Unemployement in India by Vebs111

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Gokhale Institute of Politics and Economics

GOKHALE INSTITUTE OF POLITICS AND ECONOMICS.

UNEMPLOYEMENT IN

INDIA

Presented By

Mr.Vaibhav Eknathrao Tandale

Mr.Hrishikesh Dilip Bade.

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Introduction:-

mployment has featured as an important item in the development agenda in India. Approaches to the subject have, however, varied in different periods during the last over 50 years. In the initial years of development planning, unemployment was not expected to emerge as a major problem; yet care was taken to see that employment of a reasonable magnitude is generated in the development process to

productively employ the growing labour force. A reasonably high rate of economic growth combined with an emphasis on labour intensive sectors like the small scale industry was envisaged to achieve this goal. The rate and structure of growth rather than technology were seen as the instruments of employment generation. Thus while granting that in ʹan economy with relative abundance of labour, a bias in favour of comparatively labour in intensive techniques is both natural and desirableʹ, it was clearly recognised that ʹconsiderations of size and technology should not be set aside to emphasise employmentʹ. Unemployment was estimated to be relatively low, as was also the growth rate of labour force, and a targeted economic growth rate of 5 per cent with some emphasis on labour intensive consumer goods sectors, was expected to generate large enough employment over the years to prevent any increase in unemployment. These assumptions and expectations continued from one Five Year Plan to another during the 1950ʹs and 1960ʹs. Meanwhile magnitude and rate of unemployment increased significantly. Economy grew at a rate of around 3.5 as against the planned rate of 5 per cent per annum. Yet, employment grew at a relatively high rate of 2 per cent per annum. However, since labour force growth was much higher at 2.5 per cent as against less than 2 per cent per annum assumed, the result was an increase in unemployment. Magnitude of

unemployment had almost doubled during 1956‐1972, from around 5 to 10 million and

unemployment rate from 2.6 to 3.8 per cent. It sought to address the employment issue by reorienting the pattern of growth in favour of employment intensive sectors. At the same time, a strong opinion was emerging to suggest that growth alone cannot solve the problems of poverty and unemployment, and therefore, a number of special employment and poverty alleviation programmes were launched during 1974-79. They were mostly of two kinds: providing financial and other assistance for productive self employment, and offering supplementary wage employment to the underemployed. Employment growth during 1999-2005 not only outpaced the growth rate of the working age population, at 2.85% per annum it also signalled a reversal of the previous trend of ―jobless growth‖ during the 1990s (1993-2000), which showed an overall employment generation at around only 1% per annum. This unprecedented high growth in employment was celebrated by the government as a success of the growth strategy followed after liberalisation. The recently released results from the 64th round (2007-08) of the National Sample Survey (NSS) are interesting. Fully comparable with the quinquennial rounds, estimates of employment from this round suggest that

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employment growth slowed to 0.17% per annum between 2004-05 and 2007-08. This is the lowest employment growth recorded ever since data on employment and unemployment started being collected by the National Sample Survey Organisation (NSSO) four decades ago. The idea of ―jobless growth‖ is thus likely to be back on the agenda, since the period 2004-05 to 2007-08 was also the best ever in terms of real GDP growth – 9.4% per annum. While the Economic Advisory Council of the Prime Minister went to the extent of declaring that unemployment would be wiped out from the country by 2012..!

Meaning of Unemployment India as a nation is faced with massive problem of unemployment. Unemployment can be defined as ―a state of worklessness for a man fit and willing to work.‖ It is a condition of involuntary and not voluntary idleness. Some features of unemployment have been identified as follows:

The incidence of unemployment is much higher in urban areas than in rural

areas.

Unemployment rates for women are higher than those for men.

The incidence of unemployment among the educated is much higher than the

overall unemployment.

There is greater unemployment in agricultural sector than in industrial and other

major sectors.

Economists and social thinkers have classified unemployment into various types. Generally unemployment can be classified in two types:

(1) Voluntary unemployment a person is out of job of his own desire doesn't

work on the prevalent or prescribed wages. Either he wants higher wages or doesn't want to work at all. It is in fact social problem leading to social disorganization.

Social problems and forces such as a revolution, a social upheaval, a class struggle, a financial or economic crisis a war between nations, mental illness, political corruption mounting unemployment and crime etc. threaten the smooth working of society. Social values are often regarded as the sustaining forces of society. They contribute to the strength and stability of social order. But due to rapid social change new values come up and some of the old values decline.

At the same time, people are not is a position to reject the old completely and accept the new altogether. Here, conflict between the old and the new is the inevitable result which leads to the social disorganization in imposed situation. In economic terminology this situation is voluntary unemployment.

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(2) In voluntary unemployment

In this type of situation the person who is unemployed has no say in the matter. It means that a person is separated from remunerative work and devoid of wages although he is capable of earning his wages and is also anxious to earn them. Forms and types of unemployment are.

a. Cyclical unemployment –

This is the result of the trade cycle which is a part of the capitalist system. In such a system, there is greater unemployment and when there is depression a large number of people are rendered unemployed. Since such an economic crisis is the result of trade cycle, the unemployment is a part of it.

b. Sudden unemployment –

When at the place where workers have been employed there is some change, a large number of persons are unemployed. It all happens in the industries, trades and business where people are employed for a job and suddenly when the job has ended they are asked to go.

c. Unemployment caused by failure of Industries – In many cases, a business a factory or an industry has to close down. There may be various factors responsible for it there may be dispute amongst the partners, the business may give huge loss or the business may not turn out to be useful and so on.

d. Unemployment caused by deterioration in Industry and business –

In various industries, trades or business, sometimes, there is deterioration. This deterioration may be due to various factors. In efficiency of the employers, keen competitions less profit etc. are some of the factors responsible for deterioration in the industry and the business.

