October 2013

Vol 57

Chief Editor : Rajesh K. Jha Joint Director (Production) : V.K. Meena

Senior Editors : Shyamala M. Iyer Cover Design : Gajanan P. Dhope
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: Hasan Zia
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Website : www.yojana.gov.in

Let noble thoughts come to us from all sides

Rig Veda

CONTENTS

On Measuring Poverty J&K Window . .................................................................................39

TCA Anant................................................................................................4
Paradox of High Growth and Low Employment
Employment and Growth in India: Pralok Gupta...........................................................................................41
Trends and Policies
S Mahendra Dev.....................................................................................11 Trends in Manufacturing Employment
Bishwanath Goldar.................................................................................46
Special Article
do you know?................................................................................50
Demand for Smaller States in India: The Right to Education, 2009 and
Impending Dangers Repercussions for Marginalised Groups
Guljit K Arora.........................................................................................17 Claire Noronha........................................................................................52
Economic Growth, Employment and Poverty Burden of Success: Decline in Participation
Reduction: Evidence and Lessons Sonalde Desai..........................................................................................56
Rizwanul Islam.......................................................................................24
The Indian Growth Trajectory
Depreciation in Rupee–Causes, Sona Mitra...............................................................................................61
Impact and the Way Ahead
Harkirat Singh.........................................................................................30 The widening gender gap in Employment
Indrani Mazumdar...................................................................................65
Growth, employment, poverty
Jomo Kwame Sundaram, Anis Chowdhury............................................34 North east diary . .....................................................................71

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YOJANA October 2013 1

 YE-129/2013

2 YOJANA October 2013

 Economy is doing fine but…

A
dignitary visiting Brazil in 1971 asked its head of state Emilio Medicin about the economic
situation of the country to which he replied , ‘The economy is doing fine, but the people
are not.’ This captures the paradox of growth that does not create employment and reduces
poverty. The close interrelationship between growth, employment and poverty has long been a
matter of debate and dispute among economists. The ‘trickle down’ theory of economic growth
has long lost its relevance and it is now well recognized that growth may not be enough to achieve
the objectives of employment and reduction of poverty. The impact of growth on employment and
poverty depends upon a multitude of factors and the proper dynamics of the relationship between
these three goals needs to be understood in a broader context.
How far growth will impact poverty depends upon its employment generating capacity. In case
of India, despite having a high overall growth rate, the extent and quality of employment generation
has been low. The employment generation has mostly come from the low productivity informal
sector. According to one estimate between 1999-2000 to 2009-2010, 63 million workers were added to the workforce out
of which 70 per cent were added in the unorganised sector and the rest into informal organised sector. This is linked to the
disproportionate increase in the contribution of the services sector in the economy from 41 per cent of GDP in 1990–91 to
64.8 per cent in 2012–13. However, the share of services in employment is less than 30 per cent. On the other hand in 2011-
12, manufacturing contributed 16 per cent to the GDP and its share in aggregate employment was close to 13 per cent.
In terms of the economic policy for high employment growth, the experience of some of the fast growing countries of
South East Asia could be useful. These countries have made investments in labour intensive industries. Special attention
was paid to the export oriented industries which had a high labour intensity. In the entire process, agriculture was also given
incentives to have better terms of trade and promote non-farm agricultural activities. Recent experience of high current
account deficit and depreciation of rupee also points to the need to orient our economic policies towards incentivising
manufacturing and improving exports by leveraging our abundant labour force. Employment is thus the crucial link
between growth and reduction in poverty. There is a strong case for a big push to the manufacturing sector for generating
employment through its stronger backward linkages.
There has been a lively debate recently about the poverty estimates brought out by the Planning Commission. Despite
controversies and arguments against the method used for the estimation of poverty, there are strong indicators that suggest
a clear trend in the reduction of poverty in India. If we take two time periods 1993-94 to 2004-05 and 2004-05 to 2011-12,
per capita income growth (up from 4.4 per cent to 6.9 per cent) , real wages of casual workers (increased from 3.1 per cent
to 6.5 per cent) and agricultural output growth (rose from 2.5 per cent to 3.9 per cent ) between the two periods have shown
clear upward trend. It is obvious that higher expenditure under schemes like MGNREGA and PDS has also contributed
in achieving this.
Indeed, poverty alleviation, employment, equitable income distribution across social classes and regions remain crucial
goals of economic policy in India. The growth must be broad based to foster a truly 'democratised market economy'.
Investment in human capital, so that people can take advantage of the opportunities offered by the market, becomes essential
in such a framework. Transfer of resources to the vulnerable sections of society through governmental schemes are needed
but they have to be carefully designed keeping in mind their complex effect on the market for food and labour and on the
incentive structure of the economy as a whole. The major challenge lies in making the productive process more widely
and equitably distributed among people. After all, as Amartya Sen has said, growth is a means towards valuable human
end and not an end in itself. Only then will the people also be fine when economy is doing fine. q

YOJANA October 2013 3

statistical issues
methodology

On Measuring Poverty

TCA Anant

M
easuring keep it in the agenda of discourse;
Poverty in India has (ii) to design policies, programs
a long and venerable and institutions to alleviate poverty;
tradition. In the (iii) to monitor and evaluate these
pre-independence policies, programs and institutions
period, Dadabhai that are associated with it. Each
Naoroji sought to measure poverty with of these objectives imposes very
a view to describe the consequences different requirements on data and
of colonial rule in India. His book the methodology of measurement. In
Poverty and Un-British Rule in particular it could easily be argued
Poverty is India drew attention to the enormous
drain on wealth caused by colonial
that the latter two are not single
objectives but are in turn composites
principally a policy and was the foundation to
many intellectual arguments for
of multiple objectives.

distributional independence. Subsequently, during

the freedom struggle the Congress
In so far as the first is concerned,
the objective is easily understood
attribute of the Party, the Planning Commission and and is in fact the basis of Dadabhai
Naoroji's book published in 1901, the
many eminent scholars have worked
consumption on this issue. Srinivasan(2007) has a purpose of which was to influence
British public opinion about the
detailed review of this background. In
distribution. We fact, it would not be an understatement consequences of colonial rule on
India. It was principally to bring
could in principal that this discourse has been one of
India’s major contributions to the poverty in the political discourse
and influence policy with that in
take a somewhat field of development studies. It is not
a merely a scholarly exercise. the mind. An objective repeated by the
National Planning Committee of
coarser measure World Bank has stated that fighting
poverty is at the core of its work. the Congress and the authors of the
of consumption, the United Nations when it outlined
the millennium development goals
Bombay Plan (See Srinivasan (2007)
before independence and by the
but generate a stated that the first goal is to eradicate Planning Commission in more recent
times. What is common in all these
extreme poverty and hunger. Poverty
richer sense of its is at the heart of almost all discourses approaches is to state a normative
criteria of what constitutes socially
on development policy.
distribution and acceptable minimum “ necessary for
In this context, when we seek to the bare wants of a human being, to
dynamics measure poverty, there are at least keep him in ordinary good health and
three distinct types of objectives: (i) decency” (Naoroji 1901). Having
to build awareness on poverty and to done so, the aim is to estimate the

The author is Chief Statistician of India and Secretary, Ministry of Statistics and Programme Implementation, Government
of India. The views expressed in this article are personal.

4 YOJANA October 2013

proportion of people who on average Awas Yojana, where caps on numbers actual modalities of the dialogue and
in some defined period of time over of beneficiaries are reached based on many other such considerations. This
some region do not meet this criteria. the estimates of the profile. It is clear class of issues are described in the
This estimation is then achieved that while both forms of targeting literature as non-sampling error
usually through a survey which use the profile developed for the first
canvasses (usually) households with objective, the finer the targeting, the Both these issues are well known
a view to assess the proportion of more intensive is the use of the data to statisticians and are dealt in
generating the poverty profile. This survey designs through a variety
those who do not meet the desired
then leads to the question as to how of means. Their overall impact on
criteria. these results, based on the
appropriate is this? To answer this the measurement is captured in the
design of the survey are described by
question we need to understand the analysis, by the concept of standard
geography, communities as may be
statistical properties of the profile errors of estimates. The magnitude
feasible. In India, this has been done
generated for the first objective. of this error typically depends on the
since the 1970’s using the household
design of the sample and the overall
consumer expenditure survey, based
Statistical Attributes of the Poverty size of the sample. The latter in turn
on criteria established by the planning
Profile is influenced by the desired degree of
commission task force in 1979. The
granularity in the estimates. Thus, for
estimates are generated for rural and As noted earlier, the poverty
instance, estimates for India as whole
urban areas separately in each state estimate is a calculation of a sample
over the entire year will have lower
of the union. This profile has them proportion who do not achieve a
standard errors, whereas in a given
been the basis for our discussions defined criteria of needs. as such the
survey estimates for states, districts
on poverty. statistical properties of this estimate
and for sub rounds will have higher
can be described through formal
Tu r n i n g n o w t o t h e s e c o n d standard errors.
techniques of statistical analysis.
objective, the principal objective is
The relevance of this discussion
to design programs and policies so The measurement process is
for the different uses of poverty
as to better target their objective. that a sample of households is
estimates is because, when the
Thus the authoritative World Bank selected from the population through
estimate is used for decision making
stratification at various stages. The
like deciding the quantum of target
What is common in all these household is then canvassed about its
population in a region, the inherent
approaches is to state a consumption over a period of time.
randomness in the estimate induces
normative criteria of what Based on collating the data from the
errors of inclusion and exclusion.
sample over the period of the survey,
constitutes socially acceptable These are over and above inclusion
we estimate the proportion who did
minimum “ necessary for the and exclusion errors generated
not meet the prescribed norm. This
bare wants of a human being, through the operation of the target
may differ from the true proportion
to keep him in ordinary good for a variety of reasons: The households actual
health and decency” (Naoroji
First-the sample is a subset consumption may differ from
1901).
of the population, the estimate of the reported consumption
the sample will differ from that of because of the design of the
handbook (2009) states “Clearly,
actual population, this difference schedule of inquiry, the ability
one cannot help poor people without
will depend on the design of the of the respondent to recall and
knowing who they are”. The principal
sample. These are typically defined
objective is to seek to design the the ability of the inquirer to
as sampling errors.
program so as to allocate resources communicate his query and
in a manner most likely to reach Second-The households actual understand the response of
the intended beneficiaries. This consumption may differ from the the respondent.
targeting can be very broad or coarse reported consumption because
or very fine. In the former case the of the design of the schedule of selection mechanism. In other words,
poverty profiling done under the first inquiry, the ability of the respondent even if there were no errors in the
objective is used to allocate resources to recall and the ability of the operation of the selection mechanism,
to regions or programs consistent inquirer to communicate his query there would still be individuals and
with the orderings in poverty profile. and understand the response of households who are incorrectly
Alternatively, the finer targeting can the respondent. These are further included and excluded.
be sought to locate beneficiaries influenced by a variety of subjective
directly as in the targeted public factors like the timing of the inquiry, This too is well recognised. The
distribution system or the Indira the length of the process and the correct targeting mechanisms would

YOJANA October 2013 5

then adjust the estimate derived 1972-73 NSS consumer expenditure programs. These concerns were
in the first exercise by a factor to survey. This was then termed as the sought to be addressed by another
correct for such errors. The form base year poverty line. This base expert committee constituted under
of adjustment would depend on year line was then periodically the chairmanship of Prof. Tendulkar.
the relative costs assigned to the revised by adjusting for inflation. The report of the committee addresses
different errors. To illustrate, in the, The percentage of poor was then these concerns through a somewhat
proposed food security mechanisn calculated in subsequent years using complex process: they suggested
incorrect inclusion implies that a the distribution of consumption formally dropping the linkage to
person who does not deserve state expenditure as revealed in various a calorie norm, which in any case
support will get subsidised grain, NSS surveys with an adjustment to the expert group had implicitly
where an incorrect exclusion implies the level of consumption to bring it in done since they had recommended
that a poor person stays hungry. line with national accounts estimates the expenditure associated with the
The balance of social consideration of household consumption. norm for 1973 without changing
has been to argue to minimise such the underlying basket of goods. The
wrongful exclusion and err on the This measure attracted a lot of
committee suggested using the urban
side keeping this possibility to a attention, discussion and criticism
poverty rate for 2004-05 arrived
very low level even if this implies as well. The planning commission
through the earlier method, as the
some degree of wrongful inclusion. decided to have a comprehensive
reference rate; and the associated
Thus, the targeted population should review by an Expert Group (1993).
basket of goods as the new normative
exceed the average number of poor The group in their report noted “
basket, applicable to both urban and
calculated by our surveys by a factor The methodology followed in official
rural households; and then updating
dependent on the standard error. estimates of poverty… has been
this expenditure using price data,
regarded by some as inappropriate
implicitly captured in the NSS survey
...in the proposed food and even inadequate in giving a
in the form of unit values in the median
security mechanism, incorrect representative picture of incidence
household class. This maintained
of poverty in India. In fact, the use
inclusion implies that a person a continued comparability with the
of State level estimates of poverty
who does not deserve state past, albeit through the urban poverty
in allocating plan resources for
support will get subsidised line, and provided for a slightly
poverty alleviation programmes
grain, where an incorrect higher level of poverty estimates.
has brought this debate into sharper
This approach clearly did not address
exclusion implies that a poor focus. The States have become very
person stays hungry. sensitive about their respective
estimates of poverty”. The group The task force defined
In order to examine the implication then eventually recommended some a poverty line for urban
of this, we turn to some implications adjustments to the procedure of the and rural areas. They first
of poverty estimates from the NSS taskforce by removing the link to described an average
68th round data from 2011-12 after a national accounts, and allowing for calorie norm, worked out in
brief review of the history of poverty inter-state variation in inflation and
consideration of the age, sex
measures in India also to change the basis for inflation
correction using CPI rather than and activity composition of
Poverty estimation in India wholesale prices. But the essential the population. The monetary
Poverty estimation in India, since norm remained as it was in the earlier value for this norm was then
1979 has been done by the Planning taskforce. The consequence was to derived from the expenditure
Commission using data from NSS bring about an adjustment for the pattern of the 1972-73 NSS
surveys on household consumption level of the estimate without altering consumer expenditure survey.
expenditure. The methodology for its statistical attributes. This was then termed as the
estimation was outlined in a report of This method, in turn, received its base year poverty line.
a Task Force (1979) of the Planning share of analysis and criticisms. These
Commission. The task force defined a criticisms centred on the method used the central concern relating to under
poverty line for urban and rural areas. for price adjustment, the rural urban estimation of the proportion of poor
They first described an average calorie differentials in poverty and inter-alia for purposes of targeting; a concern
norm, worked out in consideration of the continued relevance of the 1973 that manifested itself in a huge,
the age, sex and activity composition basket for poverty comparisons. A somewhat uninformed, public debate;
of the population. The monetary continuing concern was the purported leading to the constitution of yet
value for this norm was then derived under-counting of the poor specifically another expert group, whose report is
from the expenditure pattern of the from the view point of targeted still awaited.

6 YOJANA October 2013

 We may note that a common survey is conducted over a full table. This has been done applying
element in all the criticisms is that the year from July to June (termed as a the state level poverty lines for the
estimates are too low. The response round, hence the 68th Round covered full year to each sub round and by
has been through calibration to adjust July 1, 2011 to 30 th June, 2012). linear interpolation in the relevant
the level. This response seems to have the survey period is further divided decile class. The results yield some
missed a key facet of how poverty into four sub-rounds, each with a interesting characteristics:
measures are used in targeting duration of three months, the 1st
systems. Consumption as measured sub-round period ranging from July As expected the 1 st sub-round
in the NSS survey or other poverty to September, the 2nd sub-round and occasionally the 2 nd show the
surveys is complex conceptually and period from October to December highest level of poverty. Further the
is not feasible to measure through and so on. An equal number of 4th sub round has usually the lowest
a census. The general approach of sample villages/blocks (FSUs) is percentage of poverty
a targeting system is to develop allotted for survey in each of these In these 18 states if we examine
some observable attributes that four sub-rounds. Thus each sub round the poorest, these would be
can be simply measured in the is an independent sample capable Chhattisgarh, Jharkhand, Bihar
population and are correlated with of generating separate estimates for and Odisha; however their inter-se
the consumption poverty profile. the country as a whole and for each rankings depends on the sub round.
These attributes are typically those state. Thus, while typically, poverty Thus Odisha is second only to
that can be captured in a census and is estimated from the sample for the Chhattisgarh in the first and third sub
full year; it is in principal possible to rounds; Jharkhand appears to be the
The committee suggested also examine the data across different poorest in the 4th sub round.
using the urban poverty rate sub-rounds.
The poverty percentage also varies
for 2004-05 arrived through The identification of the NSS year quite sharply as well between sub
the earlier method, as the with the agricultural year and the rounds. In the case of Chhattisgarh,
reference rate; and the sub rounds with broad agricultural the poverty estimates can differ by
associated basket of goods as seasons, it is expected that some as much as 19 percentage points in
the new normative basket, seasonal characteristics will be there rural areas and 16 points for the state
in the data. Thus the detailed results as a whole. In fact, MP, Odisha and
applicable to both urban and
for the Employment Survey of the Maharashtra also see large variations
rural households; and then NSS, which is carried out parallel to
updating this expenditure in their sub-round wise poverty
the consumer survey, from 2009-10
using price data, implicitly show that average wage earnings per
the survey period is further
captured in the NSS survey in day received by casual wage labourers
is the lowest in sub-round 1 for both divided into four sub-rounds,
the form of unit values in the
males and females in rural and urban each with a duration of three
median household class.
areas. What is also interesting is months, the 1st sub-round
are often stable over time. These the fact that this is also the case for period ranging from July to
are then used to select entitled and average weekly remuneration from September, the 2nd sub-
excluded populations usually subject public works. Reflecting, probably round period from October to
to limits based on the poverty profile the lower amount of such works December and so on. An equal
assessed through consumption. The in this time period. Sub Round
number of sample villages/
controversy arises, because these 1also has the highest incidence
of unemployment. If we look at
blocks (FSUs) is allotted for
limits set through average measures survey in each of these four
induce large errors of exclusion. intensity of employment, in terms
of the number of days worked in the sub-rounds. Thus each sub
In our earlier discussion we had week, then again in sub round 1 the round is an independent
noted that use of average thresholds percentage of people finding work sample capable of generating
in decision making can induce errors all seven days is the lowest, and the separate estimates for the
of exclusion and inclusion. These percentage not working on any day country as a whole and for
errors are expected to be linked to the is the highest. each state.
variability of the measure.
Given the close association of
To explore this it is useful to turn employment and earnings with percentage. This is largely on account
to some operational characteristics of poverty, one should expect to see a of the fact that the fourth sub-round
the NSS consumer expenditure survey. similar pattern in poverty. This has has a much lower poverty rate than
The NSS Consumer expenditure been attempted for some states in the any other sub-round. Further on

YOJANA October 2013 7

expected lines, more developed states this possibility. Thus, suggesting that
like Punjab and Kerala see relatively ...the detailed results for the if our concern is with targeting we
low sub-round variation but quite Employment Survey of the should look for an all India measure
intriguingly so does a less developed NSS, which is carried out that aggregates seasonal peaks across
state like Rajasthan! In general, the parallel to the consumer states. The degree of interstate
larger and poorer states have higher survey, from 2009-10 show and even higher interstate seasonal
seasonal variability than the better that average wage earnings variability suggests that this type
off states. per day received by casual of variation would increase as we
go down further into sub State level
The seasonal variability is only wage labourers is the lowest measures. In fact it is quite likely that
part of the problem. A related question in sub-round 1 for both males backward districts would have much
is on its correlation structure. If and females in rural and urban higher seasonal variability in poverty.
seasonal cross correlation across areas. What is also interesting A targeting measure seeking to
poverty profiles is low then the is the fact that this is also minimize exclusion would need to be
overall measure cannot be a simple the case for average weekly based on both a very granular estimate
average but a suitably weighted and take account of the variability at
remuneration from public
sum! We cannot easily measure that level; thus an average based on
correlation across seasonal measures works. Reflecting, probably the
district level seasonal maxima would
because in the current design, lower amount of such works in be considerably higher than our
households are only measured once this time period. current estimates.
and we do not have a sense of their
seasonal variation in consumption. In Conclusion
programs, the correlation is likely to
developed states, with less seasonal be high. In other cases correlation In this essay we have explored the
variation in employment and also in may be low. Our measure of inter basic approaches to measure poverty
states with strong active anti poverty seasonal range is a partial indicator of and its areas of use. Our discussion has
Percentage below the poverty line (Tendulkar method) 2011-12 (selected states)

2011-12 RURAL URBAN

Full Year SR1 SR2 SR3 SR4 Full Year SR1 SR2 SR3 SR4
Andhra Pradesh 10.96 14.8 10.7 9.5 9.3 5.81 9.4 8.2 7.2 6.3
Assam 33.89 37 32.7 34 30 20.49 17.6 24.3 20.5 18.3
Bihar 34.06 31.8 39.8 34.9 30.6 31.23 30.2 39.5 23.7 32
Chhattisgarh 44.61 50.8 50.8 41.6 31.2 24.75 25.6 23.5 26 21.9
Gujarat 21.54 26 26 18.6 15.9 10.14 14.4 11.1 9.2 9.2
Haryana 11.64 12 11.3 15.6 8.2 10.28 14.8 9.2 7.5 8.3
Jammu & Kashmir 11.54 17.4 9.6 10 9 7.2 9.1 8.6 6.6 8.5
Jharkhand 40.84 42.5 43.4 34.9 36.3 24.83 25.3 31.5 20.1 15.5
Karnataka 24.53 29.3 25.2 21.7 20 15.25 16.6 17.1 13.2 15.7
Kerala 1
9.14 11.6 10 9.2 9.4 4.97 9.4 8.1 7.3 8.5
Madhya Pradesh 35.74 43.6 45 34.6 31.4 21 27.8 22 20.3 15
Maharashtra 24.22 33.2 23.8 25.7 17.5 9.12 13 9.2 8.2 9
Odisha 35.69 44.5 31.6 37.7 30.4 17.29 16.8 16.2 17 20.8
Punjab 1
7.66 8.6 8.6 8.3 8.7 9.24 8.6 9.5 11.3 9.4
Rajasthan 16.05 17.8 16.5 18 14.5 10.69 12.4 13.4 8.6 8.9
Tamil Nadu 15.83 18.3 18.7 18 10 6.54 10.9 8.3 8.2 6.4
Uttar Pradesh 30.4 33.5 32.4 28.4 26.7 26.06 31.1 27.7 29 18
West Bengal 22.52 26.5 21.4 24 16.8 14.66 16.1 17.6 15.3 12.4
All India 25.7 28.1 26.9 25.6 22 13.7 16.2 14.5 13.5 10
The poverty percentages are based on linear interpolation in each decile. This leads to some over estimation in the lowest decile class.

