Jobless growth


The jobless growth theory, a major criticism of the liberalization process, has received official confirmation. It is a jobless growth and it is also confirmed by the economic census.

Preliminary data for the fifth Economic Census, released revealed that employment in the non-agricultural sector grew 2.5% annually, while the number of enterprises engaged in services and manufacturing grew 4.8% a year during 1998-2005.

What’s more, on an average, the 42.12 million Indian enterprises ranging from grocery stores to small-scale units and large factories employed on average only 2.35 workers. In fact, only 1.4% or 583,000 enterprises had over 10 workers.

The trend shows that enterprises are clearly focusing more on capital as a means of production and are paying lesser attention to job creation, while trying to maximize profits. The capital intensive nature of enterprises will not provide large employment. But the growth in employment is largely in line with rising population. This is what the conclusions that are drawn from the ‘economic’ statistics.

The organized sector numbers have shown that overall employment has been declining, not just for the public sector but also for private corporate sector. The trend in manufacturing sector has been such that it has not favored labor but capital intensive modes of production. The Principal Economist with the rating agency Crisil opines that a part of the problem lies with Indian labor laws. Because of these the businessmen or Industrialists are willing to invest in capital intensive plants or automated plants rather than labor oriented.

Jobless growth has been one of the major criticisms of the liberalization process and the government too has acknowledged the problem. It has been trying to step up manufacturing activity in the economy with the view to improve employment in labor intensive sectors like food processing, auto components and leather but the results haven’t shown so far.

Left has very often flagged jobless growth to make a case for its anti-liberalization stance and though it did not comment on the development, some strong statements can be expected in the coming days.

On the positive side, the government can hope for better days ahead since the growth in employment is 2.5% during the seven-year period ended December 2005, compared with 1.7% during the fourth Economic Census.

The other good news is the higher growth rate for new enterprises coming up in rural India, which was estimated at 5.53%, compared with 3.71% in urban areas.

The Economic Census also revealed that 198 million people were employed in manufacturing and services, leaving 252 million or 56% of the 450 million working population to be dependent on crop cultivation. Modification in labor laws with the cooperation of workers’ unions in increasing productivity and that of business owners to give a fair deal to workers may increase the growth percentage of jobs in the same proportion as that of the enterprises.