(3) Seasonal unemployment

Certain industries and traders engage workers for a particular season. When the

season has ended the workers are rendered unemployed. Sugar industry is an

example of this type of seasonal unemployment.

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Measurement of Employment

The National Sample Survey Organisation (N.S.S.O.) has developed and standardised

the concepts and definitions of labour force, employment and unemployment suitable to

our socio-economic conditions and adopted them in quinquennial surveys on

employment and unemployment since 1972-73 (27th Round). The various estimates are

based on three concepts namely, Usual Status, Weekly Status and Daily Status.

Based on the recommendations of the Committee of Experts on Unemployment Estimates set up by the Planning Commission in 1969 (Dantwala Committee). The Three Kinds of Estimates of the Unemployed Unemployment rate is defined as the number of persons unemployed per 1000 persons in the labour force. Three kinds of estimates for the unemployed are obtained following the three different approaches. These are: I) Number of persons usually unemployed based on ‗usual status‘ approach, ii) Number of persons unemployed on an average in a week based on the ‗weekly status‘ and iii) Number of person-days unemployed on an average during the reference period of seven days preceding the survey. These are explained below:—

i. Usual Status Concept: This concept is meant to measure the usual activity status—employed or unemployed or outside the labour force of those covered by the survey; thus the activity status is determined with reference to a longer period than a day or a week. The usual activity status indicates the magnitude of persons unemployed for a relatively longer period during a reference period of 365 days and approximates to an estimate of chronically unemployed. Some of the unemployed on the basis of this criterion might be working in a subsidiary capacity during the reference period. The former is called as the usually unemployed according to the principal status (p.s.) and the latter, the usually unemployed excluding the subsidiary status workers (U.S. adjusted) which admittedly will be lower than the former.

ii.Weekly Status Concept: Here the activity status is determined with reference to a period of preceding 7 days. a person who reports having worked at least for one hour on any day during the reference period of one week while pursuing a gainful occupation was deemed to be employed. A person who did not work even for one hour during the reference period but was seeking or available for work was deemed to be unemployed. The second estimate based on the weekly status gives the average weekly picture during the survey year and includes both chronic unemployment and also the

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intermittent unemployment, of those categorized as usually unemployed, caused by seasonal fluctuations in the labour market.

iii.Daily Status Concept: Here activity status of a person for each day of the preceding 7 days is recorded. A person who worked at least for one hour but less than four hours was considered having worked for half a day. If worked for four hours or more during a day, he was considered as employed for the whole day. The third estimate based on the daily status concept gives average level of unemployment on a day during the survey year. It is the most inclusive rate of ‗unemployment‘ capturing the unemployed days of the chronically unemployed, the unemployed days of the usually employed who become intermittently unemployed during the reference week, and the unemployed days of those classified as employed according to the priority criterion of current weekly status. The magnitude of incidence of unemployment differs substantially among the three Concept of measurement. This is due to the differences in the nature of enquiry made during the household survey on employment / unemployment in regard to disposition of time of a person.

Unemployment in India by three Alternative Concepts

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The 10th Plan presented the rationale for changing over to the ‘current daily status’ basis of measurement:- In the Ninth Plan, the calculations of employment and unemployment were based on Usual Principal and Subsidiary Status basis (UPSS). The Report of the Special Group has viewed current daily status (CDS) as a better measure to capture unemployment and underemployment than the usual status, and therefore recommended the use of CDS basis for estimation purpose.

Current daily status .Unit = Y-axis (Million) and on X-axis (Years) The rationale for using CDS for measuring employment and unemployment is the Following: i) The Approach Paper to the Tenth Plan recommended creation of gainful Employment opportunities for the entire additions to labour force during the Tenth Plan And beyond. Therefore, policies and programmes to fill the gap between requirements

2001-02 2002-03 2003-04 2004-05

0

50

100

150

200

250

300

350

400

450

Unemployment in the first three years of the Tenth Plan

Labour force

Employment

Unemployment rate

No. of unemployed

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And availability of gainful employment opportunities is to be worked out. At any Point of time, there is a large unemployed and under-employed workforce i.e., not Having any gainful employment, although by using the measurement on UPSS basis, Several of them are declared employed. This results in over-estimation of the level of Employment. To avoid this, largely, the Special Group suggested estimation of the Extent of employment and unemployment on CDS basis. ii) According to the NSSO employment and unemployment survey report of 1999- 2000 ‗The usual status approach adopted for classification of the population is unable to capture the changes in the activity pattern caused by seasonal fluctuations. But the estimate obtained by adopting the current weekly or current daily status approaches are expected to reflect the overall effect caused by the intermittent changes in the activity pattern during the year. The latter (CDS) reflects also the changes, which take place even during the week. The estimate of the employed based on current daily status gives average daily picture of employment. Therefore the Special Group regarded the CDS measurement as the most appropriate measure to have an estimate of the gap i.e. jobs to be created on gainful basis, in order to bring out recommendations as to how they can be filled up by changes in policies and programme.

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Poverty with Unemployment under the alternative basis of measurement – UPSS & CDS In the UPSS basis of measurement, the estimate of unemployment of the better-off persons (those having higher levels of consumer expenditure) turns out to be higher than that of the poor. As per the CDS basis of measurement, the poor have a higher level of unemployment than the rich. Table (above: illustrates this feature both for the rural and the urban areas. UPSS unemployment rates of the rural rich are nearly double that of the poor. And the CDS unemployment rates of the rural poor are 10 percentage points higher than the UPSS unemployment rates of the poor. It may also be noted that in the CDS measure the incidence of unemployment rises sharply as the income level (as measured by the consumption expenditure here) falls; for example, the unemployment of urban poor being 6 percentage points higher than the rich. The UPSS measure fails to establish a monotonic relationship between unemployment and income. In other words, the CDS measure of unemployment brings out the relationship between poverty and unemployment, clearly.

