If it is disappointing the economy hasn’t been growing to its potential, it is even more worrying that an average GDP growth rate of 6.6% between 2011 and 2017 doesn’t seem to have created too many jobs.
If it is disappointing the economy hasn’t been growing to its potential, it is even more worrying that an average GDP growth rate of 6.6% between 2011 and 2017 doesn’t seem to have created too many jobs. While the rate of unemployment itself is steady at 4%, this is probably not meaningful given the high levels of underemployment—in an economy as poor as India, few can afford to remain unemployed and work even if their productivity is very low. The headline numbers put out by the quarterly enterprise surveys of the Labour Bureau in select sectors suggest growth has been pretty much jobless. Fewer than two million jobs are being created annually, at a time when the working age population grows by some 16 million every year.
However, consulting firm McKinsey has pointed out in a discussion paper, these surveys suffer from the flaw that the sample represents only about 1.4% of all enterprises in the country and accounts for just 21% of non-farm employment. The annual surveys of the Labour Bureau, McKinsey says, paint a picture that is a lot less bleak; these show around seven million jobs were created between 2011 and 2015, taking the tally of working people from 455 million to 462 million. If that doesn’t sound too encouraging either, McKinsey points out the sluggishness masks a significant structural change; what has happened is that, even as employment in the agriculture sector fell by 26 million, non-farm employment rose by 33 million or by more than eight million a year. This shift of workers from the agrarian to the non-agrarian sectors, especially between 2013 and 2015, when the economy picked up pace, is important even if the switch hasn’t been fast enough to account for the growth in the working age population.
The surveys also reveal a three percentage point fall in the country’s overall labour force participation. This is not necessarily a bad thing if it was the consequence of more youngsters educating themselves and acquiring skills rather than going to work at 15. The data, however, show a very sharp fall in participation levels for women—between 2004-05 and 2011-12, female participation rates fell by 12.3 percentage points (ppt) for the illiterate group in rural areas, 9.4 ppt for those who have completed secondary schooling and 13 ppt for those who had college degrees. Even participation rate for urban males appears to have dropped from 73.7% to 69.1% over the period. This means that either there aren’t enough jobs being created or that the surveys are not capturing the ones that are. While McKinsey suggests the data be looked at more closely to ensure the trends coming through are correct, the government has already set up a panel to do precisely this.