8 YOJANA October 2013

pointed out that potential use should that in addition to being concerned
describe the design of measurement. about the location attributes of poverty is also affected by non-
Specifically using poverty measures poverty measures we should explore seasonal sources of variation
for targeting purposes implies that we their variability and sources and like health expenses, economic
structures in the variability. Existing and demographic cycles,
if our concern is with targeting measurement designs have principally natural disasters etc. Ideally
been focussed on estimates of mean we should seek to develop
we should look for a all India rather than those of variance and
measure that aggregates a study to understand the
covariance. This has been partly dynamics of poverty directly.
seasonal peaks across states. compounded by a misunderstanding
The degree of interstate on the nature of variance; it should not a study to understand the dynamics
and even higher interstate be identified as a fault of the design
of poverty directly. To appreciate
seasonal variability suggests but a characteristic of the process
the distinction, at present the survey
that this type of variation itself. There is clearly a need to
focuses extensively on the nuances
develop from existing studies a deeper
would increase as we go down of consumer expenditure. Poverty is
analysis of variance and covariance.
further into sub State level Further we have, in our discussion,
principally a distributional attribute
measures. In fact it is quite examined variability only on account of the consumption distribution. We
likely that backward districts of seasonal variations in economic could, in principle take a somewhat
would have much higher activity. But poverty is also affected coarser measure of consumption,
seasonal variability in poverty. by non-seasonal sources of variation but generate a richer sense of its
like health expenses, economic and distribution and dynamics.  q
should be sensitive to likely errors of demographic cycles, natural disasters
inclusion and exclusion. This suggests etc. Ideally we should seek to develop (E-mail :tca.anant@nic.in)

Development Roadmap
NULM - Livelihood opportunities for urban poor
The Cabinet Committee on Economic Affairs (CCEA) approved a flagship scheme aimed at job-oriented skills training for the
urban poor.
With an allocation of approxiametely Rs 6,405 crore, the National Urban Livelihoods Mission (NULM), aims at reducing poverty
of urban households through self-employment and skilled wage employment opportunities.
City Livelihood Centres (CLCs) will be established in mission cities to provide a platform to the urban poor to market their
services and access information on self-employment, skill training and other benefits. The Self-employment programme (SEP)
will provide financial assistance to individuals and groups of urban poor to set up gainful self-employment ventures. To be
implemented in two phases – phase I(2013-2017) and phase Ii (2017-2022), it will target all cities with a population of one
lakh or more and district headquarter towns with a population of less than one lakh as per census 2011.
Land Acquisition Bill - benefitting the poor
The Government passed recently the Right to Fair Compensation, Resettlement, Rehabilitation and Transparency in Land
Acquisition Bill that seeks to change the antiquated legal framework for acquiring land and guarantee compensation,
rehabilitation and resettlement benefits to people affected by acquisitions.
A. Compensation clauses
i. The bill, which replaces the Land Acquisition Act, 1984, proposes compensation upto four times the market value of
the land in rural areas and two times in urban areas. It has authorized states to enhance the package, if so desired.
ii. Provision added to ensure that speculators who purchase land at low prices do not benefit unduly.
iii. Tenants living off share crop above a certain period will also get compensation.
B. Consent
It makes it mandatory to obtain prior consent of at least 70 per cent of landowners in case of acquisitions for public-private-
partnerships projects and 80 per cent for private projects. It has asserted that government will retain land ownership in
PPP projects. It has also authorized states to increase the consent provision, if so desired.
C. The clauses of the Act will apply with retrospective effect to such projects where acquisition process has not been completed
when the new law comes into effect.
D. The bill states that land will be returned to the state land bank if unused for 5 years.

YOJANA October 2013 9

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policy perspective
analysis

Employment and Growth in India:

Trends and Policies
S Mahendra Dev

E
xpanding productive Trends in Growth and
employment is central Employment
for sustained poverty
Table 1 provides GDP growth,
reduction and food
employment growth, productivity
security in low income growth, elasticity of employment with
countries, as labour is respect to GDP since the early 1970s.
the main asset for majority of the The elasticity of employment declined
poor. It is also known that a high continuously from 0.52 in the 1970s
output elasticity of employment to 0.02 in the second half of 2000s.
generally ensures that growth is The story of India shows that the
egalitarian. The experience of the last relatively high growth has not been
inclusive growth two decades in India indicates that ‘jobless’ but its employment content
employment opportunities created has been low and has declined sharply
does not mean were inadequate inspite of rapid over the decades since the early 1980s.
having some social growth. Jobless growth is a concern
but on the other hand, we should
Overall productivity is increasing
particularly in the formal sector but
protection programs not have growth less jobs. In other new employment is being created in
the low productive informal sector.
words, generation of employment
or giving freebies per se without growth should not be The numbers on GDP growth,
to certain sections the policy prescription. We should
generate productive jobs.
employment growth and elasticity by
sectors for India are given in Table
of the population. In a country like India with
2. Employment growth and elasticity
have declined for the primary sector.
There should surplus labour, importance of an
employment oriented growth is well
Decline in the share of agriculture in
employment is needed. However, it
be productive known. However, an over-emphasis
on employment generation without
is declining in manufacturing sector
also. The elasticity of employment in
inclusion in terms any regard to productivity and incomes manufacturing declined from 0.78 in
of workers is also not desirable
of generating particularly in India where productivity
the 1970s to 0.25 in 2000s. Similarly,
the elasticity of tertiary sector has
productive or and income levels are low. Therefore,
the new employment generated has to
declined from 0.77 to 0.30 during the
same period. In the last two decades,
quality employment be at increasing levels of productivity
so that it does not assume a poverty
employment was generated more
in construction sector, trade, hotels,
perpetuating nature (Papola, 2012). transport and storage.

The author is Director and Vice Chancellor, Indira Gandhi Institute of Development Research (IGIDR), Mumbai. He
is a member of the newly constituted Expert Panel on poverty estimates appointed by the Government of India. He was
Chairman of the Commission for Agricultural Costs and Prices.

YOJANA October 2013 11

 Two other important trends There are large numbers of working economies achieved high growth
are observed in Indian economy. poor in India. Around 92 per cent of from the early 2000s, employment
One observes a ‘jobless growth’ the workers are in the unorganized elasticity to growth has been low.
phenomenon in organized sector with low productivity, low The employment-to-population ratio
manufacturing. The growth rate of earnings, poor conditions of work and stagnated around 60 per cent when the
employment in this sector recorded lack of social protection. The Indian world economy was growing steadily.
consistently negative growth since experience thus suggests the need The report says that while the trends
late 1980s with growth rates of-0.8 for increase in quantity and quality may mask regional and country level
in 1988-94, -2.5 in 1994-2000,-5.9 of employment. successes, at the global level, there is
in 1999-2005 and -3.4 in 2005-2008. little evidence to suggest employment
Global Experience: According to has been responding to economic
Secondly, the additional employment the Report of the Global Employment
generated mainly relates to informal growth.
Trends 2013 (ILO, 2013), global
workers. Around 63 million workers unemployment is estimated to have ILO (2012 a) report says that
were added during the period 1999- increased from 170 million in 2007 one of the reasons why employment
2000 to 2009-10. Out of that, 44.7 to 197 million in 2011. Around 39 is not responding to growth could
million were added to unorganized million people have dropped out be due to structural changes that
sector and 18.8 millions were informal of the labour market as they do the global economy is undergoing.
organized workers. In other words, all not see job prospects. These are Some of the structural changes are:
the additional employment generated also called ‘discouraged workers’. (a) labour saving technological
was of informal nature. ILO (2012a) indicates that although advances; (b) workers are moving to

Table 1. GDP growth, Employment, Productivity and Elasticity in India

Periods GDP Growth (%) Employment Growth Productivity Growth Elasticity of Employment
(%) (%) with respect to GDP
1972-73 to 1983 4.66 2.44 2.22 0.52
1983 to 1993-94 4.98 2.02 2.96 0.41
1993-94 to 2004-05 6.27 1.84 4.43 0.29
1999-00 to 2009-10 7.52 1.50 6.02 0.20
2004-05 t0 2009-10 9.08 0.22 8.86 0.02
Source: Derived from Papola (2012)

Table 2. GDP growth, Employment, Elasticity in India by Sectors

Sector GDP Growth (%) Employment growth (%) Elasticity of employment w.r.t
GDP
72-73 83 to 93-94 99- 72-73 83 to 93-94 99- 72-73 83 to 93-94 99-00/
to 83 93/94 to 00/09-10 to 83 93/94 to 04- 00/09-10 to 83 93/94 to 04- 09-10
04-05 05 05
Primary Sector 3.66 2.76 2.51 2.33 1.70 1.35 0.67 -0.13 0.46 0.49 0.26 -0.05
Manufacturing 5.47 4.94 6.70 7.97 4.28 2.00 3.17 1.95 0.78 0.41 0.47 0.25
Construction 3.08 4.88 7.63 9.20 4.43 5.67 7.19 9.72 1.44 1.16 0.94 1.06
Secondary sector 5.09 5.35 6.68 7.78 4.43 2.82 3.97 4.64 0.87 0.53 0.59 0.60
Trade, hoteling 5.74 5.58 8.64 8.47 4.62 3.77 5.24 2.54 0.81 0.67 0.61 0.30
etc.
Transport 6.48 6.03 10.57 14.50 5.88 3.39 5.16 3.68 0.91 0.56 0.49 0.25
&communica
Financing, 5.95 9.07 7.29 9.47 7.43 3.58 7.23 7.68 1.25 0.39 0.99 0.81
insurance etc.
Community, 4.49 5.86 6.53 6.58 3.18 3.91 0.40 1.85 0.71 0.67 0.06 0.28
social etc.
Tertiary Sector 5.46 6.58 8.00 9.35 4.21 3.77 3.41 2.83 0.77 0.57 0.43 0.30
All non-agri. 5.31 6.12 7.54 8.84 4.30 3.36 3.64 3.61 0.81 0.55 0.48 0.41
Total 4.66 4.98 6.27 7.52 2.44 2.02 1.84 1.50 0.52 0.41 0.29 0.20
Source: Derived from Papola (2012)

12 YOJANA October 2013

low productivity informal sector; (c) 1961 to 170 in 2009. During the same suggest a complementary relationship
economies are facing adjustments to time it increased from 100 to more than between manufacturing and services
ensure environmental sustainability 200 in Brazil, China and Indonesia. as both are required to absorb India’s
to fight against climate change; The yields of many crops in India large additions to the labour force.
(d) some demand is coming from are lower than many countries. Thus, However, service sector has greater
extractive sectors which have low there are a lot of opportunities for duality in terms of informality and
employment intensity. increase in TFP and yields in India wage inequality. On one hand, we have
with appropriate price and non-price highly skilled activities like IT getting
The conclusion of ILO (2012a) policies (technology and extension, very high salaries. On the other hand,
is that (a) growth is not a necessary water management, marketing and we have low productive large informal
condition for employment generation rural infrastructure). Diversification sector getting very low incomes and
although it is thought to be a necessary of agriculture, focus on Eastern and wages.
condition (b) the structural changes in Central regions, increase in supply
the world economy do not seem to be chains and links to agro processing Unemployment is a problem
conducive for employment generation. can increase productive employment. in the country, particularly youth
The challenge at global level is creating Higher agri-growth also increases rural unemployment, which is in the range of
productive and decent jobs for the non-farm sector productivity because 15 to 20 per cent, has to be addressed.
working poor, the 200 million out of of linkages. But, the major employment challenge
work and for the 40 million people is the large number of ‘working
entering the labour force every year Over the time, however, as shown poor’. Many of these workers are in
plus those ‘discouraged workers’. by the East Asian experience, we need unorganized sector which constitutes
labour intensive manufacturing to 92 percent of total workers. These
Generating Productive Employment: shift workers from agriculture. The people are working but with low
Options and Policies share of manufacturing employment in productivity and low incomes without
There is a need to have policies for India is only 11 per cent as compared any social security. There is also an
generating productive employment. All to 30 to 40 percent in East Asian economic argument for increasing
countries in 2009. In a research paper, their productivity and incomes as
Ramaswamy and Agarwal (2012) the unorganized sector contributes
The challenge at global level is compare the employment and job more than 50 per cent of GDP to the
creating productive and decent quality of manufacturing and services country.
jobs for the working poor, in urban India during the period from
the 200 million out of work 1999-2000 to 2009-10. Based on the
results of the paper, they conclude the
...the major employment
and for the 40 million people challenge is the large number
entering the labour force every following:
of ‘working poor’. Many
year plus those ‘discouraged The “results strongly suggest that of these workers are in
workers’. services sector would be an unlikely unorganized sector which
destination for the millions of low constitutes 92 percent of
the three sectors of the economy i.e. skilled job seekers. India needs to total workers. These people
agriculture, industry and services can focus on manufacturing sector to are working but with low
contribute to the growth of productive provide large scale employment. productivity and low incomes
employment although labour intensive Manufacturing has the capability without any social security.
manufacturing is the most important because it has stronger backward There is also an economic
one. linkages unlike the services sector. We argument for increasing their
cannot afford to neglect manufacturing productivity and incomes
Agriculture growth is one of the at this stage of development. The policy as the unorganized sector
important components for productive signals have to clearly say that we contributes more than 50
inclusion. Crop sector cannot absorb stand to support manufacturing activity percent of GDP to the country.
any more workers but allied activities in a big way.” Labour intensity of
and agro processing etc. can absorb organized manufacturing sector has to
some of the growing labour force. The approach paper says that
be improved apart from increasing the two conditions have to be fulfilled
Global experience shows that GDP productive employment in SMEs and
growth originating in agriculture is in order to add to growth potential
unorganized manufacturing.
at least twice as effective in reducing of ‘demographic dividend’. “First,
poverty as GDP growth originating It does not mean that service higher levels of health, education and
outside agriculture. The index of total sector has no potential to add to the skill development must be achieved.
factor productivity (TFP) in agriculture growing labour force. In fact, a study Second, an environment must be
in India has increased from 100 in by Eichengreen and Gupta (2011) created in which the economy not

YOJANA October 2013 13

only grows rapidly, but also enhances generation of productive world exports of manufactures while
good quality employment/livelihood employment the share of China was a whopping
opportunities to meet the needs and 15 per cent. The reforms since 1991
India has achieved much in the have not been comprehensive enough
aspirations of the youth”. Thus, last 22 years of the reform period
importance of skill development and to remove the bias towards capital
particularly in the macro performance. and skill intensive industries. Also,
need for quality employment is rightly On growth and inflation fronts,
recognized. there are distortions in input markets
the country did well till the global like land and labour. Productivity
financial crisis. Now we have many of SMEs and unorganized sector
Finally, large expenditures are
short run macro problems: decline in manufacturing has to be enhanced.
undertaken on social protection
investment and growth, high inflation, Role of agriculture in structural change
programs such as wage employment twin deficits, lower exports, rupee
(MGNREGS) and self employment is not through increasing employment
depreciation etc. India should quickly but through increasing productivity.
programs (National Rural come out of short run problems
Livelihoods Mission) schemes. Low productivity growth in agriculture
and focus on long term issues for is one of the disappointments.
These programs should generate sustainable growth. A lot remains to be Services and manufacturing have a
productive employment. For example, done for achieving the goals of higher complementary role.
MGNREGS should increase in growth and inclusive development.
agricultural productivity which can Naturally, the question arises: What's The third disappointment is
generate additional jobs. next? sluggish progress in education and
skill levels of workers. Not taking
There are five disappointments advantage of demographic dividend
The fresh perspective in the post-reform period. These are
regarding employment and is one of the failures. The draft of 12th
important for generation of productive Plan quotes Prime Minister saying that
growth in India relates to employment, achieving higher growth young population is an asset only if
shifting focus from quantity to and inclusiveness. These are elaborated it is (a) educated (b) skilled and (c)
quality and skill development. below. finds productive employment. Even in
The focus is also on labour First, slow infrastructure 2009-10, around 52 per cent of total
intensive manufacturing development is the first disappointment.
sector so that workers can be Although there is a lot of progress, Even in 2009-10, around
shifted from agriculture to high almost all indicators score poorly if 52 percent of total workers
one looks at India’s infrastructure are either illiterate or have
productivity sectors.
particularly compared with countries been educated only upto
like China. For example, power primary level. Overall 10
The 12th five year plan objective percent of the workforce
shortage is perennial in India. This is
of achieving ‘faster, sustainable in the age-group of 15-59
one of the single biggest constraints
and more inclusive growth’ (though for our growth. However, there years received some form
independently done) is in line with the are positives during 11th five year of vocational training. Vast
thinking of the post-2015 development plan. In the 12th Plan, out of one majority of workers have non-
agenda at global level. The fresh trillion dollars projected, 47 per cent formal vocational training.
perspective regarding employment investment is expected to be from There are huge challenges in
and growth in India relates to shifting private sector. It is not surprising raising education and skills of
that the index of infrastructure across workers and population.
focus from quantity to quality and
skill development. The focus is also states is highly correlated with per
capita income and level of poverty. workers are either illiterate or have
on labour intensive manufacturing been educated only upto primary level.
IFPRI’s study on India showed that
sector so that workers can be shifted Overall 10 per cent of the workforce in
public expenditures on roads have
from agriculture to high productivity better impact on poverty compared to the age-group of 15-59 years received
sectors. Social protection to workers that of anti-poverty programmes. some form of vocational training. Vast
and improving productivity of workers majority of workers have non-formal
are also emphasized. However, skill The second disappointment is the vocational training. There are huge
development for workers is given the failure in raising labour intensive challenges in raising education and
manufacturing. In the post-reform skills of workers and population.
highest priority for achieving faster
period, share of manufacturing in
and inclusive growth. This is also total employment has been almost The fourth disappointment is
important for taking advantage of the stagnant at 11 to 12 per cent. In 2010, slow social sector development.
demographic dividend in India. India accounted for 1.4 per cent of the Although there have been

14 YOJANA October 2013

achievements in social sector during improvements in Gujarat, it has in terms of generating productive or
the reform period, the progress has to go a long way in raising human quality employment.
been very slow. If we compare longer development.
periods of 1993-94 and 2009-10, the Readings
rate of decline in poverty for India The last and fifth disappointment
Eichengreen, Barry and Poonam Gupta
has been around 0.97 per cent per is governance failure. Reforms were
(2011), “The Service Sector as India’s Road
annum; inequality has increased; expected to improve governance at
to Economic Growth in India”, NBER
poverty reduction has been slower various levels. However, there are
working paper, USA
of STs. In the recent short period new problems in governance and
2004-05 to 2009-10, there have been persistence of old problems including GOI (2012), “Twelfth Five Year
improvements: the rate of decline in corruption. A study on performance Plan (2012-17)”, Planning Commission,
of Karanataka’s Lokayukta published Government of India
poverty has been faster at 1.5 per
annum; the rate of decline in poverty in India Development Report 2012- ILO (2012a), “Growth, Sructural
for SCs and STs is higher than for all; 13 suggests that without overhaul Change and Employment”, concept note
inequalities in rural areas declined of the country’s administrative for the global meeting on the post-2015
slightly but increased in urban areas. structure, ex-post prosecution of framework for development, Conference
However, in the longer period, one corruption or withdrawal from paper, ILO, June 2012.
expected much more progress in all economic activities cannot reduce
corruption. At present, the design of ILO (2013), “Global Employment
these indicators. India had success in
Trends 2013”, International Labour
growth but there is extreme failure anti-corruption ombudsman leaves a
Organization, Geneva.
in progress of social indicators or lot to the personality of Lokayukta.
the MDGs including environment. The analysis also suggests that the Papola, T.S. (2012), “ Economic growth
We are not only behind China but overburdened legal system needs and employment linkages: The Indian
the progress is slower than that of legal reforms. Dr. Bimal Jalan and experience”, Keynote paper presented at
Bangladesh. One study published many others feel that the governance the 95th annual conference of the Indian
in India Development Report 2012- problem is the biggest constraint for Economic Association, Geetam University,
13 estimated inequality adjusted achieving our development goals in Visakhapatnam, 27-29 December, 2012
human development index. It shows the country. Fixing this problem is R a m a s w a m y, K . V. a n d Tu s h a r
the cost of inequality HDI is 32 per important for success of the above Agarwal (2013), “Service led growth,
cent. The loss due to inequality is four issues also. employment, skill and job quality: A study
the highest in education dimension of manufacturing and service sectors in
(43 per cent), followed by health (34 To conclude, inclusive growth
urban India”, in Dev, S.Mahendra (2013,
per cent) and income (16 per cent). does not mean having some social
ed.), India Development Report 2012/13,
There is a debate about progress of protection programs or having freebies
Oxford University Press, New Delhi.  q
human development in Gujarat and to certain sections of the population.
Kerala. Although there have been There should be productive inclusion (E-mail : profmahendra@igidr.ac.in)

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 YE-125/2013

16 YOJANA October 2013

stateS reorganization
special article

Demand for Smaller States in India:

Impending Dangers
Guljit K Arora

I
ndia’ s three - t i e r become much more complex. The poor
federal structure validated particularly in the poorest regions are
by our Constitution offers a likely to get further marginalized; more
great deal of administrative, so when some of the regions continue to
economic and political stagnate, in spite of following the policy
freedom including of balanced regional development and
redrawing the domestic political map the significant proportion of the Central
to the constituent units. But the way public sector investment in those
political economy of the federation in regions. Given that the population is
India has worked over the period shows non-homogeneous, and geographic
that states at times, take unreasonable regions socially differentiated, the
positions for economic and social gains level of general economic frustrations
and political accommodation (Kumar of the people is likely to be exploited
2009). The people have lost faith in for political gains by political elites and
the institutions of “state” because the allied population groups, if growing
Since this is a political “state” which can help in creating
conditions for and provide enabling
politicization and multiparty system
and the way aggressive rule flouting
and emotional issue, environment have not come up to those mechanism continue to be used to
expectations. (Mahajan, 1999). hold on to power. Political arguments
the political class based on strong regional identities for
The framework of centralized
has to take the lead economic planning and governance on
having smaller administrative units
are likely to be widespread and people
to create governance federal principles could not adequately
provide a solution to the serious
may launch agitations under political
leaders at the regional level for new
mechanism and socio- challenges of inter-state disparities, jurisdictions.
unemployment and mass poverty,
economic institutional ill-health and malnutrition, illiteracy, States Reorganization: The Historical
structures, which social differentiation induced by caste, Perspective
religion, region, and language related
are people-sensitive, discrimination and riots, insensitivity The Drafting Committee of the
Constituent Assembly recommended
people-friendly and of the political institutions to the basic
needs of the people, and political the appointment of a Linguistic
Provinces Commission (known
people inclusive corruption.
as the Dar Commission). The Dar
During the period of on-going Commission reported against any
globalization induced transition, it reorganization given the prevailing
is said the inequality problem has circumstances and emphasized, “. . .