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Situation of Employment 1983 to 1993-94 Fundamental changes in the workforce structure are first observed for the 1980s. While employment growth was only 1.61% per annum between 1983 and 1987-88 by usual status and 1.81% by weekly status, it showed employment growing at 2.9% per annum by daily status. Employment growth was not only higher than the rate of growth of population, but along with a high rate of growth of employment it also showed non-farm employment increasing much faster than in any of the previous periods. This high growth of employment continued in the next period, between \1987-88 and 1993-94, with employment growing by 2.4% per annum. While this period did show a reversal of the trend of non-farm diversification, the high rate of growth of employment between 1983 and 1993-94 at 2.1% by usual status and 2.7% by daily status was seen as a response to the acceleration in the growth rate of GDP from the ―Hindu‖ rate of growth of less than 4% per annum to an average of 6% rate of growth in the 1980s. However, there are two significant exceptions to this general trend. First, the daily status Workforce Participation Rate (WPR) for both males and females shows a sharp increase between the 38th and 43rd rounds while all other measures (weekly status and usual status) suggest a decline in the WPR. The second exception to the general trend of falling WPR is that the WPR measures from all the four classifications show an increase between the 43rd and 50th rounds. However, to put matters in perspective, a brief mention is made here of the nature of the problem and correction. As far as the first is concerned, this is merely a reporting error with employment and unemployment reports for the 43rd round (1987-88) suggesting a daily status WPR is very close to the weekly status WPR in rural areas which is nearly impossible, particularly in a drought year. Estimates of daily status from the unit records do confirm that it is merely a reporting error and the estimates obtained from the unit level data are in line with the general trend observed so far. But it does question the previous literature, largely based on daily status estimates of 1987-88 which credited a much higher rate of growth of employment during the 1980s to a transformation in rural areas. As far as the second outlier is concerned, this is largely to do with the change in methodology in arriving at the estimate of workers in the 50th round. In brief, the change was the following: (A) In the earlier NSS quinquennial surveys (up to the 43rd round) the identification of usual status involved a dichotomous classification of persons into the ―employed‖, ―unemployed‖ and ―out of labour force‖, based on the major time criterion. In the 50th round, the procedure prescribed was a two-stage dichotomous procedure which involved a classification into ―labour force‖ and ―out of labour force‖ in the first stage and the labour force into ―employed‖ and ―unemployed‖ in the second stage.

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(B) In the earlier surveys, the current weekly status (CWS) of a person was first assigned on the basis of the response to the questions relating to his participation in gainful activities (non-gainful activities) and thereafter the daily time disposition data was collected only for those in the labour force as per the CWS. In the 50th round, the daily time disposition was collected for all the persons surveyed and the CWS was determined based on the time disposition data so collected, without any further probing on this point. The net impact of both these changes was that a small set of population which would have been out of the labour force by the previous definition was now counted as workers. These persons would be all those who were out of the labour force for less than 182 days and spent a larger part of the remaining 183 days as employed, but with the condition that the number of days worked by them was less than the number of days spent out of the labour force or more precisely, 182 days. In the rural workforce where this category would be large, this change can have a significant effect on the participation rates of workers. The nature of employment in the rural areas is still dominated by agricultural employment and it is common knowledge that such work is at best seasonal with many rural workers reporting the number of days available for work as anywhere between 90 and 180 days. This impression is also corroborated by the large number of micro studies available on the conditions of rural workers, both of casual labourers as well as self-employed cultivators. Even the most conservative estimate of these persons being counted as workers in the 50th round as opposed to them being classified as non-workers in the previous rounds would inflate the estimate of the WPRs. This is also corroborated by the fact that the major contribution towards this increase in worker participation rate came from those employed in agriculture with the percentage of those employed increasing between the 43rd and 50th rounds, as opposed to the trend of greater diversification towards nonagricultural activities which was seen since the 32nd round. Clearly, the category of persons identified above would most probably be in the agricultural sector and hence the reversal of a trend of diversification towards non-farm employment. The second evidence in this regard is the case of the female workforce, which continues to show a decline in participation rates by principal status for the 50th round compared to the 43rd round, but shows an increase in participation rates for the principal and subsidiary status taken together.

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The category of employment mentioned above would have a large number of females who work between three and six months but remain out of the labour force for the large part of the year. These women who would have been counted as out of the labour force till the 43rd round would have been counted as employed by subsidiary status by the new classification in the 50th round. Given the nature of changes in the 50th round compared to the previous round and the nature of questions asked in the EUS, it would be extremely difficult to arrive at any comparable estimate

of changes in workforce participation rates between the 43rd and 50th rounds. Even the availability of unit records is of little help in this regard. But it does offer some clue to the extent to which the estimates would have been affected by such reclassification. The relevant question in this regard was the one that asked the number of months for which persons were seeking work/alternative work. This question is also relevant as far as the extent of underemployment is concerned, but for the present purpose it does give some idea of the extent of change in participation rates. Table presents the estimates from the 43rd and 50th rounds for those who were not classified as unemployed regarding the

Number of months they were seeking work

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Situation of Employment after 1993-94

