Sectors where growth is poor are also labour-intensive
Given how key labour-intensive sectors, such as agriculture and exports, have not done too well between FY14 and FY16, it is not surprising no new jobs were being created in the economy during this time. In fact, the KLEMS India database reveals a contraction in the workforce over this period, with about 1.2 million jobs being lost and the total employment down from 483.9 million to 482.7 million.
Ideally, employment should have grown because the economy, as a whole, did. GDP clocked in a fairly good 7.4% in FY15, and an even better 8.4% in FY16. That was thanks to a strong performance from the manufacturing sector, which grew 7.9% in FY15 and 12.8% in FY16, from just 5% in FY13. But clearly, manufacturers didn’t hire too many more people—because only an additional 0.3 million jobs were created. Unfortunately, the agriculture sector, which provides nearly half the total employment, barely grew in either of the years, and actually contracted 0.2% in FY15. Consequently, the number of people employed slipped from 217.6 million in FY14 to 210.1 million in the next year and further to 202.7 million in the subsequent year.
Again, the loss of jobs in the textiles sector—around 0.7 million jobs were lost in the two years between FY14 and FY16—could be partly due to the near collapse of the exports sector, which contracted to $316.5 billion in FY15 and further to $266.4 billion in FY16, from $318.6 billion FY14. Sector experts have been pointing out exports from labour-intensive sectors have been slower than that of the sector as a whole. Much of this, they say, is due to structural issues, and caution that labour-intensive sectors are becoming less competitive. Over the past year, demonetisation and the delays in refunds, on account of GST, have further hurt exporters.
While the government had, in late 2016, eased some labour laws for the garments segment allowing fixed-period employment, just about 655 units have taken advantage of this, and approximately1.55 lakh jobs have been created. Last month, the government extended the facility of the fixed-period employment to all sectors by amending the Industrial Establishment (Standing Order) 1946. This should make employers more comfortable and result in more hiring. However, the slowdown in sectors, such as construction, which grew just 1.3% in FY17, is not good news because it accounts for around 12-14% of the total employment. More than 10 million jobs were created in the construction sector in the two years to FY16 although growth decelerated from 4.3 % in 2014-15 to 3.7% in FY16. With real estate slowing down significantly since then, it’s unlikely the additional employment would have been significant. The KLEMS data shows the pace of job creation has decelerated since the early nineties; with an additional12 million people looking to earn a livelihood every year, the economic environment needs to be a lot more friendly.