The author is Principal, Bhim Rao Ambedkar College, University of Delhi and was associated with the Finance Commissions
twice. With more than 25 years of teaching experience at University of Delhi, he has written on a variety of issues related
to federalism, underdevelopment, Chinese economy, sustainable development, health, Centre state fiscal relations etc.

YOJANA October 2013 17

everything which helped the growth factors having bearing on reorganising financial resources adequate enough to
of nationalism had to go forward and states. at least maintain minimum standards
everything which impeded it had to be of services to its people; (iii) increase
rejected or should stand over” (SRC Formation of States : Factors the revenue resources required for
1955, p.15). Since pressures for smaller ensuring a minimum rate of growth
states and political decentralization and development and; (iv) generate
The Congress appointed another revenues so that state’s dependence
Committee (December 1948, continue to be present and have grown
persistently over the period, it would on central transfers is not transformed
Jaipur Session) known as the J.V.P. into an inverse flow of resources, i.e.
Committee. This Committee, after be useful to review factors and their
dynamic interrelationships in the interest payments and loan repayments
having considered the question exceed the fiscal transfers received
of linguistic provinces, the Dar decision making process linked to
states’ reorganization and alternation of from the Centre.
Commission Report and problems
that had arisen since Independence, their boundaries. Some of the important Unity, Strength and National
sounded a note of warning against factors are as follows: Security: In any scheme of
the linguistic principle and stressed Language: Language is an reorganization of administrative
on the unity, security, and economic expression of feelings of people, and boundaries of constituent units,
prosperity of the country. However, reflects their culture and “internal the question of unity and strength
it agreed to the formation of the cohesiveness”. The language as a assumes importance. It includes
Andhra State, under the influence of determinant of states’ reorganization is all the administrative, political and
and as agreed by, Andhra Provincial justified on grounds like a convenient social structures, which are built
Congress, the Tamilnad Congress tool of administration, an important with the primacy of the nation as one
and the Madras Government; but it link, ensures social homogeneity and harmoniously integrated unit; and
did not agree to the formation of the what Ambedkar said, a fellow feeling. discourages linguistic fanaticism and
However, counter arguments such provincialism while giving due space
...language as a determinant as, a single predominant language to diversity reflected in language,
of states’ reorganization may result into “exclusivism” and culture, and traditions of the people.
is justified on grounds may challenge history and existing
like a convenient tool homogeneity and unity and so on are In smaller units, citizens in
equally strong. smaller administrative units
of administration, an
important link, ensures social Cultural Aspects: Generally can confront the bureaucracy
homogeneity and what speaking, culture indicates all shared and even the political mafia
Ambedkar said, a fellow values, practices and behavioural and corruption directly to
aspects relating to beliefs, habits, carry forward the objective
feeling. However counter
morals, laws and customs, and art and of balanced development
arguments such as, a single knowledge acquired by a person as a
predominant language may particularly when the country
member of society, and practiced in
result into “exclusivism” and some way. Culture, in fact, is a social is non-homogeneous and
may challenge history and heritage reflecting moral, spiritual socially differentiated.
existing homogeneity and unity and economic values, which are
expressed in the distinct way of life Geographic Size and Contiguity:
and so on are equally strong. The geographic size of a constituent
of people and may not find direct
Karnataka State for lack of unanimity link with administrative activity. unit is very vital in the functioning of
among the great majority of the people But, since the culture reflects local a federal political economy like India.
of Mysore State [SRC 1955]. languages, customs and traditions Since it is a common factor linked to
and art forms, it assumes importance the issue of smaller versus large states,
In December 1953, States in reorganizing states. However, it is it needs little elaboration.
Reorganisation Commission with desirable to promote the composite
A.V. Pai as the Secretary was appointed In smaller units, citizens in smaller
national culture while preserving
to consider the whole question of the administrative units can confront the
individual characteristics.
Reorganisation of States of Indian bureaucracy and even the political
Union to promote the welfare of the Administrative and Economic mafia and corruption directly to carry
people of the constitutent units and the Vi a b i l i t y : E c o n o m i c v i a b i l i t y forward the objective of balanced
nation as whole. The Commission gave requires state’s ability to (i) match development particularly when the
recommendations and the scheme of revenue and expenditures after country is non-homogeneous and
proposals for reorganisation in addition meeting of debt servicing of the socially differentiated. It is easy to
to review, rationality and timing and central government loans; (ii) to raise enhance allocative efficiency, improve

18 YOJANA October 2013

cost effectiveness, accountability, and preferences of the local people financial resources. The relatively poor
resource mobilization and and therefore are efficient in the States, given their meager resources,
accessibility and effectiveness of economic sense. This is challenged on lack of competitiveness to attract
government services. It allows wider many grounds. Tastes and preferences new investments and the declining
experimentation in developing skilled may not get accurately reflected; fiscal transfers from the Centre are
public administrators, and introducing production may not necessarily be likely to further suffer on account
an institutional change, which other cost effective; qualified people, skilled of compression of expenditure on
regions may emulate over the period. manpower and resources to be devoted health, education and essential public
It will not be an easy task for the to technology and innovation, research services (Rao and Chakraborty, 2006).
Central Government to be an efficient and development to meet technical A few States may find it easy to
supplier of the uniform level of production frontiers may not be indulge in “races to the bottom” by
output for reasons of imperfections or available. Corruption and financial diluting their tax laws and giving
asymmetries in information available malpractices, though smaller in volume fiscal concessions and incentives to
with the Centre; and political pressures and scale, may be wide spread and attract foreign investment. However,
or even constitutional constraints deep rooted as more people find the poorer State may not find resources
limiting the capacity of the Central access to local politicians and local for extending these incentives and
government (Oates 1998). bureaucracies. in fact may witness distortions in
social investments, patterns caused
On the contrary, too many smaller It must also be recognized that
by the demonstration effect of the
states empowered with general monetary development experience of different
elite consumption patterns. With
and fiscal aspects including domestic constituent units shows that economic
the nation-state becoming relatively
and foreign market borrowings, transformation can be neutral to size,
a less significant player and TNCs
access to money and capital markets, geographical compactness and physical
taxing, subsidizing and providing tax geography. What ultimately matters is more powerful, the weak regions lag
incentives etc. may not worry about not the size, but the intrinsic merits of far behind and also lose grip over
macroeconomic stability (Prud’homme the administrative unit. conflict management instruments at
the political level with a reduction in
On the contrary, too many H i s t o r i c a l Tr a d i t i o n s a n d the absolute power of those in power
smaller states empowered Connections: A sense of kinship and [OECD 2001].
oneness as reflected through history;
with general monetary and its traditions create a common Globalization induced pains
and fiscal aspects including consciousness. But how much weight through the consequently reduced
domestic and foreign market should be given to this factor in role of the “state” as a producer,
borrowings, access to money redrawing the political map of a
and capital markets, taxing, country cannot be overstressed. Given the existing economic
subsidizing and providing tax disparities across the
Constitutional Structure of the
incentives etc. may not worry Country: Indian experience of more States at intolerable levels,
about macroeconomic stability than six decades with the Constitution and further coupled with
shows a scope for amendments, an social differentiation and
1995). They may not necessarily check in-built flexibility for states and coalition politics advancing
the rising income disparities among sufficient safeguards for the Centre to in the direction of identity
individuals and regions, because if protect the unity and strength of the
high taxes on the rich are imposed for nationalism, the country
country. Parliament has overriding
better income redistribution, the rich may get into a situation of an
legislative authority on subjects listed
may leave for lightly taxed areas. Such in Concurrent List, and in case of upsurge in statehood demands
demands for smaller States are a never grave emergency or which the national particularly from deplorably
ending process particularly if people interest so warrants; and with the poor regions even of the
are dissatisfied with “state” policies approval of a 2/3 majority of the relatively high income states.
and the country is divided into too Rajya Sabha, it can prevail over the
many ethnic entities. Demands for new State List. promoter and regulator, pressures for
states immediately after independence, federal restructuring, and pressures
in some cases like Gujarat, Samyukta Globalising India and Socio-
Economic Realities on public finances are likely to further
Maharastra, Vishal Andhra etc. were
weaken the poor regions and bring a
for more cohesive bigger states [Kumar
With reduced fiscal transfers change in rules and culture that shape
2000:22].
available with states, they have to the system of governance. Given the
It is often argued that smaller units compete more intensely ever more existing economic disparities across the
serve and provide output as per tastes than before for human, physical and States at intolerable levels, and further

YOJANA October 2013 19

coupled with social differentiation differentiation is buttressed by political 2009, p.8). There are also “signs of
and coalition politics advancing in differentiation. With more than 170 widespread election fatigue leading
the direction of identity nationalism, regional and unrecognized, 36 state and to popular disinterest in and cynicism
the country may get into a situation 6 national political parties existing in towards politics” (Yadav 1999, p.
of an upsurge in statehood demands the country, the coalition politics has 2393).
particularly from deplorably poor assumed an important place in political
governance and administration of The character of the conflict in the
regions even of the relatively high
the country. But these social and three layers of government witnesses
income states. For instance, Vidarbha
political diversities are being misused a sea change, but conflict management
and Marathwada in Maharashtra,
to obstruct cohesiveness and consensus tools continue to be “appease-now”
Rayalaseema and Telangana in Andhra
required for sound governance. The policy. Regional groups highlighting
Pradesh, Eastern part of Uttar Pradesh,
vision and perspectives have been their cultural and historical roots
North Karnataka in Karnataka and so
missing in policies related to language, have become much more assertive.
on shows a dual structure and the top-
culture, and national integration; and Public policy-making environment
sidedness of the state’s development
as a result, the national goals related has got deteriorated [Kothari, 2001];
process [Kurian 2000].
to secularism, unity in diversity etc. and conflict management has become
The 73rd and 74th amendments have become much more complex. The increasingly complex particularly in
introduced in 1992 empowering the dual system of education, described as view of the narrow local interests and
local people to plan from below “divided system” with English medium prejudices represented by regional
validated by the Constitution, continue schools accessible primarily to the rich politics (Sanghavi and Thakkar 2000).
to be illusory for the general masses. is highly divisive. The complex interplay of all these
The Thirteenth Finance Commission developments accompanied with
has seriously and rightly so viewed this The political parties have grown unhealthy and corrupt political practices
problem. The classic cases are that of arbitrary and autocratic, lacking inner in partnership with bureaucracy and
Local Area Development Scheme of democracy and accountability. Across business and deteriorating public
Members of Parliament and Legislative the political spectrum Lok Sabha policy making environment created
Assembly. Nobody has imagined the members, an important component owes a governance policy that has failed to
distortions if all the three million local their status to their families. Electoral check the unabated black money and
government representatives ask for system based on adult suffrage, and political corruption.
local area development shares which territorial constituencies have given rise
to vote‑bank‑based political cultures of The rising peoples’ frustrations
putting off contentious political issues. and exploitation on economic front is
The high degree of social linked to soaring aspirations of various
Promoting politics through caste-based
differentiation is buttressed ethnic, regional, religious and linguistic
reservations has become more common
by political differentiation. now. These cannot be ignored in a groups. Violence inflicted on the people
With more than 170 regional country committed to secular principles
and unrecognized, 36 state and democratic federal structure. The rising peoples’ frustrations
and 6 national political parties and exploitation on economic
existing in the country, the The excessive use of money, muscle
power, and moneyed interests have front is linked to soaring
coalition politics has assumed aspirations of various ethnic,
an important place in political encouraged political violence and
political corruption, and the upcoming regional, religious and
governance and administration
of the politicians with criminal linguistic groups.
of the country.
charges in the current parliament and
non‑serious political parties leading to
appears to be more legitimate than that declining political values and cultures. through caste and religious forces, and
of MLAs and MPs (Oommen, 2010). It is a sad commentary on the Lok globalization induced individualism,
Regional consciousness through sabha that Parliament proceedings in commercialism, and disharmony
‘sons of the soil’ policy given the December 2009 had to be abandoned intertwined over the period can easily
deeper penetration of coalition politics, with as many as 34 members with be used for political gains. This type
the growth of local patriotism and questions listed against their names of situation cannot be suppressed under
loyalty to a region and its language not turning up during question hours. the garb of consensus. Political ends can
and culture have grown into feelings And one hour costs around Rs. 14 lakh easily be translated into expression for
(Economic Times, 1st Dec 2009). Lok smaller administrative units, given the
of hostility and a basis for regional
Sabha worked for only 92 hours and voting rights in the political executive
conflicts.
45 disrupted hours in a 24 day session system and continuously eroding
The high degree of social in 2009 (Hindustan Times, 8 August capability of the “state” to manage the

20 YOJANA October 2013

political economy of the rule-based whenever convenient continues to political equilibrium. One may cite
policy making environment [Sen, be the main determinant for such an instances of culturally dominant and
1998]. In such a situation, determinants important issue. distinct groups such as Bundelkhand
of identity seen in terms of geography, (U.P.), Mewar (Rajasthan), Malwa
Challenges and Future Prospects
society, economics, history, politics, (M.P.), Mithilanchal (Bihar), Old
religion, philosophy, art and music The globalizing India undoubtedly Mysore (Karnataka), which fall in
overweigh the corresponding central has moved up on the developmental this category [Kumar 2000]. The
values seen in terms of harmony, scale but continues to face the serious creation of such states alone on ethnic
equality, collectivism, democracy, challenges of rising inter-state grounds may result in intense ethnic
naturalism, ethnic living, and group disparities, mass unemployment, strife. Seven states created to satisfy
participation (Raichaudhuri 1992). poverty, illiteracy, insensitivity of ethnic aspirations of the people in
the political-economy institutions the north east, continue to be in
In the long run, there may not
to the basic needs of people, and turmoil more than ever before [Madhab
appear any real consensus without
the political corruption. Inclusive 1999]. At the same time, pressures for
accommodating the demand for smaller
growth remains a distant dream. reorganizing states such as Bodoland,
administrative units. The case of
Trends of underdevelopment lead to Coorg, Bundhelkhand, Gorkhaland,
Telangana deserves mention. This is
political disenchantment and economic Khoshal, Harit Pradesh, Maru Pradesh,
a more than half a century old well-
frustrations of the people. Thanks to Mithilanchal, Saurashtra, Telengana
articulated demand for which mass
the vernacular media led information and Vidarbha are already existing. In
protests with serious political backing
revolution at the local level, the most of the cases, such demands are
have been observed. In July 2013,
dominance of national political claims not superficial given their historical
the Congress Working Committee’s
announcement to carve out a separate is also challenged. Given the socio- basis, prolonged agitations, economic
state has led to frequent disruptions of economic and political background rationality, and vernacularization
Lok Sabha by ant-Telangana members of the country, economic frustrations of the public sphere, influencing
belonging to the Congress and the may change into political formations and informing citizen at the local
Telugu Desam Party resulting in culminating into regional movements levels. The country is aware of the
suspension of 12 such members for for statehood demands. These are approaches followed by the British, the
five working days. easily exploitable as an instrument of Indian National Congress, and factors
political opportunism simply because considered in the post-independence
people can be identified in terms of period.
The political history of India
shows that “administrative small regional identities. Each case thus deserves to be
efficiency and faster economic The process related to reorganization examined on its own merits as
development were essentially of boundaries gets further compounded background features and peculiarities
the by-products, but not if political pressures for decentralization would be different. But before
the causative factors … and are serious, socio-economic arriving at any conclusion, totality of
were never the reasons for development policies are not in line circumstances cannot be ignored in the
the Centre in first place to with economic realities, and the people
become skeptical about the socio- There is a need to appreciate
initiate such reorganization”
economic consequences and their that alteration of state
(Kumar 2000:3081).
dynamics of exogenous pressures for boundaries and creation of
Unfortunately, calculus
of political opportunism globalization. In the case of Sri Krishna new states has to be regarded
Committee Report on Telangana as a means to an end rather
to be exploited whenever (2010), even after the elaborate work,
convenient continues to be the than an end in itself to achieve
the Committee could not give any the higher levels of welfare of
main determinant for such an resolution except giving out six options
important issue. the people.
for different configurations of the three
constituent regions of coastal Andhra,
The political history of India shows Rayalaseerma and Telangana. perspective of the generally recognized
that “administrative efficiency and factors. There is a need to appreciate
faster economic development were Smaller units created purely to that alteration of state boundaries
essentially the by-products, but not the meet the non-economic objectives and and creation of new states has to be
causative factors … and were never the appease certain pressures emerging regarded as a means to an end rather
reasons for the Centre in first place to for historical reasons and out of than an end in itself to achieve the
initiate such reorganization” (Kumar feelings related to caste, creed and higher levels of welfare of the people.
2000:3081). Unfortunately, calculus culture; languages; religions and The creation of Chhatisgarh, Jharkhand
of political opportunism to be exploited ethnicity may fail to achieve a stable and Uttaranchal and the tripartite

YOJANA October 2013 21

Agreement with the Government of Since this is a political and Dunn, J (2000): the Cunning of
West Bengal, Centre and Gorkhaland emotional issue, the political class has Unreason: Making sense of politics (New
Territorial Administration to give more to take the lead to create governance York: Basic Books, p.98)
autonomy to the hill region of West mechanism and socio-economic Government of India (2010):
Bengal in July 2011 has increased institutional structures, which are Committee for Consultation on the
local aspirations for forming a separate people-sensitive, people-friendly and Situation in Andhra Pradesh, December,
state of Gorkhaland along with raising people inclusive. It may even think of also known as Shri. Krishna Report.
others’ aspirations elsewhere. a new legislative solution for paving India, Government of (1955): Report
It may also be highlighted that the way for the recent statehood of the States Reorganisation Commission,
redrawing the internal administrative demands by making districts as the pp 1-266.
map should not be treated against the autonomous administrative units
(analogous to states) to be further Kumar, Ashotosh (2009): “Rethinking
‘unity and integrity’ of India nor anti-
placed under Regional Council State Politics in India: Regions within
establishment. India is well integrated
while reconstituting the Second Regions EPW CXLIV, l9), Maya:14-6
physically and emotionally, and in
political and economic terms. The Reorganisation Commission to work Madhab, Jayanta (1999): “North-
country has seen states’ reorganisation in coordination with the Finance east” Crises of Identity, Security and
many a times before, and the number of Commission and Interstate Council to Underdevelopment”, EPW, February 6-12
states has gone up from 14 and 6 UTs redraw the state boundaries. (XXXIV, 6): 320-322.
in the 1950s to the present 28 states Oommen, M.A (2010): “ The 13 th
and 7 UTs. Readings
Finance Commission ad the Third Tier”,
Thus, an evaluation of the Arora, G.K (2013): “Emerging EPW (XLV,48), 27 Nov:92-8
existing administrative boundaries Fiscal Crisis & Centre State Fiscal Srinivastu, K et al (2011):“Shri Krishna
may be undertaken but it should be Relations”,  Mainstream, February 16, Committee, Though But Unavailable” EPW
context specific and seen in totality Feb.23, Feb.30. 1991, pp.15-20. pp.17-26, (XLVI, 10) March:16-18
of circumstances, and developments and pp.26-30). State Reorganisation Commission,
taking place in broader socio-economic- Bagchi, Amresh (2008): Globalisation SRC (1956) was also popularly known as
political contexts. The specific factors and Federalism: Uneasy Partners, EPW Fazal Ali Commission.
that requires a careful and critical Sep 20:41-48
review include: language and culture; Thirteenth Finance Commission 2010-
security of the country; history, size Chandra Bipin (2000): India After 2015, vol II and earlier reports also
and the geographic contiguity of the Independence, Penguin Books. Tillin, Louise (2011): “Statehood and
region, constitutional guidelines and Chelliah Raja J (1999): Liberalization, the Politics of Intent”, EPW, May (XLVI,
also the emerging pressures; and Economic Reforms and Centre State 20):34-38. q
economic feasibility and administrative Relations”, in (ed) India’s Economic
viability. Reforms and Development. (E-mail:guljitkarora@gmail.com)

Readers may send in their views/suggestions on the articles published in Yojana at the
e-mail:yojanace@gmail.com

Yojana November 2013

Forthcoming &
December 2013
Issues
November
Land and Natural Resources

December
Right to Food

22 YOJANA October 2013

 YE-127/2013

YOJANA October 2013 23

lessons from asia
strategy

Economic Growth, Employment and Poverty

Reduction: Evidence and Lessons
Rizwanul Islam

A
l though employment for all women and men
th e M i l l e n n i u m and a few indicators for that goal were
Development Goal of incorporated in 2008 under MDG 1
reducing poverty by of poverty reduction (as MDG 1B).
half by the year 2015 However, within the framework of
(compared to 1990) is the discussions on the post-2015
likely to be achieved at the global development agenda, productive
level and by a number of developing employment is featuring prominently.
countries, there are many who are likely Given the urgency to accelerate the
to fail. Interestingly, many countries rate of poverty reduction by making
are witnessing stubborn persistence economic growth more pro-poor and
Employment intensity of of poverty despite reasonable rates of inclusive, and the potential role that can
economic growth. Such experiences
economic growth as a indicate that while economic growth
be played by productive employment in
that regard, it is important to improve our
whole can be increased by is a necessary condition for poverty understanding of why growth in some
promoting the growth of reduction at rapid and sustained rate, it situations has not been accompanied
is not sufficient. There are a number of by growth of productive employment
labour intensive sectors. studies (Islam, 2006 a, Khan, 2007, and and how growth can be made more
Hence a strategy for the country studies in Islam, 2006 b, employment friendly. The present
among others) showing that in addition paper purports to do so by providing
employment intensive to high rate of economic growth, the a brief overview of the experiences
growth would involve the pattern and sources of growth and of some Asian countries that attained
the manner in which its benefits are some success in the past in this regard
adoption of policies for distributed are extremely important and drawing lessons from that. But
promoting the growth for poverty reduction. Productive before coming to that, we first present
employment plays a critical role in an analytical framework that underpins
of such sectors until the that context. Those studies show our understanding of the linkages
surplus labour available that there is no invariant relationship between growth, employment and
between economic growth and poverty poverty reduction, and especially the
is exhausted. If one reduction, and that developments role played by productive employment
looks at the degree of in employment and labour markets in transforming the benefits of economic
are critical variables influencing the
employment intensity of poverty-reducing outcome of economic
growth into poverty reduction.

various sectors and sub- growth. An Analytical Framework

sectors, one can easily Although employment was Conceptually, the linkage between
not included in the original list of output growth, employment and
identify such sectors poverty can be analyzed at both
MDGs, the goal of full and productive

The author is former Special Adviser, Employment Sector, International Labour Office, Geneva. he has also held various
Directorial positions at the ILO. He holds a Ph.D. in Economics from the London School of Economics and Political
Science.