The purpose of the previous discussion was to highlight certain discrepancies in trends reported up to 1993-94 which could be crucial for understanding the trends in employment and unemployment. Unfortunately, it is not possible to arrive at a comparable estimate of employment-unemployment trends with the available data. However, these changes were limited to the 50th round of the EUS and subsequent rounds of employment and unemployment have retained the conceptual framework of the 50th round for collection of employment and unemployment data. That is, trends on employment from the EUS from 50th round onwards are fully comparable. There have been three thick rounds after the 50th (1993-94).These are the 55th (1999-2000), 61st (2004-05) and more recently..! The 64th rounds NSSO (2007-08):- All the rounds from the 50th to 64th rounds are fully comparable to each other and give a long-term trend in employment and unemployment for the last two decades. The first period for which comparable estimates of employment are available using a new methodology was the 1993-94 to 1999-2000 periods. This was also after the initiation of economic reforms and the results were eagerly awaited. These showed that Employment growth had slowed down considerably to 1% per annum by usual status. The deceleration was contributed to a large extent by the slowdown in employment generation in rural areas where employment grew by 0.66% per annum, less than Half the rate of growth seen during 1983-94 at 1.75% per annum.As against this, the growth rate of employment in urban areas was a respectable 2.3% per annum. Across gender, the growth rate of male employment was 1.38% per annum compared to a paltry 0.26% per annum for females. However, this was seen as the first evidence of jobless growth of the Indian economy in the post-liberalisation period. But it came despite the economy growing at a respectable 6% per annum and agricultural production not doing so badly. During the same period, the rate of growth of wages was overall slower than in the previous period but it was a Respectable 2.5% per annum in real terms. The slow growth of employment surprised many but confirmed the apprehension that the post-reform economic growth had been largely jobless. However, the gloom of jobless growth was short-lived with the 61st round showing a reversal of the trend with employment increasing by 2.85% per annum. Incidentally, the growth in employment was led by exactly the same categories that grew the slowest in the previous period of 1993-94 to 1999-2000. While urban employment growth increased by 4.22% per annum (double the rate of growth in the previous period), rural employment grew by 2.41% per annum (quadruple the rate of growth in the previous period). But, even more remarkable was the recovery of the growth rate of female employment which increased by 14 times from 0.26% per annum during 1993-2000 to 3.7% per Annum during 1999-2005. As against this, male employment growth accelerated from 1.4% per annum to a respectable 2.45%.

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While this was taken as a symbol of the employment creating potential of the Indian economy post-1999-2000, it was difficult to reconcile it with trends from the rural areas, in particular the agrarian sector which saw a severe crisis with wages decelerating to their lowest rate of growth in the last four decades. The growth rate of agricultural production was less than 1% per annum with a negative rate of growth for food grains. It was also accompanied by increasing unemployment. The other departure from the general trend seen during 1999-2005 was the increase in self employment and a decline in the share of casual employment, as against the general trend of increasing casualisation and declining self-employment. Despite the fact that the period between 1999-2000 and 2004-05 was not the best in terms of improvements in the lives of the majority of persons in rural areas, the increase in employment was seen as the success of the growth strategy. So much so that the Economic Advisory Council of the Prime Minister quickly declared that unemployment will wiped out from the country with the growth rate of the workforce equal to the growth rate of labour force. This was also reconfirmed in the government‘s First Report on Employment in July 2010. The same optimism was shared by the Planning Commission though to a lesser extent in the Eleventh Plan documents as well as in the mid-term appraisal of the Eleventh Plan. Unfortunately, this optimism was also short lived. The results of the thick round on employment for 2007-08 showed a reversal of most of the trends reported between 1999-2000 and 2004-05. In the period 2004-05 to 2007-08, employment growth slowed to 0.17% per year as against 2.85% per year during 1999-2005. The results show that the total employment created between 2005 and 2008 by usual status was only 2.4 million, which was 0.8 million per year. The total number of workers increased from 457.9 million in 2004-05 to 460.2 million in 2007-08, a growth rate of 0.17% per year as against the 2.85% per year growth of employment achieved during 1999-2000-2004-05. This was the lowest rate of employment generation in the previous three decades, even lower than the spell of jobless growth of 1993-2000 when employment increased by less than 1% per year. A detailed examination of the trends also suggests that while employment generation decelerated considerably in urban areas, increasing by 4.4 million only between 2005 and 2008, it actually declined by 2 million in rural areas. But in both rural and urban areas, the decline was largely contributed by the female workforce. Overall, employment for males increased by 5.2 million per year but declined by 4.4 million per year for females. Sectoral trends also suggest that the trend of non-farm diversification in employment in rural areas, which was also the focus of the Eleventh Plan, has not yielded any results with the 2007-08 estimates showing almost no non-farm employment diversification compared to 2004-05. These trends are also confirmed by the daily status measure which show that person days of employment in rural areas declined from 93.8 billion person days in 2005 to 92.9 billion person days in 2008.

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Trends in Income and Output The slow growth of employment during 2005-08 in itself is worrisome but it is all the more so because 2005-08 also happens to be the best period of economic growth in independent India with GDP growing at more than 9% per annum. Table gives the rate of growth of GDP for the three periods mentioned above. A quick Look at Table A clearly shows that there is an inverse relationship between output growth and employment growth. This is true for agriculture as well as in the aggregate.

Growth Rate of GDP at Constant Prices (% per annum) {A} 1993-94 to 1999-2000 1999-2000 to 2004-05 2004-05 to 2007-08

Agriculture 3.99 1.56 4.55

Non-agriculture 9.36 7.30 10.56

Total 7.86 5.98 9.47

In fact, the lowest rate of growth of GDP is seen for the 1999-2000 to 2004-05 periods, which incidentally is also the period of the highest rate of growth of employment. The lowest rate of growth of employment was in the period 2004-05-2007-08, which also Happened to be the period of highest growth in GDP. The period 1993-94-1999-2000 shows a rate of GDP growth which is clearly better than the 1999-2000-2004-05 period but it experiences a lower rate of growth in employment than the later period. A similar picture emerges by looking at the earnings of wage workers. As Tables B and C show, the period 1999-2000 to 2004-05 appears to be one of the lowest rates of growth of wages. This is true for casual wages in agriculture as well as in non-agriculture. While casual wage growth decelerated sharply, they declined in real Terms during the same period for workers of all educational status except for graduates and above in rural and urban areas.

