Jobless Growth in India: Reasons and Way Forward (GS3)

Reasons for Jobless Growth:

1. Structural Transformation:
   • The Indian economy has transitioned from agriculture to services without a commensurate increase in manufacturing jobs.
   • The service sector, which contributes the most to GDP, is less labor-intensive compared to agriculture and manufacturing.
2. Automation and Technology:
   • Advances in technology and automation have reduced the demand for labor in many industries.
   • Even sectors like manufacturing have increasingly adopted automation, reducing the need for a large workforce.
3. Skill Mismatch:
   • There is a significant gap between the skills possessed by the workforce and the skills required by the job market.
   • Educational institutions often do not align with the practical needs of the industry, leading to a surplus of graduates who are not readily employable.
4. Informal Sector Dominance:
   • A large portion of India’s workforce is employed in the informal sector, which is characterized by low wages and job insecurity.
   • Formal sector jobs, which are more stable and better paid, have not grown at the same rate as informal sector jobs.
5. Regulatory and Business Environment:
   • Complex labour laws and regulatory hurdles deter businesses from expanding and hiring more workers.
   • High costs and difficulties in starting and running a business in India also contribute to slower job creation.

Data Summary:

1. GDP Growth vs. Employment Growth:
   • Between 2000 and 2020, India's GDP grew at an average annual rate of about 6-7%, while employment grew at only about 1-2% per year.
2. Sectoral Contribution to GDP and Employment:
   • Agriculture: Contributes about 15-20% to GDP but employs over 40% of the workforce.
   • Manufacturing: Contributes around 15-20% to GDP with a declining share in employment.
   • Services: Contributes over 50% to GDP but employs only about 30% of the workforce.
3. Unemployment Rates:
   • The Periodic Labour Force Survey (PLFS) 2021-2022 reported an unemployment rate of around 6-8%, with youth unemployment significantly higher.

Way Forward:

1. Promoting Manufacturing:
   • Focus on the 'Make in India' initiative to boost manufacturing and create more jobs.
   • Encourage small and medium-sized enterprises (SMEs) which are more labor-intensive.
2. Skill Development:
   • Strengthen vocational training and skill development programs to bridge the skill gap.
   • Align educational curricula with industry needs to ensure graduates are job-ready.
3. Improving Business Environment:
   • Simplify labour laws and reduce regulatory burdens to make it easier for businesses to hire.
   • Enhance ease of doing business to attract both domestic and foreign investments.
4. Boosting Infrastructure:
   • Invest in infrastructure development to create jobs and improve the overall business environment.
   • Enhance connectivity and logistics to support industrial and commercial activities.
5. Encouraging Entrepreneurship:
   • Provide support and incentives for startups and new businesses to foster innovation and job creation.
   • Create a conducive ecosystem for entrepreneurship with access to finance and markets.
6. Strengthening the Informal Sector:
   • Formalise the informal sector through better regulation and support.
   • Provide social security and benefits to informal workers to improve job quality and stability.

Conclusion:

Addressing jobless growth in India requires a multifaceted approach involving structural reforms, skill development, and improving the overall business environment. By focusing on these areas, India can achieve more inclusive and sustainable economic growth, ensuring that the benefits of growth are shared more broadly across the population.