Having recognised India’s jobless growth and the problems associated with it, it is important to understand the reasons for it. The main contributor to India’s stellar growth performance over the last decade and a half is the sector comprising financial, retail and business services including information technology-enabled services.
My research with Reshad Ahsan of the University of Melbourne shows that average labour productivity in this sector is 5-10 times that in the overall Indian economy, while its share in overall employment is only about 1.7 percent. Due to the small employment base from which it is growing, albeit very rapidly, this sector adds relatively very few jobs every year. However, its high productivity means that it adds a significant amount to the GDP. Unfortunately, only a tiny proportion of India’s labour force can meet the skill and education requirements of this sector.
Since bringing the majority of the population to that level of education might take a few decades, in the short and medium term, it is labour-intensive manufacturing that would need to grow to absorb India’s growing labour force at reasonably high productivity levels. This has not happened so far. As a result of which India’s manufacturing sector accounts for only around 15 percent of national employment.
Thus both the quantity and quality of jobs in the manufacturing sector have been inadequate.
---End of Article---