0 5

2.8

3.67

1.38

0.67

4.35

3.13 2.95

5.13

1.04 1.51

5.95 6.04

2.78

4.19

1.31 0.76

5.08

3.29

0

1

2

3

4

5

6

7

Agriculture Non-agriculture Agriculture Non-agriculture Agriculture Non-agriculture

1993-94 to 1999-2000

1993-94 to 1999-20002

1999-2000 to 2004-05

1999-2000 to 2004-052

2004-05 to 2007-08

2004-05 to 2007-082

Male Female Persons

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Growth Rate of Real Wages (1999-2000 Prices) for Casual Workers of Age 15-59 (% per annum)

However, this situation was reversed after 2004-05 and not only did GDP growth rates

recover to an all time high, even casual wages grew at a rate which was higher than that

seen any time in the previous two decades. This is all the more impressive for

agricultural wages. Interestingly, while non-farm wages also recovered to their previous

levels, the growth was more than 6% per annum for females. Unfortunately, regular

wages did not recover their high growth rate in rural areas with overall wage rates for

regular employees declining in real terms. But even in rural areas, the illiterate regular

workers show a reversal of a trend of decline in real wages to a respectable 2.23% per

annum. On the other hand, urban regular wages recovered to their Previous levels of all

educational categories except for the sec-ondary educated ones.

However, it is also clear that if anything there is an inverse relationship between

growth of incomes and output with growth of employment. The standard argument of

high growth also creating high employment and therefore making the task of

redistributive justice easier may not hold if the disjunction between economic growth and

employment creation holds true. It will also be a setback to the agenda of inclusive

growth centered on creating decent jobs.

-4

-2

0

2

4

6

8

Ag

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No

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ltu

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Ag

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No

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Ag

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No

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ltu

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1993-94 to 1999-2000

1993-94 to 1999-2000

1999-2000 to 2004-05

1999-2000 to 2004-05

2004-05 to 2007-08

2004-05 to 2007-08

Not literate

Primary

Secondary

Graduates

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Employment and Unemployment Situation in India In this section the analysis of the overall employment and unemployment situation in India is presented. a. Labour Force Participation Rate The labour force participation rate indicates about the percentage of population who are Already engaged any kind of work and those who are ready to work given the employment opportunity. In other words the labour force includes both the workers or the employed and the unemployed. India would be the second largest country in the world in terms of the size of the labour force. There was around 469.96 million labour force constituting 43 per cent of the India‘s total population estimated at around 1092.9 million by the end of 2004 (as on 1st January 2005). In the recent period, by the end of 2007, the labour force in India has increased to 471.7 million. The overall labour force participation rate (LFPRs) based on NSS usual status (includes both principal and subsidiary) shows that there has not been any steady decline or increase during the last three and half decades but it was fluctuating between 40 to 44 percent (see Table ). However, a close look at the trend shows that during 1970s the LFPR had increased to its highest ever in 1977-78 and began to decline thereafter. During the 1980s decline in WPR continued till late 1990s. Between 1987-88 and 1993-94, although there was marginal increase in LFPR, there was a sharp decline of 2 percentage points between 1993-94 and 1999-2000. But the LFPR increased again between 1990-2000 and 2004-05 with sharp increase of 2.4 percentage points. Again during 2007-08 the LFPR has declined by 1.7 percentage points from the level of 2004-05.

Labour force Participation Rates (LFPRs) in India

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In fact the sharp decline in LFPR during 1990s could be partly due to increasing attendance rate in educational institutions. The same explanation may not withstand in the LFPR revival scenario given the continuous increase in the enrolment. Therefore one may have to search elsewhere the explanation for fluctuations in LFPR in the recent past. There are rural-urban and male-female differences in labour force participation rates. The LFPR is higher in the rural areas when compared to urban and higher among the male population when compared to their female counter parts. There has not been any clear trend of change in terms of declining or increasing rural-urban and male-female differences in LFPR. The labour force participation rate (LFPR) by age group indicates that it is declining among younger cohorts below 30 years of age over the period and a slight increase in the older cohorts (see Figure in table). Owing to reshuffling of labour force across age groups, the overall participation rate remained the same. The explanation of increasing enrolment for declining LFPR may be applicable to younger cohorts. But one has to search explanation for increasing LFPR among the senior (30 + age) adult cohorts. It may be that the loss of income due to withdrawal of younger cohorts while attending education to the household has to be compensated. Moreover, the household has to increase its income level to invest in children‘s Education. Therefore, the number of adults available in the labour market might have to Increase.

Labour Force Participation Rate (LFPR) in India by Age Group

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School Attendance Rate in India – Percentage of 5-29 age group Attending Educational Institutions (Usual Status)

The percentage of persons below 30 years of age attending educational institutions by age group indicates that it has been higher among 5 to 14 years age group and it increased over the period between 5 and 29 years of age (see Figure page no 18). The increase in the school attendance rate has a corresponding decline in labour force participation rate, as above (see Figure above), in this young age cohorts.

b. Worker Population Rate (WPR) The measure of work participation rate presents the percentage of persons who actually Worked or employed in the total population. Work participation rate (WPR) excludes the Percentage of unemployed from the labour force participation rate (LFPR). In India there were about 459 million workers during 2004-05 consisting of 42 per cent of the country total population and the workforce has increased to 461.4 million in 2007-08. The trend in work participation rate during the last three and half decades shows that

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there has not been any sharp decline or increase; it remained between 40 to 42 per cent. But a close look at the trend shows a similar pattern observed in the case of LFPR. Clearly, during 1970s the WPR had increased to its highest ever and during the 1980s there was a decline that continued till late 1990s. The WPR declined to its lowest ever to 39.7% in 1999-2000 and revived between 1999-2000 and 2004-05 with an increase of 2.3 percentage points. But, it declined to 40% in 2007-08.