24 YOJANA October 2013

macro and micro levels. At the macro higher levels of productivity, and (iii) Taking elasticity of employment with
level, the link between the income increases in real wages and earnings respect to output as an indicator of
aspect of poverty and output growth from self-employment. employment intensity of economic
can be conceptualized in terms of the growth, the above-mentioned study
Higher levels of earnings from
average productivity of the employed found that elasticity of employment
the process mentioned above would
workforce which, in turn, gets in manufacturing industries has a
enable workers to spend more on
reflected in low levels of real wages education and skill formation of their statistically significant impact on
and low levels of earnings in self- children, thus raising the productive poverty reduction.
employment. At the household level, capacity of the future workforce The above-mentioned study also
the same linkage between poverty and creating necessary condition for examined the influence of other
and employment operates through achieving higher levels of economic employment and labour market
the type and productivity of economic growth. The process would thus variables on poverty reduction.
activities in which earning members complete the virtuous circle of The variables included the sector
of a household are engaged, the level economic growth leading to poverty
of employment (i.e., the proportion
of human capital of the members of reduction via growth of employment
of employment in agriculture and
the workforce, dependency burden with rising productivity, thus creating
manufacturing), education (measured
that limits participation in labour the possibility of further increase
by adult literacy rate), and dependency
force as well as the availability of in productivity and higher rates of
economic growth (see Figure 1). ratio. Using data from 40 developing
remunerative employment. countries and employing regression
A low average productivity of Some Empirical Evidence techniques, the study found that the
the workforce could be due to the sector of employment has a strong
Empirical evidence is available
deficiency of capital relative to labour influence on poverty: higher proportion
in support of the proposition that
and the use of backward technology. of workers in the manufacturing
similar rates of output growth can
The role of productive employment be associated with different rates of sector is associated with lower rate
in transforming economic growth poverty reduction (Islam, 2006 a, of poverty, while the opposite is the
for example). While there can be a case with agriculture. The incidence of
into poverty reduction in that kind
variety of reasons for the variation poverty is negatively associated with
of situation can be conceputalized in
in the poverty reducing effect of the proportion of workforce that is
terms of the following process. When
economic growth, one important factor literate, and positively associated with
a high rate of economic growth leads
is the employment content of growth. dependency ratio.
to sustained increase in productive
capacity, employment opportunities Figure 1: Virtuous Circle of Links between Economic Growth,
with rising levels of productivity Employment and Poverty Reduction
should be generated. This is more
likely to happen if structural change Economic
takes place in the economy in terms growth

of sector composition of output

Increase in
as well as employment. That, in Higher
productive
turn, would allow for a progressive productive
capacity
absorption and integration of the capacity

unemployed and underemployed

into expanding activities with higher
Change in the
levels of productivity. In the process, structure of
the poor would be able to attain production and
higher productivity and increase their Higher expenditure on employment
incomes in existing occupations or education, health and
move to new occupations involving skill development
higher levels of productivity, skills Growth of
and/or better technology. The result of productive
the process described above could be employment
Higher wages and
reflected in (i) improved productivity
incomes of the
of various sectors and occupations, (ii) poor
a shift in the structure of employment
towards sectors and occupations with Source: Islam (2006 a)

YOJANA October 2013 25

 Support for the hypothesis of successful in that respect and also in If the figures mentioned above
employment intensity of growth reducing poverty. are juxtaposed on those relating to
influencing poverty reduction can also employment and labour market,
be found by looking at the experience India provides an example of it should be possible to see the
of developing countries of Asia. high rate of economic growth not importance of the latter in translating
By now, it is quite well-known that producing poverty reduction at high the benefits of economic growth into
during the 1980s and 1990s, a number rate (especially during the 1990s). poverty reduction. Although, it is
of countries of East and South East Although, there is a consensus that very difficult to find consensus among
Asia (to be henceforth referred to as growth during the 1990s has been researchers as to what happened in
ESEA), e.g., the Republic of Korea, associated with poverty reduction, it the labour market of India, a few
Malaysia, Indonesia, and Thailand is difficult to say whether the rate of developments seem quite clear. First,
not only attained higher rates of poverty reduction during that period while there was a positive growth of
economic growth, but also higher was higher than in the earlier decade. employment in manufacturing during
rates of poverty reduction compared The percentage of population below the the 1990s compared to a net decline in
to countries of South Asia. The role poverty line was officially estimated the 1980s, there was a decline in the
that productive employment played in at 27.8 per cent for 2004-05 and the overall employment growth during the
the former group of countries becomes average decline in poverty between 1990s (0.98 per cent during 1993-94 to
clear if one compares the elasticity of 1993 and 2004-05 was estimated to be 1999-2000 compared to 2.04 per cent
employment with respect to output 0.74 per cent per annum. The official during 1983 to 1993-94). The decline
of the two groups of countries (see estimate for the rate of decline in in rural areas was sharper compared to
Table 1). High output growth in the poverty during that period is 0.79 per urban areas. However, that trend was
former was accompanied by high cent per year. The elasticity of poverty reversed during 1999-2000 to 2004-
employment growth rates, which in reduction with respect to per capita 05 with a growth of employment of
turn, led to labour market tightening GDP growth declined from 1.13 during 2.6 per cent per annum. But the rate
and increase in rates of remuneration. 1993-94 to 1999-2000 to 0.69 during of open unemployment continued to
The countries of South Asia were less 1999-2000 to 2004-05. rise from 6.1 per cent in 1993-94 to

Table 1: Output Elasticity of Employment (OEE) in Selected Asian Countries

Country OEE (economy-wide) OEE (manufacturing

1980s 1990s 1980s 1990s
Bangladesh a
0.55 b
0.50 b
0.76 c
0.72c
Cambodia n.a. 0.48 n.a. 0.56
China 0.33 b
0.13 b
0.50 0.25d
India 0.40 0.15 0.37 0.29
Indonesia 0.44 b
0.38 b
0.79 e
0.61f
Malaysia 0.55 0.48 0.67g 0.71g
0.55h 0.45h
Sri Lanka 0.51 0.46 0.64 0.47
Thailand 0.56 0.10 0.55 0.53
Notes and sources:
i) Unless specified otherwise, the figures have been taken from recent ILO-UNDP country case studies, a synthesis of which can be
found in Khan (2007).
ii) a Islam, (2006 a).
b
Asian Development Bank (2005)
c These figures are based on data at three-digit level. Figures based on four-digit level data show a sharper decline – from 0.74 to
0.60. See Chapter 5 in Islam (2006 a).
d
Figure for 2002.
e
Figure for 1980-84.
f
Figure for 1990-94.
g
Khan (2007).
h
Elasticity with respect to value added.

26 YOJANA October 2013

7.3 per cent in 1999-2000 and to 8.3 Strategies and Policies: some asian initially) was not neglected; growth of
per cent in 2004-05. The employment Countries agriculture and rural non-farm activities
elasticity of the economy as a whole were promoted through a variety
and of major sectors like agriculture An important question from the of means ranging from institutional
and manufacturing declined during point of policies and of possible lessons reforms to policies to improve the
the 1990s. During the first half of the from the comparative experience terms of trade of agriculture vis-a-vis
first decade of 2000s, employment of various countries of Asia is what the non-agriculture sector.
elasticity improved, but only returned explains the impressive performance
to the low levels of the 1980s. of the countries of ESEA region in It may be noted, however, that
attaining an employment intensive despite their success in translating the
The situation has not changed growth that contributed significantly benefits of high economic growth into
much during 2005-10. Although to poverty reduction. impressive rates of poverty reduction
the rate of open unemployment (by by creating conditions for growth of
the “daily status”) declined from Several points regarding the pattern productive employment, the ESEA
8.2 per cent in 2004-05 to 6.6 per of growth achieved and the policy countries faced a number of problems.
cent in 2009-10, it cannot be said regime pursued by the countries of In some countries (e.g., Indonesia),
that employment growth in relation ESEA may be worth noting (Table 2). the process was halted by the Asian
to output growth has improved. First, the economic policies adopted by economic crisis of 1997-98. Some
While the annual growth of overall them ensured an incentive structure that,
employment declined from 1.9 per (like Thailand and Vietnam) witnessed
by and large, reflected the respective growing inequality in the distribution
cent during 1983 to 2004-05 to 0.1 country’s factor endowment, and
per cent during 2004-05 to 2009- of income. However, despite problems,
the result was investment in sectors these countries have, by and large,
10, that of manufacturing became
like labour intensive industries and been successful in combining high rate
negative in the latter period -1.12 per
construction that led to the growth of economic growth with growth of
cent per annum compared to 2.5 per
of productive employment at high productive employment and rapid rate
cent per annum in the earlier period.
And that was despite an impressive rates. Second, they pursued an export of poverty reduction.
growth of output of 9.3 per cent per oriented policy of industrialization
under which, apart from removing In contrast with the experience
annum in the sector. It is thus clear
distortions in factor markets, incentives of ESEA countries, in countries of
that the elasticity of employment
were provided for export oriented labour South Asia, it is not difficult to find
in manufacturing declined further
intensive industries. Third, agriculture examples of policies that do not
during this period from the already
(where most of the poor were located help growth of jobs. Although they
low level in the 1990s.
Table 2. An Overview of Some Asian Experience on High Growth with High Rate of Poverty Reduction
Country and period Pattern of growth Characteristics of the policy regime Observations
Indonesia (1970s, Growth of agriculture and Subsidies on agricultural inputs and The trends of high growth and
1980s and 1990s till rural non-farm activities in incentive pricing of outputs; investment poverty reduction interrupted
1996) 1970s followed by labour- in infrastructure; trade liberalization by the Asian economic crisis.
intensive industrialization in and exchange rate reforms; reduction in Vulnerability around the
the 1980s and 1990s. ERP. poverty line remain a concern.
Malaysia (since 1970s) Growth in agriculture Large-scale agricultural development Some incentives were linked
accompanied by labour- projects; range of incentives for export- to employment and location;
intensive industrialization oriented industries including tax holidays, decline in employment intensity
Thailand (1980s and since 1980s. subsidies for training and R&D, licensed in a number of industries during
1990s till 1996) warehouses, etc. the 1990s.
Growth of agriculture and
rural non-farm activities Expansionary land policies followed Regional variation – the North-
followed by labour-intensive by ending of discrimination against East lagging behind – remains
industrialization. agriculture investment in infrastructure; an issue. Rising income
Viet Nam (1990s) trade liberalization, stable exchange inequality is an emerging
rate, low inflation and business-friendly concern.
Growth of agriculture and policies. Decline in the rate of poverty
rural non-farm activities; Institutional reforms in agriculture; reduction; rising income
growth of the private sector. liberalization of agricultural prices; inequality; low employment-
exchange rate reform; reform of State- intensity of manufacturing.
owned enterprises; encouragement of the
private sector.
Source: Islam (2008).

YOJANA October 2013 27

have officially abandoned the import easily identify such sectors. Policies However, the consideration of the
substitution strategy of development would need to be pursued on both need for flexibility in the labour
and industrializaiton, market prices economic and labour market fronts. markets should be combined with
of factors of production sometimes On the economic front, policies at the the need for security and protection
do not reflect their true scarcities. For macroeconomic level as well as sector of the workers
example, in India, a variety of fiscal level can have important implications
Readings
and monetary incentives are provided, for the employment outcome of
ostensibly to encourage investment. economic growth. Hence the possible Asian Development Bank (2005):
They include measures like capital impact on employment of alternative Labour Markets in Asia: Promoting Full,
investment subsidy, subsidy on policies would need to be assessed Productive and Decent Employment. Asian
interest, accelerated depreciation rate before a policy package is adopted. Development Bank, Manila.
to facilitate upgrading of machinery, In concrete terms, the following Chandrasekhar, C.P. (2008): “Re-visiting
export promotion capital goods action on the economic front would the Policy Environment for Engendering
scheme, and credit-linked capital be useful: Employment Intensive Economic Growth”.
subsidy for technology upgrading Draft paper, International Labour Office,
l Analysis of the employment
of small scale industries. But these Geneva.
impact of measures aimed at
measures encourage excessive use
bringing about macroeconomic GOI (Government of India, Planning
of capital. And there is no measure
stability, and fine tuning of policies Commission) (2006): Towards Faster and
to encourage the use of labour. One
on the basis of such analysis; More Inclusive Growth: An Approach to the
study (Chandrasekhar, 2008) found
11th Five Year Plan. New delhi.
that between 1995-96 and 2003-04, l Analysis of the employment
money wages in industries rose by impact of budgetary allocations Islam, Rizwanul (2006 a): “The nexus
about 37 per cent while the “index” taking into account the results of of economic growth, employment and
of the cost of capital (represented such analysis in deciding on the poverty reduction: An empirical analysis”,
by the combined effect of the rate allocations; in Islam (2006 b).
of interest and an index of the price l Examination of the prevailing ___ (ed.) (2006 b): Fighting poverty:
of capital goods) fell by about 18 incentive structure of an economy The development-employment link. Lynn
per cent. Thus, there appears to have to see if it correctly reflects the Rienner, Boulder, and London.
been a 55 per cent negative shift in relative scarcity of various factors
the price of capital relative to labour ___ (2008): “Economic Growth,
of production; Employment and Poverty in Asia: Evidence
_ a major distortion that may have
favoured capital intensive sectors and l U n d e r t a k i n g
of corrective and Lessons” in L.J. Fredericks and
measures (if needed) to ensure Sulochana Nair (eds.) in Proceedings of
technology.
that the policy environment does the International Conference on Poverty
Nepal allowed the import of heavy and Distribution Amidst Diversity: Options
not discriminate against the labour
construction machinery at artificially and Challenges for Development. Centre
intensive sectors; and
low rate of import duty. That led for Poverty and Development Studies,
to premature mechanization in the l Positive support to labour University of Malaya, 2008.
construction sector and the creation of intensive sectors, e.g., measures
Khan, A.R. (2007): “Asian Experience
less jobs than would otherwise have to help enterprises in such
on Growth, Employment and Poverty: An
been created. sectors with market access, to overview with special reference to the
improve competitiveness through findings of some recent case studies”, ILO,
A Policy Framework upgrading technology and raising Geneva and UNDP, Colombo.
productivity, etc.
Employment intensity of economic Mitra, Arup (2012): “Recent
growth as a whole can be increased On the side of labour market Employment Scenario”, The Indian
by promoting the growth of labour policies, since labour market rigidities Economic Journal, Special Issue 2012,
intensive sectors. Hence, a strategy for are accused of creating an obstacle to pp. 263-282.
employment intensive growth would employment creation, it would be
involve the adoption of policies for Mitra, Arup and N.R. Bhanumurthy
useful to examine if there is a solid
(2008): “Economic Growth, Employment
promoting the growth of such sectors empirical evidence in support of and Poverty in Manufacturing, Construction
until the surplus labour available is such arguments. If there is, it would and Trade in India”, unpublished draft, ILO,
exhausted. If one looks at the degree be necessary to carefully identify Geneva.  q
of employment intensity of various specific aspects of labour market
sectors and sub-sectors, one can institutions that are in need of reform. (E-mail : rizwanul.islam49@gmail.com)

28 YOJANA October 2013

 Ultimate Learning Experience (P) Ltd.
YE-130/2013

YOJANA October 2013 29

currency crisis
focus

Depreciation in Rupee–Causes, Impact

and the Way Ahead
Harkirat Singh

R
upee valuation meet three weeks of imports.
against USD has touched USDINR = ` 17.90
historic low rate of ` l 1993–INR was let free to flow
68.80 recently. More with the market sentiments. The
such historic levels with exchange rates were freed to be
corrections are expected determined by the market, with
in the near future. Technically,` is provisions of intervention by
presently under volatile trend, caused the central bank under the
by sudden change in demand and supply situation of extreme volatility.
forces in forex markets. Valuation of ` USDINR = ` 31.37
against US $ has depreciated more l 2 0 0 8 – I N R h a s g r a d u a l l y
than the 14 per cent in the span of few
Depreciation of Rupee weeks and daily change of ` 1 to ` 3
depreciated since the global 2008
economic crisis. Upward correction
is the result of number has become common. made Rupee to appreciate also to
of internal and external Brief volatile history of Rupee 39. USDINR = ` 49
movement along with main influencing l Current – INR has depreciated
factors, adversely factors is as follows: further due to out flow of foreign
affecting the economy. l 1947–No foreign borrowings
exchange, stuck up economic
policies, poor infrastructure,
Export sector has to be o n I n d i a ’s b a l a n c e s h e e t
record high CAD, trade deficit,
USDINR = ` 1
encouraged, to correct l 1951–Introduction of the Five-
low growth. USDINR = `68.80

current account deficit Year Plan. the government started Causes of Rupee Depreciation
external borrowings to finance
and initiate steps to curb welfare and development activities.
It is essential to understand why
Rupee is depreciating against USD.
non-essential imports. USDINR = ` 4.8 ` is under volatile pressures due
Market sentiments l 1975-85 – INR was devalued due
to oil price hike in early 70’s,
to combination of number of India
specific economic factors and sudden
have to be improved, to lower domestic production, license emergence of new international
stop under valuation of raj and worsening BOP situation.
USDINR = `12.36
scenario. Some of the main Indian
based economic factors are namely,
Rupee against major l 1991 – Serious BOP crisis. The increase in current account deficit
foreign currencies country was in the grip of high touching to 4.8 per cent of GDP,
slow down of exports due to
inflation, low growth and the foreign
reserves were not even worth to economic recession in Europe/USA,

The author is Professor and Consultant in the area of International Financial Management in Indian Institute of Foreign
Trade, New Delhi. Acting as Chief Coordinator of MSME Centre at the Institute and conducting capacity building for
entrepreneurs of Vietnam, Laos, Thailand & Cambodia under UNDP. Visiting Faculty to various premier Management
Institutes in India and abroad.

