August 17, 1998

Ten million new jobs a year? Perhaps more, with the right policies.

Jairam Ramesh

The creation of 10 million jobs a year has become a mantra for all political parties. Are we on track? Data on employment in India comes from two sources -- the decennial census and the quinquennial estimates of the National Sample Survey (NSS). The most recent census information was obtained in 1991 and the most recent NSS survey is for 1993-94.

The Planning Commission uses this data to calculate what economists call employment-gdp elasticities -- the statistical relationship between growth in output and in employment -- for different sectors of the economy. The elasticities are then used to project employment, based on anticipated GDP growth rates.

Using this method, it transpires that between 1978 and 1983 the economy created, annually, about five and a half million jobs. This increased to an average of about seven million per year between 1983 and 1994 and to around 10 million between 1994 and 1997. The conclusion is clear. The daunting employment challenge can be met only if the GDP and export growth recorded in 1994-95, 1995-96 and 1996-97 is maintained.

What is the level of unemployment in the country? According to the NSS data, the unemployment rate as understood and defined internationally is 2 per cent of the labour force. As on April 1, 1997, the Planning Commission estimate was 1.9 per cent.

But traditional concepts of unemployment have little relevance in India. The bulk of the workforce here is self-employed and largely (65 per cent) in agriculture. That is why underemployment is also estimated by the NSS. In 1993-94, this affected 8.6 per cent of the labour force.

Underemployment, however, seems to have declined sharply. The 1993-94 level was about half that in 1978. Nationally, 60 per cent of the increase in employment is coming from agriculture. But in states like Gujarat, Haryana, Kerala, Punjab, Maharashtra and West Bengal, non-agricultural activities are the real job creators.

Four factors have contributed to the growth of employment in recent times.

Agricultural growth is high in the resource-rich but laggard region east of Kanpur. This area has high employment elasticity in agriculture. Its share in incremental foodgrain output has doubled since the mid-'80s. However, it still suffers from weak physical and financial infrastructure, untapped irrigation potential and incomplete land reforms.

The non-farm rural sector has been dynamic. It already accounts for a quarter of rural employment. Now it also absorbs three-fourths of the new entrants into the rural labour force.

Output in unregistered manufacturing has grown at almost double the rate than in registered manufacturing. The fast-growing export sectors of garments, diamond cutting and polishing and leather processing are largely in the unregistered sector. The bad news is in the past two years, export growth has all but collapsed.

Since the mid-'80s, there has been substantial investment in special rural employment programmes like the Jawahar Rozgar Yojana (JRY). Today, the outlay for such schemes is Rs 5,000 crore.

In its Ninth Plan document, the Planning Commission has analysed the regional dimensions of unemployment over the next decade. Category I includes Andhra Pradesh, Gujarat, Haryana, Karnataka, Maharashtra, Tamil Nadu and West Bengal. These show decreasing unemployment and low growth of labour force. Category II includes Assam, Madhya Pradesh and Orissa. These show decreasing unemployment and high growth of labour force.

Category III includes Kerala and Punjab. These show increasing unemployment and low growth of labour force. Category IV includes Bihar, Uttar Pradesh and Rajasthan. These show increasing unemployment and high growth of labour force. States in categories III and IV are clearly a priority.

The popular belief is that illiterates predominate among the unemployed. This explains the emphasis on programmes like the JRY. However, the 1991 census revealed almost 47 per cent of those jobless had finished secondary school. The NSS put this figure at 64 per cent. To see it another way, a quarter of those registered with employment exchanges are graduates.

This reflects a fundamental mismatch between what the educational system supplies and what the economy demands. Vocational and technical education needs massive inputs from the private sector. Existing labour laws which are hampering faster job-creation in industry need to be modified. Trade policy reforms must remove all biases against labour-intensive activities.

The vitality of financial institutions and easy access to venture capital can facilitate new jobs in small enterprises and in the self-employed sector. Technology has made decentralised production economically viable.

The key barometer of growth is productive employment. The challenge of generating 10 million jobs year after year is formidable. Since the mid-'80s, the economy has been generating close to eight million jobs annually. India can do better; in fact, it must.

The author is secretary of the AICC's Economic Affairs Department. The views expressed here are his own.

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