Worker population ratios (WPR) in India

As in the case of LFPR, the work participation rate (WPR) too is higher in rural areas than their urban counter parts and higher among males as compared to females. However, the trend shows that locational differences have always been higher than gender difference. Though there is no drastic change in the overall work participation rate, the change is Observed across age groups especially those of young age groups. The work participation rate (WPR) by age group indicates the pattern observed in the case of labour force participation rate (LFPR) i.e. it is declining among younger cohorts below 30

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years of age over the period and a slight increase in the older cohorts (see Figure).

Current situation of Employment ( 2007-08) While the employment trends during 2005-08 do suggest a slow-down in employment generation and therefore a return to jobless growth seen in the 1990s, they do not appear worrisome given the fact that the organised sector has shown a significant increase in employment growth. But more importantly, these do fit in with the general explanation that 2004-05 was a year following distress in the rural economy and therefore a large volume of employment in 2004-05 was distress employment. Seen in this context, the decline in aggregate employment may just be the withdrawal of distress workers. Such a story also looks convincing based on evidence on income growth measured through GDP or the growth rate of wages. While some of the buoyancy in the rural And urban areas was a result of domestic policies, a significant part was also contributed by the overall buoyancy in the international environment and in weather conditions which was among the best three years in terms of monsoon rainfall. However, this situation was dramatically reversed subsequently, both internationally as a result of the financial crisis and the recession that followed in developed countries and domestically with the worst drought of the last three decades in 2009.

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These also led to a deceleration in aggregate GDP growth and also to a slowdown in the growth rate of wages as is available from the wage data from Wage Rates in Rural India (WRRI). This period also coincided with the worst spell of food price inflation, which stayed in double-digits for the most part of 2008 and 2009. It is very difficult to guess in the absence of available data from the NSSO. The most recent thick round of NSSO was conducted in 2009-10, results of which will be available sometime next year. But going by the trends seen for earlier rounds, one would expect an increase in distress employment and also unemployment rates. Fortunately, we do have information on what happened to employment trends after 2007-08, although not from the NSSO. The new source of data is from the labour bureau. This is the Quarterly Employment Report whose publication started after the recession to gauge the impact on the labour market. Starting from October-December 2008, there have been seven such surveys. The latest survey for which information is available is the seventh one covering April-June 2010. Although the coverage varies across surveys, the last few surveys have remained consistent in terms of coverage. The change in employment in selected sectors is given in Table for the seven surveys conducted so far.

Based on these quarterly surveys, the total increase in employment in the last two years has been around one million. It is also clear that the trend of a decline in employment, which followed the financial crisis, has now been arrested. At the same time, the rate of growth of employment seems to be slowing down in recent quarters. However, it must be mentioned here that the units covered in this survey are primarily in the organised sector and include manufacturing as well as services but exclude construction. But even within these sectors, the trend of a growth in employment is a continuation of the earlier trend of an increase in organised sector employment.

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Jobless Growth..? (2004-05 to 2007-08) During 2005-08 may not be a period of jobless growth. During this period, not only did organised sector employment grow at the fastest pace in the last two decades, the deceleration in aggregate employment growth would also be consistent with improved incomes and wages. In particular, the rebound of the agrarian economy and the con-sequent increase in wages would imply that females, children and the elderly would have withdrawn from the labour market. Distress was also lessened by the introduction of safety nets such as NREGA, a continuous run of good monsoons and better access to credit during the same period. This, in fact, is what is happening during 2005-08 with the largest deceleration in employment growth seen for the same population groups which saw the largest increase during the previous period. Interpreted in this manner, this would be a positive sign with a lessening of distress and consequently distress movement in employment. The improvement in the employment situation is also confirmed by the unemployment estimates which remain high for males in the rural as well as in urban areas but decline considerably for females in the rural and urban areas. As a result, the number of unemployed persons by usual status which increased from 8.97 million in 1999-2000 to 11.29 million in 2004-05 declined marginally to 10.88 million in 2007-08. The slowdown in employment growth also looks magnified because of the high base in 2004-05 as a result of distress employment. It is then better to compare the employment growth rates, ignoring the 2004-05 survey year. Moreover, since 1993-94, 1999-2000 and 2007-08 were all good agricultural years, the comparison avoids any seasonal factors. Ignoring the 2004-05 periods, the growth rate of employment during 1999-2000 to 2007-08 is a respectable 1.84% per annum, although marginally lower than the growth of employment during 1983-1993 at 2.05% per annum. However, taking into account the fact that the age corrected growth rate between 1983 and 1993 is only 1.71%, the recent period shows a better employment growth rate. Further, since the 1993-94 employment estimates were overestimated due to a change in methodology, the employment growth rate during this decade would actually be better than the 1980s growth rate of employment. Seen from a long-term perspective, the present decade may not appear to be a decade of jobless growth. But it does raise another important issue and that is the issue of a transformation of the workforce structure. With the withdrawal of the temporary workforce, the data also suggest an almost negligible non-farm transformation. Moreover, this interpretation raises a fundamental question and that is the relationship between output growth and employment growth. So far the evidence suggests that the relationship may be an inverse one. If that is the case, then how can employment generation be the cornerstone of inclusive growth?

