What are trends in Employment Elasticity in India?

Employment elasticity is a measure of the percentage change in employment associated with a 1% change in economic growth. It indicates the ability of an economy to generate employment opportunities for its population as per cent of its growth process. This implies that when employment generation is commensurate with the economic growth, there is positive employment elasticity. Negative employment elasticity indicates a slow employment growth in comparison to economic growth. Negative employment elasticity indicates that economy is not able to generate employment with the progress in economy. Low and negative employment elasticity show “jobless growth”.

Sector wise Employment Elasticity in India

As per 12th plan documents, the below table shows the sectoral employment elasticity in India from 1999-2000 to 2009-10. These figures were based on NSSO employment data up to 2009-10.

The above table makes it clear that highest employment elasticity in construction while agriculture is one of the sectors with lowest employment elasticity.

Trend of Employment Elasticity in India Post-Liberalization Period

The data shows India has low or negative employment elasticity year-on-year basis and this indicates that India’s growth is jobless growth. During 2004-14, India saw some of the highest rates of gross domestic product (GDP) but it did not translate into jobs. The number of workers did not only decrease in farm sector but also manufacturing. The government explains this by quoting that labour intensive technology has been replaced by capital intensive technology and more and more labour force has been accommodated in unorganized sectors or new jobs in the informal sector, with many others went converted into successful small scale entrepreneurs. This is used to explain that the highest employment elasticity has been shown by the Construction and utilities sector (which includes energy, water and waste management). These are the biggest job generators in our country. As per the National Sample Survey Office in 2011-12, about 43% of Indian workers were engaged in agriculture and related activities; working population engaged in the secondary and tertiary sectors is growing, with 24% of them in the secondary sector and about 30% in the service sector in 2011-12, and almost 3% people remain unemployed. The unemployment rate has gone down considerably to 3% in 2012 from 9.4% in 2009-10.

Possible Solutions

The possible solutions to suggest include: resolving pernicious problems of the farm sector to make farming attractive; skill enhancement to improve quality of jobs along with numbers; giving a boost to manufacturing, particularly, MSME sector which if flourish can work as employment engines.