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Mainstream, VOL LVI No 51 New Delhi December 8, 2018

Gap between Growth and Unemployment Widening

Sunday 9 December 2018

by A.V.V.S.K. Rao and M. Ramulu

“Employment and well placed labour produce in a country general prosperity, content and cheerfulness”.Daniel Weber


India is facing severe crises of employment and livelihood. Economic growth since 2012 failed to generate secure, regular and decent incomes for a vast majority, particularly in the unorganised and informal sector.

 As per official records, the growth rate in India between July 2012-2016, was impressive. However, the untimely and ill-thought-out policies of demonetisation and completely morphed GST by the BJP Prime Minister led to crises in the economy. However, the fluctuating growth rates between August 2015-2018 failed to create more jobs and increases in productivity in certain major sectors thus failing to spur a commensurate rise in incomes. Besides, the demonetisation policy threw nearly 225 million people in rural-agricultural and informal sectors out of gear, and it would take at least a minimum of three years for them to recover from the onslaught of the shares of working capital on time provided the monsoon is active.

Studies on GDP-Employment

A study group from Azim Premji University’s Centre for Sustainable Employment came out with some interesting facts. As per the study, divergence between growth and employment had increased over a period. If one takes the period 1970-1980, when the GDP growth was as low as three-to-four percent, the employment growth was about two percent. Surprisingly, after 2013, the ratio of GDP growth to employment growth is less than 0.1 percent, particularly among the educated youth. This implies that a 10 percent increase in GDP results in less than one percent increase in employment. Employment actually declined by seven million between 2013-2016. It is likely that the absolute decline would continue in the following years. It is expected that unemployment may rise to more than five percent after 2016. In geographical terms, the Northern States of India are most severely affected. Similarly, in demographic terms young people with higher education qualification levels would suffer even if employment rate is as high as 16 percent.

While incomes are rising in a few sectors, the worrying fact is that rural wage growth collapsed after 2014 and has not risen since then. Besides, even in the organised manufacturing sector, where the number of jobs has grown, there has also been an increase in the share of contract work offering low wages and less job security. Also, the disquieting factor is the divergence of productivity and wages in the organised manufacturing sector. By 2015, labour productivity is six times higher than what it was thirty years ago. However, salaries of managerial and supervisory personnel have tripled during the same period, while low skilled and semi-skilled workers’ wages have grown nearly 1.5 times.

Another dimension of the employment situation is that female participation in the (paid) workforce is still very low. At the same time there are wide differences among States in terms of women’s employment. While in Uttar Pradesh only 20 women are in paid employment for every 100 men, the figure in Tamilnadu is 50 and as high as 70 in Mizoram and Nagaland. From the above, one can easily discern that there prevails not only gender inequality in the caste-ridden Hindi belt but also with regard to earnings. In fact the caste gap is actually larger than the gender gap. It is ironical that Dalits and Adivasis are employed more in low-paid occupations, particular in the BIMARU States. They earn hardly 50-55 percent of the upper- caste worker’s earnings.

According to the Union Labour and Employment Ministry’s wing on Employment Survey in 2012 the number of unemployed in the country was around 1.71 crore. By 2016 this figure reached 2.33 crores, that is, it almost doubled in five years. At the same time in 2014 the percentage of unemployment among the youth was 3.8; it has gone up to five percent by 2016.

All these low-paid workers have been hard hit during 2016-17 due to demonetisation denying livelihood; no relief measures have been taken by either the Central Government or the Northern States on this score.

The Ministry of Statistics and Programme Implementation should have developed times series data on employment, particularly in the rural-informal sector. The reason why this is needed is that technology is fast changing. For example, India has industries like textiles, jute, paper and sugar. Now, they are not so labour intensive in many of the South-East Asian nations. Here we need employment data, tie-up with GDP and sectoral growth particularly in the rural-informal and small-scale sectors. It is a pity that business newspapers focus on corporate sector indicating that corporate investment is picking up and India is shining. But the real fact is that these newspapers never concentrate on the non-corporate sector which provides larger employment opportunities to the low and semi-skilled workforce, both male and female. The Government of India’s ill- conceived and poorly implemented demonetisation in the rural sector has been disastrous and has virtually broken the backbone of the informal sector. The informal sector accounts for 20 percent of the GDP and 80 percent of employment. Rural India is home to twothirds of India’s population. It is high time that India develops formal and informal employment data of rural India.


The World Bank in 2018 released a report on “South Asian Growth and Employment Situation”. The report especially mentioned India’s employment situation which revealed that to maintain its employment rate India needed to add 80 lakh jobs every year in future. As per the World Hunger Index, India’s position at 97 in 2016 has worsened in 2018 to 108 out of the 119 countries taken for review. Even in most of the States in India the employment generation both in the government sector and private organised sector is not as expected. Almost 40 percent of the government job vacancies are not filled because of unproductive expenditure on popular measures. Even in the private sector, the job creation is disappointing. According to ASSCHAM, as the Indian economic growth has slowed due to government policies, campus selections have declined to 45 per cent between 2014-16. By encouraging the manu-facturing sectors, which have spread effects, Japan, South Korea and China could increase job creation rapidly between 2009-2014. Unfortunately India’s manufacturing sector growth is slow and still in stage of the infancy.

Gap between Major Central Government Civil Jobs

2013-14 32.90 lakhs
2014-15 32.94 lakhs
2015-16 32.84 lakhs

Upsc, SSC, RRB Recruitment

2014-15 1.13 lakhs
2015-16 1.10 lakhs
2016-17 1.00 lakhs

Central Sector Employment

2013-14 13.49 lakhs
2014-15 12.91 lakhs
2015-16 11.85 lakhs
2016-17 11.30 lakhs

Source:  Information to stared questions in Lok Sabha by Ministry of Employment

There is an urgent need for fresh thinking without any ideological pre-commitment. In a democratic welfare state, every Indian should be ensured to lead a secure dignified life in a just and sustainable way.

Prof Rao is a Professor in Economics, Jawaharlal Nehru Institute of Advanced Studies, Hyderabad. He was formerly the Head, Department of Economics, Osmania University, Hyderabad. Dr Ramulu is an Assistant Professor, Department of Economics, University College of Arts and Social Science, Osmania University, Hyderabad.

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