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Approach to the Twelfth Five Year Plan for Employment The Eleventh Five Year Plan (2007‐08 to 2011‐12) had aimed at achieving faster and

More inclusive growth. Rapid GDP growth, targeted at 9 percent per annum, was regarded necessary for two reasons: first, to generate the income and employment opportunities that were needed for improving in living standards for the bulk of the population; and second, to generate the resources needed for financing social sector programmes, aimed at reducing poverty and enabling inclusiveness. The economy has performed well on the growth front, averaging 8.2 percent in the first

Four years. Growth in 2011‐12, the final year of the Eleventh Plan was originally

projected at around 9 percent continuing the strong rebound from the crisis, which saw

an 8.5 percent growth in 2010‐11. Instead, the economy actually slowed down

somewhat in 2011‐12 compared to the previous year – a phenomenon common to all

major economies reflecting the fact that 2010 was a rebound from depressed levels in

2009. Growth in 2011‐12 is likely to be around 8.0 percent.

The economy is therefore likely to achieve an average GDP growth of around 8.2 percent over the Eleventh Plan period, which is lower than the 9.0 percent originally targeted, but faster than the 7.8 percent achieved in the Tenth Plan. This implies a

nearly 35 percent increase in per‐capita GDP during this period.

It has also led to a substantial increase in government revenues, both at the Centre and

the States, enabling thereby a significant step‐up of resources for the programmes

aimed at inclusiveness. A healthy increase in aggregate savings and investment rates, particularly in the private sector, testifies to the strength of our economy as it enters the Twelfth Plan period. The acceleration in growth in the Eleventh Plan period compared with the Tenth Plan is modest, but it is nevertheless a good performance, given the fact that a severe global economic crisis depressed growth in two of these five years, and also that in the year 2009 India had the weakest monsoon in three decades.

The slowdown in 2011‐12 is a matter of concern, but it can be reversed if the investment

climate is turned around and if fiscal discipline is strengthened.

Plan Programs for Inclusiveness The Eleventh Plan gave a special impetus to several programmes aimed at building rural and urban infrastructure and providing basic services with the objective of increasing inclusiveness and reducing poverty. Some of these programmes were new, while others augmented existing initiatives. Thirteen such flagship programmes are listed in Box. Most of these programmes are Centrally Sponsored Schemes (CSS), which are Implemented by State Government agencies, but which are largely funded by the Central Government with a defined State Government share. The total expenditure on

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these schemes by the Central Government in 2011‐12 (budget estimate) is Rs.188, 573

crore, and the total expenditure during the Eleventh Plan period is almost Rs. 700,000 crore. As one would expect, the effectiveness of their implementation varies from State to State. Instances of misuse of funds are frequently reported in studies and press reports, and these are a legitimate source of concern that needs attention. However, it must be kept in mind that while instances of misuse or leakage present serious problems, they do not necessarily imply that the overall impact of the

programme is not positive. For example, MGNREGA, which was started in 2006‐07 and

Extended to cover the whole country during the Eleventh Plan has seen several instances of misuse of funds, but it has also notched up a remarkable success. It must be admitted, however, that there has been a proliferation of Centrally Sponsored Schemes over a period of years. This has led to poor implementation, duplication, lack

of convergence and sub‐optimal results.

There is an urgent need to transform the system and sharply reduce the number of Schemes. This will enable more focused and effective implementation. A Committee under Shri B.K. Chaturvedi, Member, Planning Commission, has been appointed to review the entire gamut of Centrally Sponsored Schemes and make recommendations for rationalization and consolidation leading to a significant reduction in their number.

With a people‐centred, demand‐driven architecture, completely different from the

Earlier rural employment programmes, MGNREGA has directly led to the creation of 987

crore person‐days of work since its inception in 2006‐07. In financial year 2010‐11,

MGNREGA provided employment to 5.45 crore households generating 253.68 crore

person‐days. It has also successfully raised the negotiating power of agricultural labour,

resulting in higher agricultural wages, improved economic outcomes leading to reduction in distress migration. This is not to deny that with better project design implementation leakages could be greatly reduced; and the assets so created could make a much larger contribution to increase in land productivity. Reforms in implementation of Plan schemes are a priority and should receive focused Attention in the Twelfth Plan. There is need for more flexibility in the design of the schemes to reflect the ground realities across the States. Additional provisions should be considered for encouraging innovation; also special efforts to promote convergence at the level of implementation to prevent duplication and to create synergies that improve the quality of outcomes. For growth to be inclusive it must create adequate livelihood opportunities and add to Decent employment commensurate with the expectations of a growing labour force. As noted above, India‘s young age structure offers a potential demographic dividend for growth, but this potential will be realised only if the extent and quality of education and skill development among new entrants to the workforce is greatly enhanced. One of the most remarkable things brought out by the 66th round NSSO survey on Employment

(2009‐10) is that the number of young people in education, and therefore out of the

workforce, has increased dramatically causing a drop in the labour participation rate.2

The total number of young working‐age (15‐24) people who continued in educational

institutions doubled from about 30 million in 2004‐05 to over 60 million in 2009‐10.

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The survey also shows that between 2004‐05 and 2009‐10, the overall labour force

Expanded by only 11.7 million. This was considerably lower than comparable periods earlier, and can be attributed to the much larger retention of youth in education, and also

because of lower labour force participation among working‐age women. Over the same

period, 18 million job opportunities were created on current daily status basis. Thus, in absolute terms, unemployment came down by 6.3 million; and the

unemployment rate which had increased from 6.06 percent in 1993‐94 to 7.31 percent in

1999‐2000 and further to 8.28 percent in 2004‐05, came down to 6.60 in 2009‐10.

