Model Answer
0 min readIntroduction
The post-economic reform period in India, initiated in 1991, witnessed a significant shift towards liberalization, privatization, and globalization. While these reforms spurred economic growth, the employment generation has remained surprisingly sluggish, often described as ‘jobless growth’. This phenomenon is a major concern, given India’s demographic dividend and the need to provide livelihoods for a rapidly expanding workforce. The disconnect between economic expansion and employment creation necessitates a thorough examination of the underlying reasons, ranging from the nature of growth itself to structural issues within the labour market.
1. Capital-Intensive Growth & Sectoral Shifts
The economic reforms prioritized capital-intensive industries over labour-intensive ones. Sectors like finance, IT, and telecommunications experienced rapid growth, but these sectors inherently generate fewer jobs per unit of investment compared to manufacturing or agriculture. This led to a decline in the labour share of national income. Furthermore, the share of agriculture in GDP declined significantly (from 30.7% in 1990-91 to 17.8% in 2022-23 – *Source: Economic Survey 2022-23*), while its employment share remained stubbornly high (around 45-50%), indicating low productivity and disguised unemployment.
2. The Rise of the Informal Sector
The formal sector’s limited capacity to absorb the growing workforce pushed a large segment of the population into the informal sector. The informal sector, characterized by low wages, lack of social security, and precarious employment conditions, grew substantially. According to the Periodic Labour Force Survey (PLFS) 2022-23, approximately 90% of the workforce is employed in the informal sector. This growth in informal employment doesn’t reflect genuine economic progress and often masks underemployment and vulnerability.
3. Skill Gaps and Mismatch
A significant reason for sluggish employment growth is the mismatch between the skills demanded by the economy and the skills possessed by the workforce. India’s education system has historically focused on theoretical knowledge rather than practical skills. The National Skill Development Corporation (NSDC) was established in 2008 to address this gap, but its impact has been limited. The demand for skilled workers in emerging sectors like artificial intelligence, data science, and renewable energy remains largely unmet.
4. Technological Advancements & Automation
Technological advancements, particularly automation and digitalization, have led to job displacement in certain sectors. While technology creates new opportunities, the pace of job creation in these new areas often lags behind the job losses in traditional sectors. For example, the increasing automation in the textile industry has reduced the demand for unskilled labour. This requires continuous upskilling and reskilling initiatives to prepare the workforce for the future of work.
5. Demographic Factors & Labour Force Participation
India’s demographic dividend, while potentially advantageous, also presents challenges. The increasing working-age population puts pressure on the labour market. However, female labour force participation rate (FLPR) in India remains low (around 32.5% in 2022-23 – *Source: PLFS 2022-23*), hindering the full utilization of the country’s human capital. Social norms, lack of childcare facilities, and limited access to education and employment opportunities contribute to this low FLPR.
6. Policy Failures & Investment Climate
Inadequate investment in labour-intensive manufacturing, coupled with a complex regulatory environment, has hampered employment generation. Policies aimed at promoting labour-intensive industries haven’t been effectively implemented. Furthermore, land acquisition issues, infrastructure bottlenecks, and bureaucratic hurdles have discouraged investment in manufacturing, limiting its potential to create jobs. The implementation of labour laws has also been a challenge, leading to rigidities in the labour market.
| Factor | Impact on Employment |
|---|---|
| Capital-Intensive Growth | Lower job creation per unit of investment |
| Informal Sector Expansion | Precarious employment, low wages, lack of social security |
| Skill Gaps | Mismatch between demand and supply of skills |
| Technological Advancements | Job displacement in traditional sectors |
| Low Female Labour Force Participation | Underutilization of human capital |
Conclusion
The sluggish employment growth in post-reform India is a complex issue stemming from a combination of structural changes, policy failures, and demographic factors. Addressing this requires a shift towards labour-intensive growth strategies, investments in skill development, promoting formalization of the economy, and enhancing female labour force participation. A holistic approach that prioritizes job creation alongside economic growth is crucial to harness India’s demographic dividend and ensure inclusive development. Furthermore, continuous monitoring of labour market trends and adaptive policy responses are essential to navigate the evolving landscape of work.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.