30 YOJANA October 2013

increase in imports of oil and non expressing tightening of Quantitative growth. Weakening Rupee will also
productive items like gold, sudden Easing and restricting supply of make capital items import expensive,
and fast disinvestment by FII from USD 85 billion per month to boost making our companies to delay
Indian equity and debt markets, USA economy. US Dollar is also investments in industry, hampering
slow movements in liberalization getting strength from revision of the development of much needed
process and weak political sentiments USA credit rating, improvement in manufacturing competitiveness
causing overall negative picture of long term interest rates, expectation and capacity. Ultimately, it will
India. These issues are taking the ` of higher crude oil prices due to lead to adverse economic scenario,
towards sudden and deep decline, Syria problem, recession in Euro unemployment and recession. Now,
especially against US $, Pound zone and recent monetary policies currency rate changes can suddenly
Sterling, Euro and Yen. Structural of European and Japanese Central convert profit making transactions
economic problems like high inflation, banks. Dollar index has also touched into loss making ones and vice
adverse fiscal deficit due to various a three years high level of 84.30, versa.
subsidy schemes, weak sentiments making it the stronger currency in
in capital markets, high consumer Impact and Challenges for
international forex markets. These
price index, decline in economic Exporters
are some of the international factors
growth, flat industrial growth with
giving strength to US $ against major Rupee depreciation against US$ is
decline in import of capital goods
currencies including `. Mainly, these good news for our exporters specially
and high liquidity available in local
local and international factors caused in IT sector and those not using
high volatility in Rupee valuation imported inputs. Exporters using
Some of the main Indian against USD which is creating serious high contents of imported raw material
based economic factors problems for economy and external component like diamond, jewellery,
are namely, increase in sector. engineering goods etc. will be badly
current account deficit affected by steep appreciation of
Impact on Indian Economy & US$. ` depreciation provides right
touching to 4.8 percent of Corporates
GDP, slow down of exports platform to our exporters, to compete
Combination of these local and with other suppliers in international
due to economic recession markets by reducing prices without
in Europe/USA, increase international factors created high
volatile situation for Rupee, leading affecting profitability. Exporters
in imports of oil and non
to historic low levels of US $ =
productive items like gold, ` 68.80, £ =104.30 and € = ` 86, Exporters must avail this
sudden and fast disinvestment with high probability of not going opportunity to penetrate
by FII from Indian equity back to 2012 levels. Volatility of deep in existing markets
and debt markets, slow Rupee has had adverse effect on by understanding business
movements in liberalization profitability, revenues, expenses,
model of their foreign buyers.
process and weak political costs, imports, increasing burden on
foreign currency loans and making Exporters must make their
sentiments causing overall export supply chain effective
our companies uncompetitive in
negative picture of India. international business. Greater and efficient to meet future
the volatility, higher is the chance challenges. Such approach will
market, etc. accelerated the speed of
of frequent, unexpected and enhance competitive capacity
depreciation of ` against US$.
directionless movement in external
value of Rupee destabilizing the and cost efficiency which will
Market sentiments are very
negative resulting in `drop from Indian economy. Volatility, has help them to develop long
` 60 to ` 68.80 in couple of weeks. to be controlled soon to stop term strategy in international
Now, one adverse factor is attracting further damages and uncertainty in business.
negative sentiments for `, causing business.
an adverse feeling in the economic
Weakening of Rupee is going to must avail this opportunity to
scenario and fast depreciation of `
affect adversely, all main sectors of the penetrate deep into existing markets
against main invoice currency USD.
economy. The rapid decline in Rupee by understanding business model
Under valuation of Rupee is mainly
value will increase inflation due to of their foreign buyers. Exporters
due to adverse market sentiments.
increase in price of oil which in turn must make their export supply chain
A major international event which will adversely affect all the related effective and efficient to meet future
triggered steep fall of ` against USD sectors of the economy. Inflation challenges. Such approach will
was the statement of Chairman of US will not allow decline in interest enhance competitive capacity and
Federal Reserve, Mr. Ben Bernanke rates which is essential for industrial cost efficiency which will help them

YOJANA October 2013 31

to develop long term strategy in USD. Similarly, foreign acquisition We have to reduce our dependence
international business. plans by Indian companies have on USD in international business.
become more expensive and at USD/`, market turnover is small
Rupee depreciation has posed
the same time value of their old as compared to international forex
new challenges for exporters. This is
purchases have become high value market and still controlled by RBI.
the best time for exporters to develop
assets. Change in demand and supply of
brand image in their existing and
USD causes volatility, destabilizing
new markets. Export sector must Importers have to either pass
the external sector of the economy.
focus on improving technology, on high cost to local consumers,
Surplus dollar reserves should
reducing costs, improve quality, pushing up inflation in Indian
be used for high value crude oil
develop competitive manufacturing economy or develop local sourcing
and military imports, etc. so as to
capacity and improve efficiency like Indian auto sector. This sector is
reduce the demand of USD in local
of cheap labour. We may not dominated by experienced Japanese,
onshore forex markets. Government
get, in the near future, such an Korean, European and American
must encourage bi or multilateral
encouragement for export promotion. multinational auto companies. To
Policy making agencies should agreements, to encourage local
meet the challenges of ` depreciation,
initiate comprehensive packages for currency payment in order to lesson
auto industry has developed a long
development of export sector. This the dependence on third currency
term strategy to arrange auto parts
is probably the best time for our USD. Such policy initiatives will
from Indian ancillary units. Rupee
exporters to compete with China and lessen downward pressure on Rupee.
depreciation will encourage locals
replacing them from certain foreign Emphasis should also be to use local
in sourcing and will change business
markets. currencies in developing currency
models by encouraging exports to
swap arrangements. payment in
strong currency areas and imports
We may not get, in the near Rupee, negotiating for long credit
from weak currency countries.
future, such an encouragement periods for high value imports and
for export promotion. Policy The Way Ahead encouraging local investments in
making agencies should production areas are some of the
History of US$/` rate reveals issues which will reduce dependence
initiate comprehensive that once Rupee value goes down, it and demand of USD in local forex
packages for development of never returns back. Now, corporates
export sector. The is probably must make future business strategies
best time for our exporters payment in Rupee, negotiating
by taking USD = 60 ` plus exchange
to compete with China and rate into consideration. This is the for long credit periods for
replacing them from certain right occasion to enhance our exports high value imports and
foreign markets. and restrict non essential imports to encouraging local investments
correct current account deficit and in production areas are some
Effect on Imports and Loans pressure on Rupee. Big exporters of the issues which will reduce
Portfolio may establish warehouses abroad dependence and demand of
or build manufacturing capacities USD in local forex markets.
Depreciation of ` is escalating
in their main international markets.
the overall cost of import business.
Long term export promotion strategies markets. Policy actions should be
Depreciating trend of Rupee is against
have to be developed. Guru mantra firm and growth oriented to give
the interest of importers, borrowers
to do international business would be positive sentiments to `.
of foreign currency on cheap interest
to reduce the cost of each and every
rates, students planning for higher Hedging Currency Risk
business transaction.
studies abroad, tourists bound for
foreign destinations and for medical A focused policy approach is Rupee volatility has emphasized
treatment abroad, etc. As per RBI required to increase inward remittances the need for hedging of currency risk.
survey, majority of companies have and Non-Resident deposits. Sincere Indian corporates have to develop
not hedged their repayment of efforts are required to encourage innovative hedging strategies by using
foreign currency loans raised in foreign inward remittances like financial derivatives like forwards,
US$. Such casual approach towards issuing Dollar based long period exchange traded futures and options,
hedging of currency exposure has bonds and encouraging investments in to protect against adverse movement
made cheap foreign currency loans India. Preserve the foreign exchange in exchange rates. Now, corporates
more expensive than Rupee loans due reserve to protect the value of Rupee should use currency option which
to fast appreciation of loan currency in unexpected market situations. will provide flexi hedging, portfolio

32 YOJANA October 2013

of derivatives and partial hedging Moreover, hedging strategy has be encouraged, to correct current
strategies to protect against volatility to be dynamic to meet the future account deficit and initiate steps to
of USD/Rupee exchange rates. Time challenges of depreciation or curb non-essential imports. Market
is right for corporates to develop appreciation trends cycles of Rupee sentiments have to be improved, to
operational hedging strategies for against major foreign currencies. stop under valuation of Rupee against
long period exposures, to meet future Rupee has to go up or down against the major foreign currencies. Foreign
changes in Rupee valuation. Foreign USD and hedging policy should allow trade and borrowings transactions
currency loan must be hedged by flexibility to cater to the dynamic need innovative hedging to protect
using currency swap, option and exchange rate scenarios. against currency risk as per approved
rollover forwards with the help of policy of management, to protect
the commercial banks. Corporates Depreciation of Rupee is the profit margin and remain competitive
have to formulate hedging strategy result of number of internal and in international business.  q
depending on their risk policy duly external factors, adversely affecting
the economy. Export sector has to (E-mail : harkirat@iift.ac.in)
approved by the management.

Scholarship scheme for North East States

An exclusive scholarship scheme for the wards/widows of the ex–servicemen and the Coast Guard of the eight
northeastern States has been introduced. The scheme would replace the Prime Minister’s Scholarship Scheme, since
the dependents of the ex–servicemen community were not in a position to avail the benefit under the scheme due to
higher cut off eligibility percentage of 60 per cent.
The proposed scholarship scheme would be called the ‘Raksha Mantri’s Northeastern States Scholarship Scheme’.
The amount of scholarship would be as under: Rs 2,000 per month for boys and Rs. 2,250 per month for girls.

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global perspective
indepth

Growth, employment, poverty

Jomo Kwame Sundaram

Anis Chowdhury

M
ost development The poverty reducing impact of
advocates have growth depends on a variety of factors
maintained that that characterize the nature of economic
sustained economic growth. A critical factor in the growth-
growth is essential poverty nexus is employment – its
for poverty reduction. intensity and quality; related to this is
This belief was strongly expressed in productivity growth. Two other crucial
World Bank research in the 1990s that factors are sectoral composition or
concluded, “growth is good for the sources of growth and inequality.
poor”, implying that rising tides lift
quantity vs quality of jobs
all boats.
Employment-intensive It is often believed that growth that
growth is more likely to Many resource rich countries is employment intensive or growth
have experienced high growth due to
reduce poverty if it occurs resource price booms in the 1970s,
that occurs in employment intensive
sectors contributes more to poverty
in a “more productive” again in the middle of the last decade. reduction. Thus, empirical work on
sector, while reducing However, the poverty reduction impact the relationship between growth and
of their growth has not been very
poverty in “less productive” impressive. For example, Botswana
employment has traditionally focused
on the employment elasticity of growth
sectors usually requires has grown at more than 7 per cent for – that is, the percentage change in
more productivity growth. over two decades. Yet, the poverty employment in response to a one
Thus, the sectoral location rate remains quite high at around 21 percent change in output.
per cent. It is also one of the most
of the poor and mobility unequal countries in the world, with However, this measure has three
across sectors are also an income Gini coefficient of 0.61. important limitations. First, it says
Resource sectors are generally highly nothing about the actual extent of job
important. Labour should creation; employment elasticity would
capital intensive, and growth in these
be able to move from sectors often has very little impact on be the same for a country which grew
less productive to more poverty reduction. by 1 per cent accompanied by a 1
percent increase in employment and
productive sectors, which Empirical research, especially for a country which had a 10 per cent
often requires appropriate within the International Labour growth rate coupled with a 10 per cent
investments in skill Organisation (ILO) and the United increase in employment. Second, it
Nations Development Programme does not take demographic changes
development as well as (UNDP), suggests that even in non- into account; growth in the working age
more rapid expansion of the resource rich countries, not all growth population often outstrips increases in
more productive sectors spells have the same impact on poverty employment, having very little impact
(Table 1). on the overall poverty rate. Third, the

Jomo Kwame Sundaram is Assistant Director General, Food and Agriculture Organization, Rome. Anis Chowdhury is
Professor at School of Economics and Finance, University of Western Sydney, Australia.

34 YOJANA October 2013

 Table 1: Varying rates of GDP growth and poverty reduction: economic growth rates lead to
Some examples sustained increases in productive
capacity, employment opportunities
Rates of Rates of poverty reduction with rising productivity can be
GDP generated. This allows for progressive
growth High Moderate Low absorption and integration of the
unemployed and the underemployed
High Indonesia urban India rural India (1990s) into expanding economic activities
(1970s; 1980s) (1990s) Indonesia (1990s) with higher levels of productivity.
Vietnam (1990s) This also allows workers to invest
Uganda (1990s) in skill formation, thereby creating a
Medium Bolivia (1990s) Bangladesh Ethiopia (1990s) virtuous circle of higher productivity
(1991-96) Bangladesh (1996-2000) and higher wages. Thus, the poor are
India (1980s) able to achieve higher productivity
and increase their incomes, either
Source: Islam (2004) in their existing occupations, or by
employment elasticity of growth says experiences suggest that achieving moving to new occupations involving
nothing about the quality of new jobs full employment, even with low higher skills.
created; employment growth in low productivity employment, eventually
Sectoral growth – where the poor
productivity sectors may only increase requires employers to improve working
live and work
the ranks of the “working poor”. conditions to retain employees. This
Ricardian view of labour markets Where growth happens is also
Therefore, one cannot simply contrasts with the neoclassical view,
conclude that the high employment an important factor influencing the
and was elaborated in the context growth-poverty relationship. Since
elasticity of growth is good for poverty of economic development by W. A.
reduction. It would depend on whether the majority of the poor live in rural
Lewis. Its contemporary proponents areas and work in agriculture, and as
employment growth is faster than the
suggest that improving working agriculture is generally more labour-
growth in labour force so that the
conditions for a few employees not intensive, it is widely believed that
overall employment rate increases.
Without this, despite employment growth in agriculture is likely to be
growth, unemployment will still grow, ...for almost half a century more employment-intensive, and
which would depress wages and until around 2006, greatly hence, good for poverty reduction.
earnings. enhanced productivity in However, the preceding discussion
the production of the main on productivity is also relevant here.
The poverty impact of employment
intensive growth also depends on the cereal crops contributed to Employment-intensive growth in
quality of jobs created. Employment declining food prices. In other agriculture in Latin America has
elasticity is typically inversely related words, greater agricultural been correlated with increases in
to productivity. Mathematically, one is productivity contributed to headcount poverty. This has to be seen
the inverse of the other. However, in in the context of the last decade of the
lower consumer prices besides
reality the relationship more complex 1980s and the economic performance
higher producer incomes, thereafter due to structural adjustment
and both productivity and employment
can rise if the surplus from increased including for those supplying and other economic liberalization
productivity is reinvested. This can necessary inputs for such programmes. In the absence of
also happen if wages rise due to productivity increases. alternative means for survival, this
increase in productivity as workers resulted in greater employment
spending boosts effective demand. only transforms them into a labour (including underemployment) in the
Potentially, raising employment aristocracy, but is also likely to deter generally slow growing small farm
elasticity could mean further lowering the private investments deemed agricultural sector, resulting in stagnant
average productivity in economies necessary to sustain growth of output agricultural output and sometimes
already characterized by widespread and employment. An intermediate view declining average earnings in this
low-productivity employment. Low- in this context proposes establishing sector. Therefore, more workers meant
productivity jobs generally yield low a decent work floor above the social lower average output and earnings,
incomes which tend to perpetuate a protection floor, currently gaining implying that greater employment-
vicious circle of low productivity, low broad acceptance, as well as the intensity in agriculture undermined
wages and poverty. subsistence wage notion in Lewis’ average productivity increases.
original view.
On the other hand, recent Furthermore, for almost half a
Chinese and some Southeast Asian On the other hand, when high century until around 2006, greatly

YOJANA October 2013 35

enhanced productivity in the only receive a small fraction of their segmentation between “more” and
production of the main cereal crops increased output depending on the “less productive” manufacturing
contributed to declining food prices. nature of their terms of remuneration. jobs in middle income countries.
In other words, greater agricultural Nominally independent small farmers Industrial restructuring towards high
productivity contributed to lower may find themselves in asymmetric productivity manufacturing is a key to
consumer prices besides higher relationships with their input and credit continued poverty reduction in middle
producer incomes, including for those suppliers as well as output purchasers. income countries.
supplying necessary inputs for such Hence, while productivity increases
productivity increases. have the potential of enhancing In sum, clearly, not all growth
the incomes of the producers, the will have equal impacts on poverty
Wi t h t h r e e q u a r t e r s o f t h e circumstances of the producers may reduction. The poverty reducing impact
poor in the world living in the well have a significant bearing on how of growth depends on its employment
countryside, and most of the urban much of their increased output they and productivity intensity and shifts
poor comprising recent migrants actually benefit from. from low to higher productivity
from rural areas, it is important to activities (Table 2). This, of course,
enhance incomes for the rural poor, During their early phases of cannot happen unless high productivity
especially on small family farms and development, expansion of labour- activities expand; otherwise, rural
for wage earners. It is very unlikely intensive manufacturing rapidly migrants to urban areas could expand
that the net number involved in reduced poverty in East and Southeast the size of the low-income, urban
farm employment will increase at informal sector.
the global level, but the potential The poverty reducing impact
for rural off-farm employment and of growth depends on its Table 2: Employment-intensive
for higher value-added horticultural and productivity-intensive growth
employment and productivity and poverty reduction
and agro-processing activities has
intensity and shifts from low to
not been sufficiently developed in
many circumstances. higher productivity activities. Job sectors Employment- Output-
This, of course, cannot happen intensive intensive
Therefore, in countries where growth growth
unless high productivity
agricultural productivity is low, the
activities expand; otherwise, “More +ve +ve
focus should be on productivity- productive” correlation correlation
intensive growth, rather than on rural migrants to urban areas
with poverty with
employment-intensive growth in that could expand the size of the reduction poverty
sector. This would mean investment low-income, urban informal reduction
in agricultural technology, research sector.
and development, extension services “Less neutral/-ve +ve
productive” correlation correlation
and skill enhancement of agricultural Asia. This has also been the case with poverty with
workers. Progressive shifts of in Latin American countries where reduction poverty
agricultural workers to expanding employment-intensive growth in the reduction
high productivity non-agricultural secondary sector was also found to
activities can also raise agricultural alleviate poverty. The expansion of Pattern of growth
productivity with positive impacts on labour-intensive manufacturing and
poverty alleviation. The Botswana example cited
more skilled services draws surplus
earlier shows that inequality is an
enhancing Productivity: structural labour from agriculture increasing
important determinant of the poverty
changes labour productivity in that sector.
alleviation impact of growth. Such
Such structural change thus reduces
growth in capital-intensive sectors
While productivity increases are poverty.
can exacerbate inequality and hence
generally deemed necessary for
However, as the experience of may have less impact on poverty
poverty reduction, the relationship is
Indonesia since the 1990s shows reduction. Rapid declines in inequality
often more complex than popularly
(Table 1), the poverty reducing effect in East Asia during the early phase
assumed. It would be wrong to presume
of growth in manufacturing can of development helped poverty
that productivity increases necessarily
decline when the scope for further reduction. Besides the expansion of
enhances the incomes of producers.
drawing surplus rural workers into labour-intensive manufacturing, land
Productivity increases in agriculture
more productive sectors is exhausted. reforms contributed significantly to
have historically helped reduce food more equitable growth in East Asian
Therefore, a priori assumptions,
and other agricultural commodity economies, such as South Korea and
regarding which sector provides “good”
prices during the 20th century. Taiwan, and thereby, to rapid declines
or “bad” jobs, can be misleading. This
Workers who produce more may is because there often is internal in poverty.

36 YOJANA October 2013

 The number of absolute poor in than for the poor, the impact on poverty to output and employment growth
East Asia declined from an estimated reduction is more likely to be slower. despite the significant increase in
400 million in 1970 to about 180 Increased inequality offsets the likely inequality. In South America since
million in 1990 while the population contribution of more rapid growth to the turn of the century, there has
grew by some 425 million over the poverty reduction. Conversely, more been significant poverty reduction
same period. The World Bank estimates equitable income distribution can largely owing to declining inequality
that between 1975 and 1995, poverty alleviate poverty even when growth is even though growth rates have been
in East Asia dropped by two-thirds as weak and narrowly-based. generally lower and more uneven
people living in poverty fell from 60 than in East Asia, especially since the
per cent in 1975 to only 20 per cent The likely overall effects are last decade of the 1980s and uneven
in 1995. hence the joint outcomes of various progress thereafter.
processes, impacts and effects. In
If the growth process is such that China, therefore, we have seen very Here, it seems useful to introduce
the income of the better off rises faster significant poverty reduction due the notion of the “poverty reduction
elasticity of growth”, which refers to
Figure 1. “Pivot effect” of inequality reduction on growth-poverty an x per cent reduction in poverty due
relationship to a one per cent increase in the growth
Poverty rate. In effect, this reflects the slope
of the growth-poverty line. Research
Poverty has noted that the poverty reduction
elasticity of growth is dependent on
prevailing inequality levels. If a one
per cent increase in the growth rate
is simultaneously accompanied by a
(Inequality 1 > Inequality 2)
fall in inequality, then, this will lead
(Inequality 1 > Inequality 2) to a fall in poverty in excess of x per
cent. This means either a steeper slope
of the growth-poverty line (“pivot
effect” as in Figure 1), or a parallel,
downward shift of the growth-poverty
line (“shift effect” as in Figure 2).

(2) (1) Figure 1 shows the pivot effect,

while Figure 2 illustrates the shift
(2) (1) effect. Exactly which effect dominates
0 Growth rate
is an empirical issue depending on
0 Growth rate circumstances, but in any event,
it is clear that the poverty level
Figure 2. “Shift effect” of inequality reduction on growth-poverty falls significantly when economic
relationship growth is accompanied by declining
inequality.
Poverty
Conclusions
Poverty
Growth is often portrayed as
necessary for poverty reduction which
is why redistribution is precluded,
as implied by the notion of Pareto
(Inequality 1 > Inequality 2) conditionality. However, even with
(Inequality 1 > Inequality 2) such a condition, high growth alone
is rarely sufficient. The pattern and
sources of growth as well as manner
in which its benefits are distributed
are extremely important for poverty
reduction. Employment, productivity
and structural transformation play
(2) (1) critical roles in determining the
poverty reduction impacts of
0 (2) (1)
Growth rate growth.

