The UPA Government may have some serious challenge at hand on the employment front as job creation has not kept pace with GDP growth.
According to credit rating agency CRISIL, the country needs at least 55 million additional jobs by 2015 to maintain the current ratio of employed people to total population at 39 per cent.
Underscoring the fact that the overall employment increased just by 2.2 million between 2005 and 2010, against 92.7 million between 2000 and 2005, the rating agency said the additional jobs that need to be created would be nearly twice the jobs created during 2005-10.
If the number of people retiring or losing their jobs by 2015 is factored in then the new job hires will have to exceed 55 million. The agency said achieving this will pose an overwhelming challenge without appropriate policy support.
Between 2005 and 2010, the net addition in jobs was 27.7 million but the number of self-employed people decreased by 25.5 million. This restricted the increase in number of employed people to 2 million.
“Job creation has clearly not kept pace with GDP growth. The GDP growth increased to 8.6 per cent during 2005-10 from 6 per cent during 2000-05, but the net addition to jobs remained almost flat at around 27 million during the two-time periods,” said Mr Dharmakirti Joshi, Chief Economist, Crisil.
Combined with a decline in the number of self-employed persons, the employment intensity (number of employed persons per lakh of real GDP) has sharply reduced to one during 2005-10 from 1.7 in the preceding five years, he added.
Sector wise growth
The employment potential emanating from faster growth in manufacturing and services could not be fully exploited due to lack of policy support, according to the Crisil Research Study, which is based on the recently released National Sample Survey Organisation data on employment in India.
For instance, in manufacturing — a crucial source of jobs for relatively low-skilled labour — employment declined by 7 per cent, despite a faster growth in manufacturing output.
In services, employment growth slowed in financial intermediation and business services — a key source of jobs. In contrast, employment grew by almost 70 per cent in the construction sector, but it was mainly in casual jobs.
Insights to policymakers
The trends and pattern of employment offers two specific insights to policymakers for accelerating job creation in the Indian economy, according to the study. First, high economic growth alone is not sufficient for creating jobs as was evident in the last decade. Second, appropriate policies will have to complement high growth for facilitating the required job creation in the manufacturing and services.
According to Crisil, the role of policy assumes greater importance now since the weak growth in advanced countries is likely to hurt job growth in export-oriented sectors in India.