The NDA government will soon complete two years in office, and though Prime Minister Narendra Modi has been campaigning about increasing employment, little has changed on the ground. Data released by the labour ministry on Monday showed that change in employment across eight sectors has tumbled to a seven-year low of 135,000 in 2015, as compared to 421,000 in 2014 and 889,000 in 2009.
While the government will have to chalk out a strategy to increase employment, data from a report by India Ratings & Research (Ind-Ra) suggests that employment is just one part of the puzzle. An analysis of the Ind-Ra data points out that labour productivity in the economy has dipped to 3.84% for FY11-FY15 from 9% in FY05-FY08. The report also highlights that India will have to raise its labour productivity growth to 7.3% (73.8% year-on-year) as compared to 4.2% achieved during FY15, if it wants to attain the GDP growth rate of 9%. But the question is, can this be done only by focusing on the manufacturing sector?
A paper by Satyaki Roy—professor at the Institute for Studies in Industrial Development—in the Economic and Political Weekly shows that manufacturing, which recorded declining employment elasticity in the organised sector as the industry shifted to capital-intensive technologies partly due to shortage of skilled labour, will not be able to mend the gap between growth and employment.
In addition, the Ind-Ra report highlights that the government needs to target agricultural and construction sectors to improve labour productivity, but the sectors where productivity has been higher also need continuous improvement, particularly in the area of skill development, as a failure to do so will impact not just labour productivity, but also employment.