YOJANA0 October 2013 Growth rate 37

 Growth in one sector of the economy will not automatically
ensure poverty reduction; much depends on the employment
– and productivity – intensity of growth. Employment-
intensive growth is more likely to reduce poverty if it occurs
in a “more productive” sector, while reducing poverty in
“less productive” sectors usually requires more productivity
growth. Thus, the sectoral location of the poor and mobility
across sectors are also important. Labour should be able to
move from less productive to more productive sectors, which
often requires appropriate investments in skill development
as well as more rapid expansion of the more productive
sectors.
A virtuous circle of economic growth leading to poverty
reduction can happen via growth of employment with rising
productivity. Less poverty creates the possibility of further
increases in productivity as workers with higher wages due
to higher productivity can invest in further skill upgrading.
This, in turn, leads to higher economic growth rates. Growth
of employment with rising productivity involves a shift in
employment towards occupations and sectors with higher
productivity, and improved productivity within existing
sectors and occupations.
Another key element in the growth-poverty nexus is
inequality. A growth process that benefits the lowest quintile
of the population more than the top quintile will have
greater impact on poverty reduction than a growth process
accompanied by rising inequality.
Given the importance of such factors in poverty
reduction, it is quite possible to see different experiences
of growth and poverty reduction. While high growth rates
can be accompanied by moderate or slow rates of poverty
reduction, it is also possible to have rapid rates of poverty
reduction with moderate rates of growth – if the pattern of
growth is sufficiently employment-intensive, as in East and
Southeast Asia.
Readings
Dollar, David, and Aart Kraay (2001). “Growth is Good for the
Poor”. World Bank Policy Research Working Paper No. 2587
Islam, Rizwanul (2004). “The Nexus of Economic Growth,
Employment and Poverty Reduction: An Empirical Analysis”.
Issues in Employment and Poverty Discussion Paper No. 14,
January;
Khan, Azizur Rahman (2007). “Growth, employment and
poverty: An analysis of the vital nexus based on some recent UNDP
and ILO/SIDA studies”. UN-DESA Working Paper No. 49, July.
Gutierrez, Catalina, Carlo Orecchia, Pierella Paci and Pieter
Serneels (2007). “Does Employment Generation Really Matter for
Poverty Reduction?”. World Bank Policy Research Working Paper
No. 4432, World Bank, Washington, DC.
World Bank (1998). East Asia: The Road to Recovery. World
YE-132/2013

Bank, Washington, DC.  q

(E-mail : jomoks@yahoo.com, a.chowdhury@uws.edu.au)

38 YOJANA October 2013

 J&K Window
Handicrafts Skill Development Workshop
inaugurated at Srinagar

A
workshop for Handicrafts Skill Development and awareness programme was organized by Union
Ministry of Handicrafts and Textiles under Babasaheb Ambedkar Hastshilp Vikas Yojana (BAHVY) with
the aim to impart necessary skills development and design training in different crafts to the local artisans
and also acquaint them about the latest trends of design and crafts, educating them about the benefits of formation
of Self-Help Groups to be self-dependent .The scheme would run for five years in the state and during the period,
over 17000 rural artisans would be imparted with the latest skill and design development training. Under the
scheme, Rs.16 crore would be incurred by the concerned Union Ministry to provide tool kits, raw materials and
training .Popularly known as ‘Cluster scheme’ ,it gives packages to the clusters of various crafts to mobilize and
form Self-Help Groups for conducting training, design, workshops, exhibitions and common facility centers. Banks
are also entitled to give these SHGs loan facility by assisting in merging money.  q

International Conference on Public Health Priorities

inaugurated

T
he Health and Family Welfare Minister inaugurated the International Conference on Public Health
Priorities in the 21st century-“ Endgame for Tobacco” addressing the need for multi-sectoral policies
and public awareness to make India, a tobacco-free society .The government has banned ‘gutka’ in 33
states and UTs .The result of Global Adult Tobacco Survey(2009-10) was quoted according to which, about 275
million Indians use tobacco in some form .India has the highest number of smokeless tobacco users in the world
and tobacco causes over 1 million deaths in India annually .Also ,India has the highest number of Oral cancer
cases in the world and 90 per cent of these cases are attributed to smokeless tobacco use. However, India was
one of the first countries to ratify the WHO Framework Convention on Tobacco Control (FCTC) Convention in
February 2004.Currently operational in 42 districts of India , the National Tobacco Control Programme (NTCP)
forms the cornerstone of the government’s response to curb the threat of tobacco use and provides a conducive
environment for the effective enforcement of the Indian Tobacco control law. It plans to integrate both NPCDCS
and NTCP to strengthen the response to the overall NCD burden.
Former Cricket captain of India, Rahul Dravid has been designated as the Health Ministry’s Ambassador
for Tobacco control. The conference is expected to fillip a multi-sectoral engagement of governments, inter-
governmental agencies, NGOs in Tobacco control policies across the globe and aid in paving the path for a
tobacco-free future generation.  q

Sahitya Akademi organizes ‘Mulakat’, Nine Dogri books released

L
iterary works by the young and upcoming Dogri writers were showcased at the programme ‘Mulakat’,
organized by Sahitya Akademy, designed to encourage young and aspiring writers and give them a platform
to showcase their talent. The audience were the Senior Writers, Critics, Scholars and prominent citizens.
Director, Tourism released nine new Dogri publications by Sahitya Akademy.
‘Mulakat’ is held throughout the country in all the languages recognized by the Akademy as it brings forth the works
of young writers and launches them. A workshop on Bengali-Dogri translation and a two-day conference will also be
organized.  q

YOJANA October 2013 39

 YE-141/2013

40 YOJANA October 2013

services
trends

Paradox of High Growth and Low Employment

Pralok Gupta

S
ervices sector In sector’s share in the country’s exports
India has grown rapidly has risen from around 18 per cent in
in the post-reform era 1995 to over 39 per cent in 2011.
and has helped India
Thus, services sector has
to emerge as one of
the fastest-growing contributed significantly to the
economies in the world during the growth, GDP and linking of Indian
last decade. India has been ranked economy with the external markets
9th and 10th in terms of overall GDP in the post reforms era. However,
and services GDP respectively in the there has been debate in India over
As the services contribution world in 2011. India has also figured the implications of this services led
to GDP is expected to as the topmost country in terms of growth on employment creation.
In spite of a significant jump in
further rise in coming increase in its services share in GDP
(8.1 percentage points) for the period the services share in GDP, the
years, the policy makers services contribution to employment
2001-2011. The compound annual
need to focus on additional growth rate (CAGR) of services for increased only marginally over the
employment creation in the period 2001-11 in India was 9.2 liberalization period in India. Due to
various services. This per cent, second only in the world after this phenomenon, many economists
could be achieved through China. Given its growth performance, have criticized India’s growth story
the contribution of the services sector as ‘jobless growth’, i.e., there has
facilitating more broad- been high growth in Indian economy
(including construction) to overall
based growth within GDP has increased sharply, from 41 during past few years but adequate
the services sector, per cent in 1990–91 to 64.8 per cent jobs were not being created.
creating backward and in 2012–13. This article focuses on
forward linkages between Services sector has also unemployment aspect of India’s
agriculture, industry and contributed to India’s enhanced trade services growth story. It illustrates
services, government performance. Services exports have growth, service sector contribution
intervention and targeted grown significantly, from less than $7 and unemployment scenario in India
billion in 1995 to over $137 billion by and its various states and explains
policies and further reforms
2011. India’s share in global services the possible reasons for this paradox.
in infrastructure, regulation exports has risen from 0.5 per cent in It concludes by suggesting policy
and FDI liberalization 1995 to over 3 per cent in 2011. The measures to increase the services

The author is Consultant (Assistant Professor) at the Centre for WTO Studies, IIFT, New Delhi, under the Ministry
of Commerce, Government of India. He has also been appointed as Member (Sectoral Expert) of the Inter Ministerial
Sub-Group on ‘Data in Trade in Services’ by the Government of India. He has been actively involved in India’s Services
FTAs with Latin American countries, such as Chile, Peru, Colombia and Panama; and very recently with Israel and New
Zealand.

YOJANA October 2013 41

sector contribution to job creation and BRICS countries, only China and India the rural India. It implies that services
the employment scenario in India. have low employment contribution of growth has more or less limited itself
services. However, the gap between only to the urban India and the fruits
Services: Growth and Employment employment and GDP contribution of high services growth have not
The growth and liberalization of of services for India is much wider percolated down to the rural India.
than China. This is because of the fact A natural corollary of this imbalance
India’s services sector and consequent
that share of services is low for both is that, of late, there has been a lot of
rise in its share in India’s GDP is not
GDP and employment in China due internal migration in India from rural
well correlated with employment to the predominance of its industrial
generation in India. Table 1 shows to urban areas thereby increasing the
sector. challenges for the urban civic bodies,
the share of employment per sector in
A deeper analysis of employment which are already finding it difficult
India for the years 1993-94, 2004-05
data of India reflects that there are to meet the growing needs of rapid
and 2007-08. The data reveals that
widespread differences in employment urbanization in India.
the while the share of employment
in the tertiary sector (predominantly in various services sectors and states Table 2 shows rural and urban
across India. While some states,
services) increased over the years, sector employment per 1000 employed
such as Kerala, have a high share of
the primary sector (predominantly people for various states of India.
employment in the services sector,
agriculture) is still the dominant states like Chhattisgarh, Madhya Paradox of High Growth and Low
employer. The share of the primary Pradesh, Gujarat have relatively Employment: Why?
sector in employment fell sharply low shares of employed people in
between 1993–94 and 2004–05. services. It is worth noting that many Low employment contribution
The consequent rise in the share north-eastern states like Sikkim, of services in spite of high growth
of employment in the secondary Tripura, and Manipur have a high rates and GDP contribution is a
(predominantly industry) and tertiary share of employment in the services phenomenon particular to India.
sectors was fairly balanced between sector. From a sectoral perspective, One of the primary reasons for low
the two. employment creation in India’s
The economic theory services sector is the neglect of
Table 1: Share of employment per secondary (industry) sector during the
postulates that in the initial
sector in India (%) liberalization period. The economic
phase of development of
Year Primary Secondary Tertiary an economy, the role of theory postulates that in the initial
1993–94 64.5 14.3 21.2 primary sector is dominant. phase of development of an economy,
the role of primary sector is dominant.
2004–05 57.0 18.2 24.8 As the economy progresses,
As the economy progresses, the
the role of secondary sector
2007–08 55.9 18.7 25.4 role of secondary sector becomes
becomes important in the
important in the second phase. In the
Source: Economic Survey, 2010–11 second phase. In the third
stage, when the economy third stage, when the economy further
This observed trend for India is in further progresses, the tertiary progresses, the tertiary sector ’s
contrast to the trend in developed and sector’s contribution increases. contribution increases. However, for
some developing countries wherein the However, for India, it seems India, it seems that the second stage
contribution of services sector to the that the second stage of the of the development process has been
employment not only increased over development process has bypassed and India has entered into
time with the process of development, been bypassed and India has the third stage directly from the first
but services also became the dominant entered into the third stage stage.
player in employing human resources directly from the first stage. In this context, it is worth noting
in these economies. For instance, by that though China has shown highest
the beginning of 2000, about three construction, trade, hotels and services CAGR of 11.1 per cent
quarters of employees were working restaurants, and public administration, in 2001-2011 period, its share of
in services in several OECD countries. education, and community services services in GDP is only marginally
Not only developed countries, even are the major employment-providing
changed during this period. However,
developing countries, such as Latin services sectors in different states.
for India, high services CAGR (9.2
American countries like Chile, Peru, There are also wide differences per cent) is also associated with the
Colombia, Panama and many Asian in the employment share of services highest change in its contribution
countries, such as Korea, also have a sector in rural and urban India. In to the GDP. This also shows that
significantly higher share of services urban India, such share is very high China’s growth story is based on the
in their overall employment. Among in most of the states as compared to development of both the industrial

42 YOJANA October 2013

 Table 2: State-wise Employment in Different Sectors in Rural and Urban India in
2009-10 (per 1000 employed people)

Agriculture and Services with Services without

Industry
State/UT Allied Construction Construction
Rural Urban Rural Urban Rural Urban Rural Urban
Andhra Pradesh 687 53 97 241 217 705 150 583
Arunachal Pradesh 757 140 32 41 213 817 158 722
Assam 725 27 38 137 257 833 222 757
Bihar 669 146 53 121 279 732 174 609
Chhattisgarh 849 53 39 282 112 666 83 553
Delhi 0 1 120 285 879 712 542 682
Goa 239 14 365 289 397 696 353 552
Gujarat 783 53 62 306 156 641 112 576
Haryana 598 53 98 319 304 627 195 511
Himachal Pradesh 629 85 53 149 320 767 167 676
Jammu & Kashmir 597 110 84 227 316 662 218 552
Jharkhand 548 52 92 160 361 787 145 602
Karnataka 757 94 67 221 176 686 132 558
Kerala 357 110 132 178 511 711 357 570
Madhya Pradesh 824 98 48 203 128 700 62 569
Maharashtra 794 47 52 236 154 716 116 638
Manipur 534 205 90 118 377 677 240 604
Meghalaya 707 58 56 65 236 877 178 780
Mizoram 806 360 14 53 180 587 128 499
Nagaland 741 219 17 35 241 745 200 684
Odisha 676 103 84 215 240 683 144 549
Punjab 618 83 81 249 298 669 168 552
Rajasthan 633 70 54 186 312 743 110 595
Sikkim 539 0 48 99 414 901 282 874
Tamil Nadu 637 136 117 276 246 586 146 482
Tripura 306 21 63 89 633 891 244 716
Uttarakhand 695 54 41 199 263 747 131 629
Uttar Pradesh 669 91 76 257 257 653 134 551
West Bengal 563 36 173 279 265 683 206 621
A & N Islands 430 30 91 98 477 873 330 766
Chandigarh 31 22 145 122 826 856 629 778
Dadra & Nagar Haveli 591 38 160 632 251 332 155 315
Daman & Diu 548 394 340 177 110 430 106 398
Lakshadweep 452 277 57 164 491 558 361 483
Pondicherry 461 29 144 201 396 770 238 647
All India 679 75 80 242 241 683 147 582
Source: Economic Survey, 2011-12

YOJANA October 2013 43

and services sectors, whereas, India’s The government should focus to diversify the sources of growth,
growth story is mainly driven by the on those services which have thereby increasing employment
services sector ignoring the industrial high employment elasticity. For opportunities in Indian economy.
one. example, services like tourism,
Services sector is so far not looked
retail, construction, health, etc. have
The other reason for observing in a comprehensive manner in India.
relatively high employment elasticity.
this paradox in India is the lack Rather, various facets of services, such
Therefore, the policy makers should
of backward and forward linkages as growth, trade and employment are
not only focus in developing suitable
between agriculture, industry and looked into in a compartmentalized
infrastructure but also on capacity
services sectors. For instance, if the manner. For instance, as the current
building and training in these sectors.
agriculture sector (primary) could account deficit of India is rising
It is worth mentioning that the
have been linked with the agro- owing to merchandise trade deficit,
governments, both at the federal
processing industries (secondary) in government started focussing on
rural areas, which, in turn, could have and state level, have initiated a few
programmes for capacity building increasing services exports. However,
been linked to various input services there is no comprehensive policy
(tertiary) such as financial, transport, in selected service sectors. For
instance, in tourism sector, the state as of yet which focuses on services
insurance etc., more employment may exports, leave apart other domestic
have been generated. This would have government of Gujarat, as Public
Private Partnership (PPP) initiative, and international issues related to
also solved the problem of large scale services. Therefore, services sector
migration from the rural areas to the has set up a Centre for Tourism
and Hospitality Management for should be looked into in an integrated
urban settlements. and holistic manner instead of in silos,
training of service providers, guides
The relatively less contribution of and tourism personnel with special so as to enhance its contribution not
services to employment may also be emphasis on target groups who only to GDP but also to employment
attributed to poor recording of services are mainly from weaker sections and exports.
data in India. Many of the services are of the society. Similarly, at the Conclusion
provided in the unorganized sector, federal level, the Ministry of Tourism
such as, housemaids, workers in the has implemented various schemes There has been an insignificant
local kirana stores, selling through during 2007-12, such as, Product increase in the services sector ’s
hand pulled carts (Thaillas) etc. Infrastructure Development for share in employment in India in
Because of their unorganized nature, Destination and Circuits (PIDDC); spite of a very large increase in its
employment in these services is often Overseas Promotion and Publicity share in GDP during the last two
underestimated, though such services Including Market Development decades. This phenomenon could be
provide employment to a number of Assistance; Assistance to Academic attributed to both structural factors
unskilled workers. Institutions for Capacity Building as well as lack of appropriate policy
Policy Suggestions for Service Providers; Assistance to interventions. The demographic
Large Revenue Generating Projects, profile of India requires more and
It has been observed that the etc. The Approach Paper to the 12th more jobs to be created in order
policies and programmes of the Five Year Plan of the Government of to provide gainful employment to
government are generally not India has recommended a ‘pro-poor its growing young workforce. As
specifically designed to cater to low tourism’ approach for increasing the the services contribution to GDP is
employment in services sector only. net benefits to the poor from tourism expected to further rise in coming
Rather, they are designed to solve and to ensure that tourism growth years, the policy makers need to
the underlying problem of poverty contributes to employment and focus on additional employment
and unemployment and related poverty reduction. creation in various services. This
issues in the economy in general could be achieved through facilitating
which may have been intensified It is also important to have more more broad-based growth within the
because of liberalization of the broad-based growth within the services sector, creating backward and
economy in general and services services sector in order to ensure forward linkages between agriculture,
sector in particular. Therefore, the balanced, equitable and employment industry and services, government
need is to have targeted interventions oriented growth in the economy. intervention and targeted policies
designed categorically for specific Such broad-based growth will require and further reforms in infrastructure,
services to create more employment reforms in infrastructure, regulation regulation and FDI liberalization. q
opportunities in India’s services and FDI liberalisation in services.
sector. These measures are likely to help (E-mail : pralok@iift.ac.in)

44 YOJANA October 2013

 YE-133/2013

YOJANA October 2013 45

sectoral issues
insight

Trends in Manufacturing Employment

Bishwanath Goldar

A
t the time economic the initiation of economic reforms in
reforms were initiated India is that economic reforms lifted
in India in 1991, there the growth rate of manufacturing
was an expectation output only after some substantial
that economic reforms time lag. In the period 1976-77 to
will give a major 1990-91, the average growth rate in
boost to employment generation manufacturing output (gross value
in manufacturing. It was believed added at constant prices) was about
that economic reforms, particularly 5.8 per cent per year in the period
trade reforms, would cause the 1991-92 to 2001-02, remaining almost
industrial structure to shift towards the same at 5.7 per cent per year
for providing labour intensive industries, driven
by India’s comparative advantage,
accelerating to 8.3 per cent per year in
the period 2002-03 to 2011-12. This
ample employment and thus contribute to employment acceleration is reflected in a similar
generation. Also, there was hope
opportunities for low that economic reforms would help
acceleration in the growth rate of
manufacturing employment. Between
educated or uneducated Indian manufacturing grow faster, 1993-94 and 1999-00, the growth rate
and this would in turn favorably
youth in the next ten impact employment generation in
in manufacturing employment was
1.6 per cent per annum (substantially
years, a fast growth manufacturing. lower than the growth rate in the pre-
in manufacturing is The actual employment growth reform period), which increased to 2.8
per cent per annum between 1999-00
necessary. The new experience has, however, not fulfilled
these expectations. The average and 2011-12.
National Manufacturing annual growth rate in manufacturing Another reason why there was
Policy aims at attaining employment in the post-reform period
has not surpassed that attained in
no step up in the growth rate in
manufacturing employment in the
a rapid growth in the ten to fifteen years preceding the post-reform period is that the expected
reforms. Between 1977-78 and 1993-
Indian manufacturing 94, the growth rate in employment in
structural shift towards labour intensive
industries did not take place. Consider
so that the share of manufacturing was about 2.7 per cent
the cases of textiles and textile products,
per year, while between 1993-94 and
manufacturing in 2011-12, it fell to about 2.4 per cent
and leather and leather products. These
are two important labour intensive
aggregate GDP rises per year.
export industries. Their share in India’s
to 25 percent within a One reason why the growth rate exports was 32 per cent in 1990-91.
decade or so in manufacturing employment did not This share fell to 11 per cent by 2011-
12. Clearly, the exports structure
significantly accelerate shortly after

The author is a professor of economics at the Institute of Economic Growth, Delhi. He is a member of the National
Statistical Commission and the Chairman of the Standing Committee on Industrial Statistics. He specializes in industrial
economics and international trade.

46 YOJANA October 2013

has not changed in favour of labour sector. The trends in employment above the growth rate in employment
intensive products. The share of these in the organized and unorganized achieved in the 1960s and 1970s.
two industries in real value added in manufacturing sectors are taken up for
manufacturing has fallen from 16.6 Although, there are good
discussion next, in that order.
per cent in 1990-91 to 13.6 per cent in theoretical arguments to expect that
Employment in Organized trade liberalization will alter the
2011-12. Again, it is seen, these two
Manufacturing commodity composition of exports
labour intensive industries have not
and imports and thus lead to a change
gained in importance within Indian Over the last five decades, in the structure of the manufacturing
manufacturing. India’s organized manufacturing has sector towards labour intensive
To gain a better understanding of experienced alternate phases of new industries, no such structural change
the growth of employment in Indian job creation and jobless growth. In the has actually occurred within organized
manufacturing, it is useful to consider 1960s and 1970s, substantial additions manufacturing. The industrial groups
separately the employment trends in were made to jobs in organized (a) food, beverages and tobacco,
the organized and unorganized sectors manufacturing and the average growth (b) textiles and textile products, (c)
of manufacturing. The organized sector rate in employment in organized leather and leather products, and (d)
of manufacturing comprises industrial manufacturing was about four per wood and wood products, which are
units registered as ‘factories’ under cent per year. This was followed by a labour intensive, accounted for about
the Factories Act. It covers industrial phase of ‘jobless industrial growth’ in 22 per cent of the aggregate value
units that have 10 or more workers India in the 1980s. Between 1980-81 added of organized manufacturing in
using power or 20 or more workers and 1990-91, organized manufacturing 1990-91 (at 2004-05 prices). Their
not using power. Thus, the organized output grew at the rate of 8.3 per cent share in value added declined to about
(or registered) sector of manufacturing per year whereas employment in 18 per cent in 2004-05. By contrast,
organized manufacturing grew at a low the industrial groups (a) chemicals
rate of only 0.4 per cent per year. In the and chemical products, (b) rubber,
Over the last five years that immediately followed the
decades, India’s organized plastic and petroleum products and (c)
initiation of economic reforms, there basic metals accounted for about 47
manufacturing has were some increases in employment per cent of value added of organized
experienced alternate phases in organized manufacturing. Between manufacturing in 1990-91(at 2004-05
of new job creation and jobless 1990-91 and 1997-98, employment in prices) which increased to 48 per cent
growth. In the 1960s and organized manufacturing increased by 2004-05. Evidently, the relative share
1970s, substantial additions by about 19 per cent. The annual of labour intensive industries has fallen
were made to jobs in organized growth rate was about 2.5 per cent. and that of capital intensive industries
manufacturing and the average In subsequent years, however, there have marginally increased within
growth rate in employment in was a downward trend in employment organized manufacturing contrary
organized manufacturing was in organized manufacturing which to the prediction of conventional
about four percent per year. continued till 2003-04. Between
This was followed by a phase 1997-98 and 2003-04, employment in The theoretical prediction
of ‘jobless industrial growth’ in organized manufacturing fell by about that trade liberalization will
India in the 1980s. ten percent. The fall in employment promote labour intensive
covers relatively bigger industrial during 1997-98 to 2003-04 offset to industries crucially rests on
units. The organized sector currently some extent the gains made in 1992- the assumption of perfectly
accounts for about one fourth of total 93, 1994-95 and 1995-96. As a result, competitive markets. Once
employment in manufacturing and the average growth rate in employment
in organized manufacturing during
imperfect competition is
about 70 per cent of manufacturing brought in, trade liberalization
1990-91 to 2003-04 was only about
output (gross value added). Even need not result in contraction
0.6 per cent per year. If one considers
though, the share of the organized of capital intensive import
a longer period, 1980-81 to 2003-
sector in manufacturing employment is
04, a period spanning 24 years, the competing industries. Rather,
only about a fourth, it has an important average growth rate in employment in
place in job creation because the level
in certain cases, these may
organized manufacturing was rather expand.
of productivity and wages are much low at about 0.5 per cent per year.
higher in the organized sector than the Interestingly, the situation has changed economic theory. This does not mean
unorganized sector. Also, in terms of radically since then. In the period since that the theory is wrong. The theoretical
provision of decent jobs, the organized 2003-04, employment in organized prediction that trade liberalization will
manufacturing sector has a clear edge manufacturing has crown at a rapid rate promote labour intensive industries
over the unorganized manufacturing of about seven per cent per annum, well crucially rests on the assumption of

