Why is jobless growth continuing in India since LPG reforms? Explain

Ans: The new model of economic reforms is usually known as the LPG or Liberalization, Privatization and Globalization. India got freedom in 1947 but its economy was in shambles. To develop that tattered economy, LPG model was followed. At that time economic growth was not too good due to lack of proper resources, poor financial and industrial development.

Statistics on the country’s GDP growth, employment growth and elasticity of employment indicates that the GDP growth has steadily increased from 4.5 per cent during 1970 to 9 per cent during 2005 and 2012 periods but the elasticity of employment with respect to GDP declined for the primary sector. However, it is declining in manufacturing and tertiary sectors also.

This shows the paradox of growth that does not create employment, a phenomenon called `jobless growth.’  Economists explain that the growth is credited not because of creation of new employment opportunities as the result from development, but due to accumulation of wealth and increase in wages. Growth has two features: It increases the availability of cash in hand or increase in demand requiring new activities to meet the supply leading to an increase in employment.

It is important to note that India’s pattern of growth has been atypical and has not followed the standard path i.e., the phases of development process or the structural transformation did not go hand in hand from primary sector to manufacturing and then to tertiary, one driving the other. In India, it appears that that the second (manufacturing sector) stage of development process has been bypassed and has entered into the third (tertiary) stage directly from the first (agriculture).

The growth is attributed to service sector, whereby both employment and wages have seen a rise. But as figures say, the biggest employing sector in the country is agriculture sector employing more than 45 per cent of the population but contributing 15 per cent of the GDP, whereas service sector is the biggest contributor to the GDP but employs less than 30 per cent. Manufacturing contributes 16 per cent to the GDP and employs around 13 per cent.

Other factors attributed to the jobless growth are failure in adopting labour intensive manufacturing techniques, stagnation in manufacturing output and employment and contraction of labour intensive segment of the formal manufacturing sector, slow infrastructure development and other impediments.

The biggest failure of economic reforms has been its inability to provide good jobs in the formal sector. In fact, employment for men in the organised sector, decent jobs that pay regular wages with benefits such as PF shrank in the 15 years between 1997 and 2012. But there is some silver lining–jobs for women in the organised sector has gone up after liberalisation.

 The Takshasila IAS Academy conducted a number of seminars on the jobless growth and the academy MD BSN Durga Prasad invited distinguished guests who analysed the paradox with their acumen that greatly benefited the civil service aspirants.