Track the growth of employment and labour trends in India for UPSC Economics and policy analysis

Growth of Employment in India

• Overall Employment Growth Trends

  • The growth of employment in India experienced fluctuations across periods. During 1983–1994, the average annual growth was 2.06%, which declined to 0.98% in 1994–2000. Growth recovered to 2.95% during 2000–2005 but fell again to 0.95% between 2004/05–2009/10.
  • This deceleration occurred alongside a drop in labour force growth from 2.29% (1987–88 to 1993–94) to 1.03% (1993–94 to 1999–2000). However, employment growth remained lower than labour force growth, leading to rising unemployment.

• Employment vs Unemployment (Late 1990s–2000s)

  • Between 1999–2000 and 2004–05, employment growth surged to 2.95% per annum, up from 0.98% earlier. Approximately 47 million jobs (CDS basis) were created, compared to 24 million between 1993–94 and 1999–2000.
  • The labour force, however, also grew rapidly at 2.84%, resulting in a rise in unemployment from 7.31% in 1999–00 to 8.28% in 2004–05.

• Gender and Area-wise Employment Trends

  • During 1983–94, rural male and female employment grew at 1.15% and 1.55% respectively. Urban employment grew faster at 2.75% for males and 3.18% for females. The overall average was 1.77%.
  • In 1994–2005, rural male employment rose to 2.05%, while rural female growth slowed to 1.32%. Urban female employment accelerated to 3.34%.
  • From 2005–2010, rural female employment declined by –2.09%. Rural male growth also slowed to 1.76%, while urban employment remained at 1.75%. The total growth rate for this period was just 0.67%.
  • This employment decline occurred despite strong economic growth and the rollout of the National Rural Employment Guarantee Act, 2005. A major drop in female labour force participation contributed to the trend.

• Sectoral Employment Growth (UPSS)

  • From 1972–73 to 1983, employment in the primary sector grew at 1.67%, secondary at 4.40%, and tertiary at 4.19%. Non-agriculture jobs rose by 4.46%, with overall employment at 2.49%.
  • Between 1983 and 1993–94, growth slowed to 1.21% in the primary sector and 2.50% in the secondary sector. Tertiary sector grew at 3.54%. Total employment grew at 1.84%.
  • During 1993–94 to 2004–05, primary sector growth further declined to 0.62%, while secondary and tertiary sectors grew at 4.03% and 3.22% respectively. Overall growth stood at 1.76%.

• Sectoral Shift in Employment Shares

  • In rural areas, the primary sector’s share declined from 81.8% in 1983 to 68.6% in 2009–10. Secondary sector increased from 8.6% to 16.7%, and tertiary from 9.5% to 14.7%.
  • In urban areas, the primary sector fell from 15.6% to 8.1% (1983–2009–10), while the tertiary sector grew from 51.8% to 58.1%. The secondary sector remained steady at around 33%.
  • At the national level, primary sector employment declined from 68.9% in 1983 to 53.8% in 2009–10. Secondary and tertiary sectors rose to 20.9% and 25.39% respectively, indicating structural change.

• Changing Nature and Quality of Employment

  • Employment showed a positive structural shift toward the secondary sector between 1983 and 2009–10. However, from 1999–2004, the lack of transition from the unorganised to the organised sector limited productivity gains.
  • In the period 2004–05 to 2009–10, better-quality jobs emerged as more workers moved to the organised sector. This contributed to higher output per worker and improved overall economic performance (source: Ghosh, 2011).

Sectoral Trends and Employment Quality

• High-Growth Sectors (1983–2005): Employment in construction and financial services grew the fastest at around 6% per annum. These were followed by trade and transport, both growing at approximately 4%. In contrast, employment growth was slowest in manufacturing and agriculture.
• Employment Conditions – Two Periods: Between 1999/00 and 2004/05 (1st Period), improvement in employment conditions was modest. This period failed to trigger a significant shift from the unorganised to the organised sector. As a result, economic growth was constrained due to a negative shift in employment structure, leading to a decline in output per worker.
• Unorganised Sector Limitation: The limited improvement in this period was mainly due to small, positive changes within the unorganised sector, not from structural transformation.
• Structural Shift and Output Growth (2004/05–2009/10): In the 2nd Period, economic growth contributed to substantial improvement in employment conditions. This was achieved by a large-scale movement of workers from the unorganised to the organised sector, which significantly increased the average output per worker and supported overall economic growth (Ghosh, 2011).