YOJANA October 2013 47

perfectly competitive markets. Once jobs. The Report presents an estimate Act (IDA), and industrial enterprises
imperfect competition is brought in, according to which the Industrial in India have actually been adopting
trade liberalization need not result in Disputes Act has caused about three this means on a wide scale. There
contraction of capital intensive import million less jobs to be created in formal are econometric studies which have
competing industries. Rather, in certain sector manufacturing. These estimates provided empirical evidence to show
cases, these may expand. are based on analysis of data for the that stringent labor regulations have
period 1959-1997. In 1997, the formal led to greater use of contract workers
An interesting question is whether or organized sector of manufacturing in Indian industrial firms. An important
the recent surge in employment provided about 9 million jobs. This question that presents itself here is
in organized manufacturing at the would have been 12 million if three why has the upward trend in the use
growth rate of seven per cent per year million jobs were not lost. Thus, going of contract labour continued in India’s
is attributable to a structural shift by the estimates presented in the World organized manufacturing even though
towards labour intensive industries. An Bank study, the Industrial Disputes Act several Indian states have relaxed the
analysis of National Accounts data on has lowered employment in organized provisions of enforcement of labour
real gross value added in organized manufacturing by about 25 per cent. laws earlier. Probably there are other
(registered) manufacturing industries factors that influence and encourage
In this context, it is important to the use of contract labour in Indian
A Report of the World Bank note that there is a body of literature industries.
on labour regulations in India which
notes that by imposing Unorganized Manufacturing
takes the position that several Indian
excess rigidity in the formal states have relaxed the provision of Employment in unorganized
manufacturing labour market, enforcement of labour laws leading to manufacturing grew at the rate of about
the labour regulation has flexible practices at the ground level. three per cent per year between 1977-
created disincentives for This belief seems to go well with 78 and 1999-00, which has suffered to
employers to create jobs. the observation that in recent years some extent in the 2000s. According
The Report presents an organized manufacturing has achieved to the employment estimates based on
estimate according to which a fast rate of growth in employment. In survey of unorganized manufacturing
the Industrial Disputes Act has an article of this author, some empirical enterprises undertaken by the National
evidence has been presented that Sample Survey Office, there was a
caused about three million less
indicate that the inter-state variation decline in the number of workers in
jobs to be created in formal in employment elasticity in the recent unorganized manufacturing sector
sector manufacturing. period is positively correlated with the between 2000-01 and 2010-11.
extent of labour market reforms done.
reveals that the relative share of labour This finding supports the view that the An important question that
intensive industries such as food recent surge in employment growth in presents itself here is why
products, beverages, tobacco products, organized manufacturing is connected has the upward trend in
textiles, leather and leather products, with some degree of flexibility in the use of contract labour
and wood and wood products has not industrial labour markets introduced continued in India’s organized
recorded any substantial increase in by the Indian states. manufacturing even though
the period since 2004-05. Thus, the several Indian states have
Besides affecting the quantity of relaxed the provisions of
employment surge is not traceable employment generated in organized
to a structural shift towards labour enforcement of labour laws
manufacturing, labour market earlier. Probably there are
intensive industries. The explanation regulations have also affected the
lies elsewhere.
other factors that influence
quality of employment. There has and encourage the use of
Role of Labour Market been growing use of contract labour contract labour in Indian
Regulations in organized manufacturing. The industries.
contract workers as percentage of
A Report of the World Bank (India’s total workers employed in organized The rate of fall was 0.6 percent per
Employment Challenge: Creating Jobs, manufacturing has increased from 14 year. A closer look at these data
Helping Workers, Oxford University per cent in 1995-96 to 31 per cent in brings out that the experience of own
Press, New Delhi, 2010) notes that 2007-08, and further to 34 percent in account manufacturing enterprises
by imposing excess rigidity in the 2010-11. It is believed that the use of (units using family labour, no hired
formal manufacturing labour market, contract workers provides a means of workers) was different from that of
the labour regulation has created getting around the labour regulations, establishments (unit employing hired
disincentives for employers to create particularly the Industrial Disputes workers). Between 2000-01 and

48 YOJANA October 2013

2010-11, employment in unorganized sector manufacturing
establishments grew at the rate of 1.6 per cent per year,
whereas the employment in own account manufacturing
enterprises decreased at the rate of 1.8 per cent per year.
Not only has the employment in own account enterprises
of unorganized manufacturing fallen between 2000-01 and
2010-11, but there was also a fall in the number of enterprises
(estimated). The number of own account enterprises of
unorganized manufacturing has fallen from about 146.7 lakh
in 2000-01 to about
It seems a restructuring has 144.3 lakh in 2010-
11. The number
been taking place within the of establishments
unorganized manufacturing in unorganized
sector in the last decade, manufacturing on
away from rural own account t h e o t h e r h a n d ,
enterprises and towards has increased
establishments and urban from about 23.5
own account enterprises. This lakh to 27.8 lakh.
Interestingly, within
has contributed to increase in the own account
labour productivity. enterprises, it is the
rural component that
has experienced a fall (from 111 lakh in 2000 to 91 lakh in
2010); the urban component has seen a rise (from 36.1 lakh
to 52.9 lakh units). It seems a restructuring has been taking
place within the unorganized manufacturing sector in the
last decade, away from rural own account enterprises and
towards establishments and urban own account enterprises.
This has contributed to increase in labour productivity.
Way forward
The manufacturing sector has virtually stagnated for
long, in terms of its share in aggregate gross domestic
product (GDP) as well as aggregate employment. In 2011-
12, the share of manufacturing in aggregate GDP was
about 16 per cent and the share in aggregate employment
was about 13 per cent. The services sector has grown fast
and increased its share in GDP. In 2011-12, the share of
services in aggregate GDP was about 58 per cent. The share
of services in employment was, however, much lower at
about 28 per cent. The services sector cannot be relied on for
creating ample employment opportunities for the youth that
will be entering the labour market in the next ten years. The
skill requirements of workers in services, particularly the
modern services, are much greater than that for the workers
in manufacturing. Thus, for providing ample employment
opportunities for low educated or uneducated youth in
the next ten years, a fast growth in manufacturing is
necessary. The new National Manufacturing Policy aims
at attaining a rapid growth in Indian manufacturing so that
the share of manufacturing in aggregate GDP rises to 25 per
cent within a decade or so. This initiative holds considerable
YE-136/2013

potential to increase manufacturing employment in the

coming years.  q
(E-mail : bng@iegindia.org)

YOJANA October 2013 49

do you know?
What is Unstructured Supplementary The response from computer is networks and the USSD messages are
Service Data (USSD)? sent back to the phone. Most GSM directed towards the subscriber home
phones have USSD capability. A USSD network. In this way the change of
Unstructured Supplementary message starts with an asterisk (*).The geographical location of subscriber
Service Data (USSD) is a protocol message ends with # sign. As far as the and going beyond one’s network
used by GSM Cellular telephones uses of USSD are concerned, the most area does not come in the way of
for communication with service common use in our day-to-day life is smooth communication. The same
provider’s computers. USSD is to enquire about how much balance we set of services are thus enjoyed by the
an international system for have in our mobile phone account at a subscriber while on roaming.
communication technology, which is particular time.
used for sending text between a mobile What is Brent Crude?
phone and an application program in The user sends a Process
Supplementary Service Request Brent crude is a light crude oil. It
the network. A USSD gateway routes got its name due to the fact that it was
(PSSR) to the home zone. Under the
messages from signalling network first produced from the Brent oilfield.
guidance of the gateway, it is sent to
to service application and back. In the correct application. The application It contains about 0.37% of sulphur. It
telecommunications, gateway is a sends an acknowledgement via USSD is suitable for production of petrol and
central point at which several different gateway. PSSR responds back. The middle distillates. It is sourced from
protocols or communications signals balance appears on the screen. Balance the North Sea. This type of oil is used
are controlled and routed. It is a notification at the end of charged call as a benchmark to price European,
technology unique to the GSM. It is on our mobile phone screen is also African, Middle Eastern oil. It was
a session based communication which done through the use of unstructured discovered in early 1960s. it is
has a variety of applications. In supplementary service. sourced by UK, Norway, Denmark,
interactive applications it takes less the Netherlands and Germany. It is
time than SMS, as it is a session based The use of above mentioned a light as well as “sweet” oil. It is a
feature and not a store and forward process is also done for voice chat. blend of UK’s two North Sea oils.
service. With 182 alpha numeric USSD is also a medium for product- The production of this oil now stands
advertising. These days, aggressive at 500,000 barrels a day. There is a
characters USSD messages create
telemarketing has been a cause of
real-time connection during a session. price difference between this oil and
irritation to customers who do not like
The connection allows a two-way its counterparts. The depletion of
being unnecessarily disturbed in the
exchange of a sequence of data; thus North Sea oil fields has also affected
midst of their hectic schedules. USSD
making it a more responsive service. the prices. Differences in the supply
enabled advertising is less invasive
The process of interaction through and demand situation have also led
than telemarketing.
USSD begins wth the user composing to difference in prices. However, the
the message on the phone keyboard. It The USSD services provide a gap in prices is now less.  q
goes to the phone company network, virtual Home Environment (VHE)
where it is received by a computer during roaming. This is because USSD (Compiled by Hasan Zia, Sr. Editor,
dedicated to USSD. services are available in roaming E-mail: hasanzia14@gmail.com)

Highlights: Economic Outlook 2013-14

The 'Economic Outlook 2013-14' was released recently. Following are the highlights of the document:
Ø Economy to grow at 5.3% in 2013-14 Ø Agriculture projected to grow at 4.8% in 2013-14 as against 1.9% in 2012-13. Ø Industry
(including manufacturing, mining and quarrying, electricity, gas, water supply and construction) projected to grow at 2.7% in
2013-14 as against 2.1% in 2012-13. Manufacturing sector projected to grow at 1.5% in 2013-14 as against 1 % in 2012-13. Ø Services
projected to grow at 6.6%in 2013-14 as against 7.1% in 2012-13. Ø Domestic savings rate decline of 6% between 2007-08 and
2011-12 almost entirely on account of a decline of 3.7% in public sector savings and 2.2% in private corporate savings. Ø Decline in net
financial savings of households to 8 per cent in 2011-12 from 11-12 per cent in years prior to 2010-11. Ø Investment rate projected
at 34.7% of GDP in 2013-14 as against the estimated 35% in 2012-13. Ø Domestic savings rate projected at 31% of GDP as against the
estimated 30.2 % of GDP 2012-13. Ø Current Account Deficit projected at $70 billion (3.8% of GDP) in 2013-14 against an estimated $88.2
billion (4.8% of GDP) in 2012-13. Ø Merchandise trade deficit projected at $185 billion (10.1% of GDP) in 2013-14 against an estimated
$195.7 billion (10.6% of the GDP) in 2012-13 Ø Net FDI inflows in 2013-14 projected at $21.7 billion against an estimated $19.8 billion
in 2012-13. Ø Net FII inflows projected at $ 2.7 billion in 2013-14, The commensurate figure is estimated at $ 17 billion in 2011-12 and
$27 billion in 2012-13. Ø The Centre’s budgeted fiscal deficit is estimated at 4.8% of GDP in 2013-14, as against an estimated 4.9% in
2012-13. Ø The fiscal deficit during the first four months of the current financial year has already reached 62.8 per cent, and expenditure
on major subsidies 51.3 per cent, of the budgetary provision for the full financial year. Ø The fiscal deficit of all states put together was
2.8 per cent of GDP in 2009-10, and moderated further to 2.1 per cent in 2012-13 (BE).

50 YOJANA October 2013

 YE-142/2013

YOJANA October 2013 51

education
challenges

The Right to Education, 2009 and

Repercussions for Marginalised Groups
Claire Noronha

C
ritics faulted the by March 2013 (a deadline which has
Right to Education Act passed without fanfare) was part of this
2009 (RTE) on many line of thinking.
counts when it was
finally passed, a century On the other hand what appears like
after being proposed a massive shift in pedagogy to a child
by Gokhale. Still, the centred child friendly learning mode
RTE was welcome-the child’s right to and a stress free CCE (Continuous and
education was now a justiciable right Comprehensive Evaluation) system is
which put the compulsion of provision in tune with developments over the
on the state. years. The government schooling
system had been plagued with drop
It is important to remind In some ways the RTE takes up and out and low retention. Low retention
ourselves that RTE is not consolidates earlier trends, in others it was partly attributed to the dullness
is a striking departure from them. of classroom activity which relied
a magic wand that has on copying from the blackboard and
In mandating a basic minimum
dissolved all challenges of infrastructure and trained teachers
rote learning as major classroom
activities punctuated by the free use
in the schooling of in all schools, the RTE reversed a of the stick. UNICEF had in fact
disadvantaged children...It disturbing trend which had slowly been working on the ‘joyful learning’
become entrenched over the years. mode of curriculum transaction over
is also important to realize In the government sector, poorly many years. The National Curriculum
that the ‘right to education’ equipped EGS/AIE schools were Framework 2005 similarly had stressed
acceptable for difficult situations and
is of most significance to in many states trained teachers had
the primacy of the learner and the need
for a flexible evaluation system.
the most vulnerable – and been replaced by less qualified para
teachers or contract teachers, a low The 25 percent reservation in
the least able to claim that cost alternative. Nambissan (2010) private schools needs to be seen in the
right. From that point of remarks on the irony of poorly paid context described above – as an inroad
view children need all the less skilled teachers for disadvantaged into the fortress of elite privilege not
children as a ‘travesty of social justice’. available to the poor. But by asking for
support they can get – their The low fee for profit private schools a large percentage of enrolment from
parents are often immersed targeting the same clientele also disadvantaged groups in all recognized
relied on local less qualified staff. By schools the RTE is aiming for more
in the struggle for basic insisting that all schools have basic inclusive schooling with defined
entitlements in a highly facilities the RTE restored a certain parameters.
dignity to the schooling system for the
stratified society disadvantaged. Derecognising schools Advocates and Opponents:
which did not have these standards Though many have faulted RTE as

Claire Noronha has been active in the field of research into the schooling of disadvantaged children since 1995 and was part
of the team which published the well known PROBE report. She is a founder member of CORD (Collaborative Research
and Dissemination). This article reflects findings from fieldwork with schools and families as well as interviews with
educationists, activists and policy makers, and discussion with collaborators.

52 YOJANA October 2013

noted earlier, for not giving enough, input focused act which emphasizes – while these can be delivered at a
the RTE mandates for basic facilities, infrastructure and teaching inputs fraction of the cost thus benefitting
trained teachers and more inclusive when it is learning achievements the state as well as child. The former
education have energized a diverse set which are all important. The time argue for systemic improvement
of academics, NGOs, activists, private has come according to this school of including teacher training as this will
foundations and even international thought for a focus on outcomes since benefit the most marginalized who are
bodies who have grasped at the the challenge of access has largely chiefly in government schools, and
opportunity to see that the state is been met. Learning achievements the latter advocate private schools
indeed accountable for the education of are argued to be the only test of or ‘public private partnerships’. The
its children. They look at infrastructure school quality and the school system elite school viewpoint is somewhat
lags, at school functioning and how especially the government school different but the judgement indicates
the proposed monitoring system for system is woefully deficient on this that the Supreme Court viewed the
government schools – the SMC is score. Private schools are better and problem from the citizen’s right to a
functioning and what parents say hence parents are choosing them – life of dignity perspective which was
about the child’s learning. Another and abandoning government schools deemed stronger than the right of the
area of enquiry is whether children are everywhere. To bolster this argument school owner to pursue a trade without
indeed being able to gain admission in are the yearly ASER surveys which hindrance.
private schools using the 25 percent regularly note that children in class
reservation under the Act. The RTE 5 are unable to function at a class 2 It is important to remind ourselves
forum, an association which has been level – in literacy and in numeracy that RTE is not a magic wand that
formed to spearhead this effort, has tasks and that these children are more has dissolved all challenges in the
been holding conventions at various likely to be in government schools than schooling of disadvantaged children.
state capitals and publishing yearly in private schools. Similarly, the JRM These remain and are substantial
reports to chart the progress of RTE in (Joint Review Mission) reports which and RTE assists the child by putting
the states. Private foundations are also monitored government schools during compulsion on the state and its
working in this field. the SSA (Sarva Shiksha Abhiyan) educational apparatus. It is also
period which has just ended also made important to realize that the ‘right to
Opponents include the private frequent mention of the need to focus education’ is of most significance to
sector, particularly the powerful elite on learning achievements. the most vulnerable – and the least
private school sector. Elite schools feel able to claim that right. From that
that the 25 percent quota is a burden This view certainly has financial point of view children need all the
– reimbursement at government rates implications for governments struggling support they can get – their parents
is far too low and had challenged it in with the increased financial input are often immersed in the struggle for
court. After a long and contentious required by RTE – if infrastructure basic entitlements in a highly stratified
hearing the judgement finally came in is not important and a trained teacher society.
April 2012. Basically, it upheld the cadre can be dispensed with, then
viewpoint of the state in enjoining on learning can come through the aegis The most vulnerable are in any
the private sector a positive obligation of a tightly structured system centred case in government schools and such
to share in the task of educating round immediate learning goals families are plagued to a high degree
disadvantaged children. Schools are Low fee private schools or low cost by the struggle to live. At its most
by no means satisfied with this – on alternatives in government schooling basic level for the school this implies
several grounds - and have gone in would be in favour. A section of CSOs irregular attendance due to migration,
appeal. The cheaper private schools (Civil Society Organisations) and the need for labour of children at
although they do see the potential of others form an articulate lobby pushing certain times owing to the agricultural
government subsidy as a useful one, this agenda. Significantly, the 12th Plan cycle, illness etc. It also means
do not like the underlying possibility of prioritises the improvement of learning children minus food security and minus
losing autonomy – in effect they would achievements above all else. preschooling. Parents often have little
be subjected to greater government or no schooling.
scrutiny. Further, the RTE cuts at the Challenges Before Us: So how
very basis of their profitability through does this debate augur for the future The elementary schools these
the stipulation that all schools have a of RTE and for the schooling of children attend have modest facilities
minimum infrastructure in place as disadvantaged children. It is interesting as can be seen from DISE statistics
well as trained teachers. They point that in two of the three cases the for 2010-11(quoted in Colclough and
out that the government schools have disadvantaged child remains at the core De, DFID 2013). Only 49 percent
poor results – although they have of the debate except that the problem of schools had a functional toilet for
trained teachers. These schools too is seen from two perspectives. One girls - studies have indicated that the
have banded together to protect their viewpoint sees the child as having absence of toilets is a major reason for
interests. rights to overall holistic development drop out of adolescent girls. Only 43
and the other sees the child in peril percent of schools had electricity. As
Related to this perspective is the because government schools are not parents in an urban slum pointed out
view that the RTE is a retrogressive delivering learning achievements in a 2012 study, children could hardly

YOJANA October 2013 53

be expected to concentrate when they a revisit of schools in the same northern child into the same classroom as the
were bathed in sweat. If one also thinks states after 10 years showed that in industrialist’s child through the 25
that exposure to computers should be both surveys teaching activity was percent reservation. Even if fully
provided by a formal school then it is going on in less than half the schools. implemented, the proportion of elite
sobering to note that only 15 percent It is also worrying that the NCPCR schools to the large mass of schools
of schools had a functional computer. (National Commission for Protection in general, is too small to make a
Overall, however, there has been of Child Rights), officially entrusted major difference to the disadvantaged
progress – physical infrastructure is with monitoring RTE is hampered millions. On the other hand, it could
improving. by lack of funds, and bedeviled by be a learning experience of inclusive
interference. education for the scions of privileged
Other areas are more complex. An families. Studies show that schools
over ambitious curriculum actually Given the conditions described themselves use a variety of measures
ensures that children will be soon left above poor learning achievements to discourage disadvantaged parents.
behind and that automatic promotion in government schools (LA) are Further, admission processes are such
will compound the problem as the not too surprising and merit serious that only more educated somewhat
learning deficit increases over the reflection. However, it is startling better off parents are able to negotiate
years. Further, experts point out that that low achievement seems to be a the hoops. Even post admission
disadvantaged children for the most part of the entire schooling system they struggle to cope with costs for
part face a language problem – the according to several reputed surveys. transport, books and uniform as only
home language and the formal school Education Initiatives studied student tuition fees were exempted. The real
language are at odds and the problem achievement in ‘top schools’ across area of concern is not who gets in and
remains acute: in the words of one several major Indian cities and found how – presuming these aspects can be
educationist who is commenting on children unable to move easily from streamlined. It is the kind of education
achievement tests in primary schools: questions requiring information recall the child gets. Will the inclusion be
to those which required application. confined to being seated in the same
But ‘spot’ testing in the problem, Top states fared no better in the sole
and the use of textbook based testing… classroom?
PISA testing (PISA is an international
the language used in the book is not test taken by the 15+ age group and In conclusion, a few remarks. One,
their first language. The Maithili, enables benchmarking of a country the RTE as it is being implemented today
Bhojpuri and other home language against others) in 2009. An educational should at least reduce the bewildering
family children, are at a disadvantage system which focuses on information heterogeneity in the schooling
with using Hindi language books. It recall and rote learning has been system. Currently, government school
takes eight years for such children blamed so RTE is very much on track. infrastructure is being upgraded. What
to get comfortable with the Hindi Elite schools have quickly moved to the situation is with the cheaper private
textbook language for learning. So a CCE and non detention but for the schools is not clear. What is clear
teacher needs to be trained to do more average government school teacher is that schooling for disadvantaged
language bridging and if done, then there is confusion and misinterpretation children still faces massive challenges.
such learning can be secured. as the blame for non performance is put To move away from the era of rote
RTE does mandate trained teachers. on the non detention policy. learning to one where the teacher is
But educationists deplore the fact trained to allow the child to think and
So the challenges for the government explore his environment requires a
that the teacher training institutional school system on which the most
apparatus has all but collapsed and will quantum leap in the number of trained
disadvantaged groups rely are many teachers and the kind of training
take some time to set in order. This is and deep. One such approach has
a major threat to RTE considering that given to them. The disarray in the
already been suggested – allow the teacher training system is a threat to
the teacher often has to cope with the cheaper private schools to take over for
problems of first generation learners this. Curriculum and textbooks, the
their learning advantage is far superior language of classroom transaction
and cannot expect home support, at a fraction of the cost. Chudgar and also need massive rethinking. The
that she or he is expected to use a Quin (2012) using a very large sample entire monitoring system for schools,
teaching methodology and a method of households find that the relative government and private, is one which
of evaluation (CCE)to which there advantage of private schools can become needs strength and autonomy.
has been no prior exposure. Further, statistically insignificant. What needs
in a patriarchal and caste ridden to be done is to keep the development RTE requires all the building
society teachers are expected to be the of the child at the centre and see that blocks to be in place to secure quality
enlightened agents of social change. both private and government schools education for the disadvantaged child
These are high expectations indeed. foster this development with learning in both cognitive and non cognitive
achievement necessarily being one of domains. We need to focus on this
Further, the RTE monitoring the goals. composite task to honour the child’s
mechanism for state schools is in right to education.  q
keeping with decentralization – SMCs A sobering thought about the
from PROBE Revisited (2011) based on impact of putting the labourer ’s (E-mail : clairenoronha@gmail.com)

54 YOJANA October 2013

 YE-134/2013

YOJANA October 2013 55

women in workforce
viewpoint

Burden of Success: Decline in Participation

Sonalde Desai

U
ntil recently, 5 per centage point decline between
the Indian economy 1993-94 and 2011-12.
has grown at a rapid
pace for nearly two This decline in employment for
decades. Average per rural women is merely an overt sign
capita expenditure, of tremendous churning in rural labour
used as a proxy for income, has grown markets. It is well recognised that the
rapidly for both urban and rural areas, contribution of agriculture to Indian
although the growth in urban areas far economy has steadily declined since
outpaces rural growth when taking Independence. Declining importance of
into account inflation. Rural average agriculture is a normal transformation
monthly consumption per person has accompanying economic development.
grown from Rs. 942 in 1993-94 (in Where India differs from other
The only way 2011-12 prices) to Rs. 1287 in 11- countries is in lack of manufacturing
opportunities and consequent crowding
12, a 37 per cent growth; the urban
to reap this expenditure has grown from Rs. 1597 of workers in agriculture. While
proportion of GDP from agriculture
to Rs. 2471, a 55 per cent growth.
demographic fell by 50 per cent since 1983, the
In spite of this income growth, proportion of workers in agriculture
dividend would be we have seen little improvement has barely declined by 25 per cent and
in employment statistics, and for about half the Indian workforce is still
to work towards some time periods, even a decline is concentrated in agriculture although
providing more job apparent. This has resulted in a popular
characterisation of this growth as
agriculture accounts for only about 17
per cent of the GDP.
opportunities to being jobless growth. A deeper look
at the employment statistics provides With the declining share of
women, particularly interesting clues to this paradox. agriculture in the economy, it is
imperative that more and more workers
rural women with As Figure 1, culled from NSS
Reports shows that when we take
move out of agriculture into non-
agricultural work. However, these
moderate levels of into account both the primary and opportunities appear to be limited
secondary status, male employment and are more easily available to
education rates have hardly budged. Urban female men than to women. Consequently,
employment rates have fluctuated while rural men increasingly move
somewhat but remain more or less into non-farm work, particularly in
stable. It is the rural female employment construction labour, women appear
where decline is most striking, a nearly to be stuck in agriculture and with

The author is a Senior Fellow at the National Council of Applied Economic Research and Professor of Sociology at
University of Maryland. views are personal.

