1

2

3

4

5

6

7

8

9

10

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

cent of employment in rural and urban areas combined.17 One result has been that rural

employment growth rates have collapsed to less than 0.7 per cent, pulling down the overall,

(rural plus urban), employment growth rates to unacceptably low levels, pushing up recorded

rates of unemployment and easing some people out of the labour force altogether. In short, the

evidence from the 1990s demonstrates that the unorganised non-farm sector alone cannot carry

the burden of providing work,

In the mid 1990s, only one substantial sector, (trade), and three minor

subsectors, (i) transport, (ii) banking, financial and legal services, and (iii) warehousing,

generated levels of gross value added per worker as high as Rs. 1,000 per month in 1993-94

prices. Together these accounted for less than thirty per cent of all rural employment in the

unorganised sector. In subsectors accounting for the remaining 70 per cent of rural unorganised

enterprise employment - manufacturing, restaurants and hotels and the rest of the service sector -

average labour productivity is too low to sustain the average worker without resort to other

sources of income. Moreover, in unorganised manufacturing enterprises, which employ the

largest number of people, (about 45 per cent of all rural unorganized segment workers), average

labour productivity has been going down, at least during the first half of the 1990s.6 This has

happened also in transport, which witnessed such a large increase in the number of workers

employed in rural areas in the most recent decade, that labour productivity in this sector was also

depressed. The decline in labour productivity in manufacturing it may be noted, took place

despite the exit of roughly three million rural enterprises and roughly four million workers from

this sector during the late 1980s and early 1990s. Since per worker productivity in the surviving

enterprises failed to improve as a result of these adjustments, the recent restructuring of the rural

unorganised manufacturing segment seems to have served no constructive purpose. Although it

can be verified, from tables in the next subsection, that the situation in urban unorganized sector

enterprises is far better on the whole, it needs to be mentioned that there are huge inter state

labour productivity disparities, such that urban unorganised segment workers in some states such

as Uttar Pradesh are worse off than rural unorganised segment workers in others, such as

Punjab.18

17 http://planningcommission.nic.in/reports/sereport/ser/restruc/stdy_rsturc_ch1.pdf 18 http://www.igidr.ac.in/pdf/publication/IDR-2011.pdf

Employment in Organised Sector

The Union Labour & Employment Minister Shri Mallikarjun Kharge has informed

the Lok Sabha that according to the information collected under the Employment Market

Information Programme of the Ministry of Labour and Employment, the growth rate of

employment in the organised sector is given below:19

(Figures in lakh)

Year ended 31st March Total Employment Percentage increase over previous year

2008 275.48 1.0

2009 281.72 2.3

2010 287.08 1.9

The share of women in employment in the organized sector during 2008 to 2010 is given below:

(Figures in lakh)

Year Ended

31st March

Total

Employment

Employment of

Women

% of women Employment to

total Employment

2008 275.48 55.12 20.0

2009 281.72 55.80 19.8

2010 287.08 58.59 20.4

19 http://india.gov.in/topics/labour-employment/organized-sector-workers

Conclusion:

In India, a major chunk of labor force is employed in the unorganized sector. The unorganized /

informal employment consists of causal and contributing family workers; self employed persons

in un-organized sector and private households; and other employed in organized and unorganized

enterprises that are not eligible either for paid the unorganized sector plays a vital role in terms

of providing employment opportunity to a large segment of the working force in the country and

contributes to the national product significantly. The contribution of the unorganized sector to

the net domestic product and its share in the total NDP at current prices has been over 60%. In

the matter of savings the share of household sector in the total gross domestic saving mainly

unorganized sector is about three fourth. Thus unorganized sector has a crucial role in our

economy in terms of employment and its contribution to the National Domestic Product, savings

and capital formation.

The organized part comprises commercial banks in India both public sector and private sector

banks and foreign banks. The Reserve bank of India the apex bank is the regulator of the money

market in India. It regulates the flow of the credit and money in the economy. To influence the

liquidity in the system the RBI intervenes in the money market from time to time either to

augment or reduce the supply of credit. The open market operation of the RBI provides signals

for other segments of the financial system regarding the future monetary and credit policy of the

apex bank. There is an absence of a well-organized banking system. Though developed to some

extent in the recent years their presence is insignificant in rural areas even today. The absence of

banking facilities to the rural masses due to slow branch expansion in the country is a matter of

concern. It is not merely the size of the national income that is important. The composition of

national income gives us a clear picture of the nature of the economy. The increase in national

income does not always improve the welfare of people. For example, the national income of a

country may increase during a period. But suppose the price level increases faster than the

increase in the incomes of the people; people may not be better off.

Bibliography:

Kaushal, Savita. Patra, PROSPECTS OF DEVELOPMENT OF NON AGRICULTURE SECTOR pg.02

Sinha ANP, Article, Times of India, pg.06, (2012)

Government of India, Problem of non agriculture sector,pg.42,(2012)

Singh, Neelima. Organized sector employment , Jun 3, 2009

Webliography:

http://www.investopedia.com http://mutual-funds.indianmoney.com

http://safefuture.hpage.co.in http://www.economist.com http://pib.nic.in

http://www.skwirk.com/types-of-employment. http://www.meritnation.com/

http://www.wageindicator.org http://planningcommission.nic.in

http://www.igidr.ac.in http://india.gov.in