Context:

• The two important indicators of structural transformation in any economy are 

1. Rates of growth and changes in the structural composition of output and
2. The workforce. 

• India has experienced fairly consistent changes in the first indicator, especially after the 1991 reforms, but the trend in employment has not revealed any consistent or clear pattern.

Rates of growth

• The growth rate of the economy, measured by gross value added (GVA) at constant prices, accelerated from 4.27% in the 20 years before the economic reforms to 6.58% between 2010-11 and 2019-20 at 2011-12 prices. 
• This growth trajectory was accompanied by 
  • a steady decline in the share of agriculture from 30% in 1990-91 to 18% in 2019-20 and 
  • a steady increase in the share of non-agriculture output in total economic output.

Employment patterns

• Two major sources of data on workforce and employment 
  • Decennial population census 
  • The nationwide quinquennial surveys on employment and unemployment by the National Sample Survey Office (NSSO) now been replaced by the Periodic Labour Force Survey (PLFS).

What does the data say?

• PLFS data shows an increase in the worker to population (WPR) ratio from 34.7% in 2017-18 to 38.2% in 2019-20. 
• Female WPR ratio increased from 17.5% to 24% between 2017-18 and 2019-20. 
• The gap between the male and female worker participation rate is narrowing down. 
• The unemployment rate in the female labour force in rural areas is far lower than the male labour force.
• PLFS data show that the unemployment rate declined from 6.1% in 2017-18 to 4.8% in 2019-20. 
• But despite this, the number of unemployed persons has increased by 2.3 million between 2017-18 and 2018-19, mainly because of an increase in the number of job seekers (52.8 million) in these two years.

Challenges in employment patterns

• The sectoral composition of the workforce shows that 45.6% of the workers in India are engaged in agriculture and allied activities, 30.8% in services and 23.7% in industry. 
• Between 2019-20 and 2017-18, 56.4 million new jobs were created. 
• Out of this, 57.4% were created in the agriculture and allied sectors, 28.5% in services and 14.5% in industry. 
• This means that there is no increase in the share of industry and services in total employment and the labour shift out of agriculture is not happening. 
• The young labour force are not able to get absorbed into jobs other than agriculture because the industry and services sectors have adopted capital-intensive and labour-displacing technologies and production strategies. 
• Rising share of industry and services in national income without a sizable increase in employment share puts a serious question mark on the relevance of conventional models of economic growth and development.

Way forward

• • There is also an urgent need to generate much more employment in the manufacturing and services sector compared to the number of jobs they have offered in the recent past. 
  • This should include 
    • changes in labour laws which discourage industry to adopt labour-intensive production 
    • employment-linked production incentives and

• special assistance for labour-intensive economic activities.

Reference:

1. https://www.thehindu.com/opinion/op-ed/a-hazy-picture-on-employment-in-india/article38354755.ece