The lower growth in the labour force is not expected to continue in future and we can assume that much larger numbers of educated youth will be joining the labour force in Increasing numbers during the Twelfth Plan and in the years beyond. The clear implication of this is that the pace of job/livelihood creation must be greatly accelerated. Part of this must come from a significant boost to the manufacturing sector of the economy, such that it grows at a rate that is faster than most other parts of the economy. However, this may not be enough, In part because not all categories of manufacturing are labour intensive. Although GDP

from manufacturing increased at 9.5 percent per annum between 2004‐05 and 2009‐10

along with some increase in employment in the organised manufacturing sector, the survey suggests that overall employment in manufacturing actually declined during this

period. The implied shakeout of labour from the un‐organised manufacturing sector

needs to be examined in detail and appropriate steps taken so that the obvious potential of the MSME sector as a source of jobs/livelihoods is realised fully. The 66th round NSSO Survey of Employment shows that the vast majority of new jobs

Created between 2004‐05 and 2009‐10 was in casual employment, mainly in

construction. While such jobs are often more attractive for rural labour than casual work in agriculture,

there is a potential for an accelerated pace of creation of more durable rural non‐farm

jobs/livelihood opportunities. Such job opportunities could come from faster expansion in

agro‐processing, supply chains and the increased demand for technical personnel for

inputs into various aspects of farming that is undergoing steady modernisation, and also the maintenance of equipment and other elements of rural infrastructure. The service sector too has to continue to be a place for creation of decent obs/livelihood opportunities, in both rural and urban areas.

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Development Programmes for Rural & Urban By Central Government

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Conclusions Changes in the workforce structure have always been a concern for policymakers and planners. These are indicators of the working of the development strategy and also of the linkages between the workforce structure, levels of living and the extent of poverty. Given the vast magnitude of poverty and relatively modest levels of per capita income, a more effective system of redistribution or dependence on trickle down alone would not be enough in the Indian context. With population growth largely exogenous, a development policy leading to a higher long-term rate of growth of the economy is necessary. But a balance between objectives is achieved more easily in a pattern of economic growth that has higher employment content. Rapid employment growth reduces the burden of redistributive justice through state intervention on the one hand, and, on the other, if this employment is ―gainful‖, it Also contributes to the national product making the task of growth with redistributive justice easier. This essentially is the basic premise of ―inclusive growth‖ centred on decent employment creation. However, such a model of economic development also assumes a linear relationship between output growth and employment creation. Unfortunately, the analysis of employment data since the 1970s suggests that such a linear relationship may not exist, particularly in a developing economy with a large workforce employed in agriculture. Analysis of the employment trends since 1972-73 suggests labour market changes have been very slow and gradual. This is not only true for aggregate employment but also for changes in the status of employment and industrial affiliation of workers. This has largely been because of three distinguishing features of the labour market. The first is the predominance of agriculture and the informal sector in total employment which implies that a majority of workers are self-employed in low quality employment and there has been a slow growth of labour productivity in these sectors. Second, large poverty and distress also lead to a situation of vulnerability where participation in the labour market is not out of choice but is governed by changes in the income level. This is true for a majority of workers classified as reserve labour and includes women, children and the elderly. And, finally, the dualism in the labour market following from the kind of growth followed in the last two decades. Not only has dualism increased over time, labour market behavior and the responses of the two segments of the labour market are often completely opposite to each other. The implication of this is that the traditional approaches of understanding the employment-output relation based on individual choices may not hold in a developing country context. The decision to enter and exit the labour market is more a response to household earnings. These, in turn, are governed by the changes in macroeconomic policies and the sectoral pattern of growth.

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Bibliography

Web. Data:-

Chandrasekhar, C.P., Jayati Ghosh and A.Roychowdhury (2006), “The „Demographic Dividend‟ and Young India’s Economic Future”, Economic and Political Weekly, No.49, Vol.41.

Jayaraman, Raji and Peter Lanjouw (1999): “Poverty and Inequality in Indian Villages”, World Bank Research Observer, Vol 14, No 1. www.jstore.com U n e m p l o y m e n t r e p o r t 2 0 0 4 - 0 5 , I n i t i a l s . ( 2 0 0 9 , 7 7 ) . P l a n n i n g

c o m m i s s i o n o f I n d i a . R e t r i e v e d f r o m h t t p : / / e n . w i k i p e d i a . o r g / w i k i /

c o m m i s s i o n o f i n d i n . c o m

GOI, Planning Commission; Sixth Five Year Plan; Chapter 13: Manpower and Employment, paragraph 13.3. http :// www.planningcommission.org

i n t e - p a p e r , I n i t i a l s . ( 2 0 1 0 , 1 1 3 ) . U n e m p l o y m e n t I n I n d i a . R e t r i e v e d f r o m

h t t p : / / w w w . l i v e m i n t . c o m / S e c t i o n P a g e s / E c o n o m y - P o l i t i c s . a s p x ? N a v I d = 1 1

Book

INDIAN ECONOMY

AUTHOR :- MISHRA & PURI

PRATAYOGITA DARPAN INDIAN ECONOMY 2011

ECONOMICS SURVEY 2010-11

ECONOMICS SURVEY 2005-06

Newspaper

The Hindu

The times of India

http://www.jstore.com/

http://en.wikipedia.org/wiki/%20commission%20of%20indin.com

http://en.wikipedia.org/wiki/%20commission%20of%20indin.com

http://www.planningcommission.org/

http://www.livemint.com/SectionPages/Economy-Politics.aspx?NavId=11

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Index

CONTENTS Page NO.

Introduction………………………………………………..………………..….1

Meaning of Unemployment……………………………..……………...……3

Measurement of Employment………………………………....………….…5

10th planning and current daily status’ basis of measurement……….7

Situation of Employment 1983 to 1993-94 …………………………..…10

Situation of Employment after 1993-94………………………………...13

Trends in Income and Output………………………………………………15 Employment and Unemployment Situation in India ……………….….17 a.Labour Force Participation Rate (LFPR)

b. Worker Population Rate (WPR)

Current situation of Employment (2007-08)……….………………...…21 Jobless Growth..?..........................................................................23 Twelfth Five Year Plan ……..……………………………………………….25 CONCLUSION ………………………………………………………………...29

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Table C: Growth Rate of Real Wages (1999-2000 Prices) of Regular Workers by Education Status (% per annum)

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Unemployement in India by Vebs111

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