56 YOJANA October 2013

 on women’s time. If domestic demands
Fig 1. Trends in are limiting women’s labour force
Work Participation Rates participation, this decline should lead
͸Ͳ to increase in women’s employment.
In contrast, we see a decrease, at least
Percent Population

ͷͲ
for the rural women.
ͶͲ
A second possibility is that rising
͵Ͳ —”ƒŽƒŽ‡
incomes have led to a decline in
ʹͲ —”ƒŽ ‡ƒŽ‡ women’s labour force participation. It
ͳͲ ”„ƒƒŽ‡ has been well documented that as men’s
”„ƒ ‡ƒŽ‡
incomes increase, a family’s need for
Ͳ money declines and women may prefer
to concentrate on domestic activities.
As noted above, undoubtedly incomes
have increased. However, this does not
seem to be the sole explanation for a
declining importance of agriculture participation rate (WPR) has slowed decline in Indian women’s labour force
in the economy are often squeezed down, however. National Sample participation.
out of the labour force. Rural men Survey documents that between 2004-5
Few data sources exist that provide
are also most likely to span sectors, and 2009-10 rural women’s WPR
information on household income,
something not easily documented including both primary and secondary
particularly at an individual level.
by NSS surveys and hence, often activities fell from 32.7 per cent to 26.1
Household incomes used for this
overlooked. Fortunately, a survey per cent and further fell to 24.8 per
analysis must exclude women’s own
conducted by National Council of cent in 2011-12. This amounts to an
incomes since likelihood of women’s
Applied Economic Research (NCAER) annual decline of about 2.5 per cent in
labour force participation is the primary
and University of Maryland, supported the past two years compared to about
issue of interest. However, the IHDS
by the Planning Commission, provides 4.5 per cent in the prior five years.
survey referred to above, contains
information on incomes of different At least some of this improvement
information in incomes of various
members of the household. This survey, may be attributable to the Mahatma
household members. Results from this
India Human Development Survey Gandhi National Rural Employment
survey are presented in Table 1.
(IHDS) was conducted in 2004-5 from programme which mandates that
and was canvassed to a nationally at least one third of the beneficiaries This table documents two things:
representative sample of urban and must be women, and men and women (1) With rising income, as we go
rural households in all states and should be paid equally. Nonetheless, down the rows in each column, work
union territories with the exception of regardless of the opportunities in participation rates decline. Suggesting
Andaman-Nicobar and Lakshadweep. NREGA, women’s exclusion from that income of other household
It collected information on all jobs by rural labour markets remains a potential members is associated with declining
an individual in the preceding year and concern. labour force participation by women.
found that in 2004-5, about 51 per cent (2) With increasing education, as we
Could other factors explain this
of the rural male workers work in farm go across columns, work participation
decline? It is sometimes argued that
related activities (either as own account rates also decline, with an uptick only
family pressures may account for
farmers or as wage labourers), 21 per emerging after completion of 12 th
women’s withdrawal from the labour
cent worked in both farm and non- standard. Suggesting that regardless
force. However, fertility has steadily
farm activities, and 28 per cent only of income, education is associated with
fallen for both urban and rural areas.
worked in non-farm sector. In contrast, lower female labour force participation.
Rural Total Fertility Rate (TFR)
among women workers, 84 per cent This may well be due to shortage of
declined from 3.7 in 1992-93 (as
worked in farm oriented activities, 7 employment opportunities for women
measured in National Family Health
per cent combined farm and non-farm whose education makes them eschew
Survey-1) to 2.8 in 2011 (as measured
work, and 9 per cent worked only in manual labour but who are not qualified
by Sample Registration System).
non-farm activities. Thus, absence of enough for a clerical job.
Urban TFR over the same period
non-farm opportunities places a great
declined from 2.7 to 1.9. Similarly, Increase in women’s education
impediment on women’s labour force
increased access to clean fuels and has occurred in both urban and rural
participation.
proliferation of processed foods such areas with greater improvements in
The decline in rural women’s work as wheat flour have reduced demands urban areas. Incomes have grown in

YOJANA October 2013 57

 Table 1: Women’s Work Participation Rates by Education both urban and rural areas with greater
and household income (excluding women’s own earnings) increases in urban areas. So why do
Women’s Education we see decline in female employment
in rural areas but not in urban areas?
None 1-4 5-9 10-11 12 & some Graduate
The key may lie in the nature of
Std. Std. Std. Coll
employment changes in urban and rural
Rural areas, shown in Table 2.
Lowest Quintile 81 79 70 59 (NA) (NA)
Most of the working women in
2nd Quintile 74 72 67 61 (NA) (NA) rural areas remain concentrated in self
3rd Quintile 72 58 59 51 (NA) (NA) employment – working on household
4th Quintile 67 56 50 39 46 53 farms or in petty self employment.
Although the same can be said of
Highest Quintile 65 58 45 43 36 46 men, there is a steady decrease in
self employment and a rise in casual
labour as well as regular salaried work
Urban
for rural men over the 20 year period
Lowest Quintile 62 60 51 36 (NA) (NA) between 1993-94 and 2011-12. In
2nd Quintile 45 31 30 28 (NA) (NA) contrast, women’s self employment
has grown and their participation in
3rd Quintile 39 34 23 23 27 46
casual work has declined, albeit with a
4th Quintile 27 23 16 13 20 27 very small increase in regular salaried
Highest Quintile 19 17 11 9 14 23 work. This suggests a stagnation in
NA -- Not available due to small sample size. job opportunities for women outside
of self employment. Under these
Source: IHDS 2004-5.
circumstances, where aspirations
for non-manual work are rising with
Table 2: Distribution of Workers by Employment Status as Percent of Workers education but work opportunities
  Self Employed Regular Salaried Casual Labour continue to stagnate, it is not surprising
Rural Males       to see labour force withdrawal among
2011-12 54.5 10 35.5 educated women.
2009-10 53.5 8.5 38 In contrast, urban areas show a
2004-5 58.1 9 32.9 welcome trend. In urban areas, women
1999-2000 55 8.8 36.2 seem to be making rapid gains with
1993-94 57.7 8.5 33.8 decline in self employment as well as
Rural Females casual work and rapid gains in regular
2011-12 59.3 5.6 35.1 salaried work. In 1993-94, 28.4 per cent
2009-10 55.7 4.4 39.9 of the urban working women were in
2004-5 63.7 3.7 32.6
regular salaried jobs; by 2011-12, 42.8
per cent are in regular salaried jobs.
1999-2000 57.3 3.1 39.6
This perhaps accounts for the fact that
1993-94 58.6 2.7 38.7
urban women’s work participation rates
Urban Males   have increased marginally, although
2011-12 41.7 43.4 14.9 rapidly rising urban household incomes
2009-10 41.1 41.9 17 have created considerable pressure for
2004-5 44.8 40.6 14.6 labour force withdrawal.
1999-2000 41.5 41.7 16.8
What is the policy significance of
1993-94 41.7 42 16.3
these trends? If fortunate conditions
Urban Females
like growth in men’s income and
2011-12 42.8 42.8 14.3 rising education are at least partially
2009-10 41.1 39.3 19.6 responsible for decline in women’s
2004-5 47.7 35.6 16.7 labour force participation, should we
1999-2000 45.3 33.3 21.4 not rejoice and let the market forces
1993-94 45.8 28.4 25.8 dominate? Unfortunately long term
impact of this decline has tremendous
Source: NSSO social significance; its consequences

58 YOJANA October 2013

for reaping the demographic dividend is just one of the issues
to consider.
The much trumpeted demographic dividend theory
suggests that a young population will give India a productivity
advantage, not available to aging countries such as China
where a shrinking working age population is left to support
a large number of elderly. Theoretically, this is a plausible
proposition. Population projections suggest that dependency
ratio, the ratio of non-working age population to working age
population is likely to go from 0.39 in 2001 to 0.50 in 2030
for China, with the reverse trend, from 0.55 to 0.48 expected
for India. However, this naïve discourse ignores striking
differences in women’s labour force participation between
India and China.
While Indian and Chinese men exhibit similar work
participation rates, Indian women substantially lag behind the
Chinese women. World Bank World Development Indicators
show that for population above 15 years, 68 per cent of the
Chinese women are employed compared to only 29 per cent of
the Indian women. This implies that instead of simply relying
on age distribution differences to calculate the dependency
ratios, if we take differences in work participation rates into
account, in year 2030 the Chinese dependency ratio will be
about 0.89 compared to 1.26 for India. This striking difference
hardly provides reason to be sanguine about the potential for
realizing the demographic dividend.
The only way to reap this demographic dividend would be
to work towards providing more job opportunities to women,
particularly rural women with moderate levels of education.
Rising incomes and education are positive trends, but they are
both associated with lower work participation by women. Thus,
special attention is to be paid to generate jobs for educated
women, particularly in rural areas.  q
(E-mail : sonalde.desai@gmail.com)

India and China agree to enhance cooperation

in the Media sector

India and China have agreed to initiate steps to include Media

cooperation as part of 2014 celebrations being observed to
commemorate “Friendly Exchanges” between the two countries.
During the discussions between the two delegations it was also
agreed to explore possible areas of cooperation in the field of
Capacity Building, Co-production Agreements related to Films,
sharing of the experience of institutionalizing Digitization in the
Broadcasting sector and enhanced participation during the Film
Festivals being held in both countries. It was also suggested that all
possible areas could be identified under the aegis of the Working
Group set up between the two countries. In view of the vibrant
Media & Entertainment industry in both countries, both sides
YE-128/2013

also agreed to share experiences with regard to strategy, policy

initiatives, innovation and implementation across different media
platforms.

YOJANA October 2013 59

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60 YOJANA October 2013

macroeconomics
probe

The Indian Growth Trajectory

Sona Mitra

T
he trajectory of substance, given the spate of economic
India’s economic growth reforms that have taken place since
has been commended early 1990s in all areas of policy and
across the globe for success. Simultaneously, in terms of
almost a decade now the impact of the global recession, India
w i t h t h e c o u n t r y ’s should be less affected compared to
average annual growth rate of GDP other similarly placed economies due to
ranging between 6-8 per cent every its significantly lower trade integration
year. However, at the current juncture, with the developed countries.
India’s growth bonhomie has slowed
down, for more than a year now, as a Growth: Sectoral Composition

At the current juncture, consequence of several domestic and Although the infamous and low
global economic factors. In the context “Hindu rate of growth” was transcended
where a number of the declining trends in the growth as far back as the 1980s, India’s growth
of macroeconomic rate, it has been argued by a section story had picked up after 2003-04. As
of the academia that since the spate in is evident from Figure1, The GDP
concerns are plaguing Indian growth rates was not based on growth rates were fluctuating in the
the Indian economy the kinds of stimuli and methods of initial years of reforms; however, India
financing that have characterised the registered unusually high growth rates
ranging from rapid growth of some other more successful in GDP between 2003-04 and 2007-08.
depreciation of rupee Asian economies, the Indian resilience The growth rate reached a peak of 9 per
to the global economic crisis is over. cent around 2005-2008. However, the
and resultant increase On the other hand, the government rates dipped slightly in 2008-09 during
in current account and the policy establishment within the global financial crisis to return back
the country has been issuing statements to its high in 2009-10. Unfortunately,
deficits, increased assuring that the declining growth rates this could not be sustained and since
inflationary pressures and are just a one-off phase and would soon 2011-12, the growth rates have dipped
be reversed. A part of the blame has to nearly half of what it had been.
declining services and been placed with the Reserve Bank of Given such trends, it is important to
manufacturing growth, a India’s reluctance to cut interest rates look at the sectoral composition of the
that were raised to combat inflation. growth rates to understand the nature
revival would be possible But the more fundamental explanations of the growth.
by greater emphasis on being offered are the poor performance
A closer look at the growth rates
of the global economy and the difficulty
employment-generating of pushing ahead with more ‘reform’ in by sectors show that the period of high
growth India’s heterogeneous polity. rate of GDP growth also coincides
with high contribution to GDP by the
In the context of India, the argument service sector (Figure 2). On the other
of inadequate reform is without much hand, while the manufacturing sector

The author works as a Senior Research Officer with the Centre for Budget and Governance Accountability (CBGA),
New Delhi.

YOJANA October 2013 61

growth rate in the early 1990s averaged status in the planning and policy Administration, Social and Community
at 3-4 per cent per annum and increased paradigm. Services and other service activities
to almost 7-8 per cent during the (Employment and Unemployment
It is therefore, important to note here Survey 2011-12 NSSO). with the
high growth period, the contribution
that while agriculture’s contribution to inclusion of Trade and Transport
of manufacturing to GDP shows
GDP is negligible, it still forms the sectors within the service sector, the
an evident stagnation and a decline
mainstay of majority of the population. share in GDP rises to almost 60 per cent
after 2010-11 (Economic Survey of The latest National Sample Survey
India, 2012-13). The contribution of and the share in employment stands at
(NSS) estimates on Employment 26.9 percent by the same estimates.
agriculture to GDP has been negligible, and Unemployment Survey 2011-
which is also reflected in the dismal 12, shows that almost 50 per cent of Growth and Employment: Links
growth performance of the sector. The total employed are still engaged in
annual average agricultural growth rates agriculture. The largest contributor to Therefore, while the high GDP
between 2003-04 and 2008-09 has been GDP, i.e. the service sector (contributing growth led by a surge in service sector
around 2 per cent. (Economic Survey nearly 32 per cent of GDP as per the has been a major characteristic of
of India, 2012-13). With the onset National Accounts Statistics, 2011-12 the Indian growth story, whether the
of reforms, the agricultural growth estimates, CSO-GOI), hardly has 11 growth has translated into employment
suffered a setback as a consequence percent of the workforce engaged in generation requires a close look into
of declining public expenditure in the the sector. Service sector here refers to the employment growth patterns.
sector and loss of its ‘priority sector’ Financial Services, Real estate, Public By the latest figures of the National
Sample Survey (NSS) estimates on
Figure 1: Annual average rate of growth of GDP at Employment and Unemployment
factor cost at 2004-05 prices (in %) Survey 2011-12, the overall rate of
growth of employment has declined
from nearly 3 per cent in 1999-00/2004-
05 to 1.2 per cent in 2004-05/2011-12.
There is an observed decline of the
annual average overall employment
growth rates in both rural and urban
areas. The decline is sharper among
the age cohort of 15-59, which is by
definition, the working age group.
In terms of employment elasticity
as well, the indicators do not present
a favourable picture. Employment
elasticity essentially measures the
employment generating capacity of
growth within a particular sector and
is the ratio of employment growth rate
to rate of growth of value added in
Source: National Accounts Statistics, CSO,2013 the sector. Such exercises show that
the total employment elasticity for the
Figure 2: Trends in Annual Average GDP Growth by Sectors (in %)
decade 1999-00 and 2009-10 hovers
at a low rate of 0.2, thus indicating the
overall lack of employment creating
capacity of the GDP growth witnessed
in India. Within the manufacturing
sector, the employment elasticity has
declined from 0.47 to 0.25 while for
the services sector, it has although
improved, but is substantially low at
0.28 over the two decades of 1993-94
and 2009-10 (Table 1). The financial
services show high employment
elasticity with respect to GDP but the
total share of employed within the
sector remains at less than 1 per cent
Source: National Accounts Statistics, CSO,2013 (Employment and Unemployment

62 YOJANA October 2013

Survey 2011-12, NSSO). It is also stagnated at around 3 per cent by the growth and employment, they do raise
known that the employment elasticity latest count. concerns about the inclusiveness of
of service sector is low due to its the growth process. Generation of
intrinsic character, advanced use of Given such patterns, it can be fairly sustainable livelihood forms the core of
technology and a resulting inability to assessed that high growth rates in an inclusive growth process. From the
absorb more labour, and therefore the GDP have not translated into adequate employment figures, it is evident that
onus of labour absorption lies on the employment generation in India. In fact such features have been missing from
manufacturing sector; but, given the in the last two years, when the data the Indian growth story. The features
declining elasticity of manufacturing speaks of a reversal in employment discussed in the Indian growth pattern
employment associated with a situation towards the better, the GDP shows ample potential for a default.
stagnation in manufacturing sector’s growth rate has plummeted downwards While a decline in growth rates in the
share in GDP, the rate of growth of as shown earlier. While such trends do last two years does not signify the end
employment in manufacturing has also not establish direct correlation between to the ‘success of Indian growth’, it
Table 1: Employment elasticity with respect to GDP does mark an important juncture to
revisit the ‘trickle down’ aspect of
Sectors 1993-94 to 1999-00 to growth and analyse the ‘inclusiveness’
2004-05 2009-10 in the Indian growth trends. At the
Agriculture 0.26 -0.05 current juncture, where a number of
Secondary, of which 0.59 0.60 macroeconomic concerns are plaguing
the Indian economy ranging from rapid
Manufacturing 0.47 0.25
depreciation of rupee and resultant
Tertiary, of which, 0.43 0.30 increase in current account deficits,
Trade 0.61 0.30 increased inflationary pressures and
Financial services 0.99 0.81 declining services and manufacturing
Community and personal services 0.06 0.28 growth, a revival would be possible
Total 0.29 0.2 by greater emphasis on employment-
generating growth.  q
Source: Calculated from EUS, NSSO and National Accounts Statistics, CSO, Various
Years (E-mail : sona@cbgaindia.org)

YE-135/2013

YOJANA October 2013 63

 YE-138/2013

64 YOJANA October 2013

gender issues
discussion

The widening gender gap in Employment

Indrani Mazumdar

T
he 2009-10 employment from 1993-94 to 2011-13 (Fig. 1) show
survey by NSSO that contrary to the general assumption
revealed a startling fall in that globalization leads to feminization
numbers of women in the of labour, female employment has
workforce since 2004- been lagging and the gender gap in
05. Notwithstanding the employment has widened. Women’s
immediately following round of 2011- share of overall employment has
12 showing a slight increase in the actually fallen from close to 33 per
number of women workers, the fact cent in 1993-94 to around 27 per cent
remains that the female workforce in 2011-12.
was reduced by more than 19 million
more than 86 per cent between 2004-05 and 2011-12, and Some of us in women’s studies
female work participation rates dropped have been arguing that the aggregate
of the female population to the lowest ever in the history of workforce figures that are put out
is today completely independent India in 2011-12. There by the NSSO do not give us a true
picture of women’s employment, since
is a widespread assumption that this
economically/financially recent slump in work participation they include unpaid (and therefore
financially dependent) workers
dependent and without rates is due to increased participation
involved in economic activities. In
in education, an understanding that is
any employment/ reflected in the 12th Plan as well as the the case of women – the share of
such unpaid workers is particularly
income. Such Economic Survey 2012-13. However,
detailed analysis of the 2004-05 and high and reached an all time high of
overwhelming evidence 2009-10 data (when the fall in numbers 44 per cent of the female workforce
of women workers was in excess in 2004-05, the only year across four
of the widening gap of 20 million) has shown that most quinquennial rounds of employment
between male and of the fall in women’s employment surveys (1993-94 to 2009-10), when
cannot be accounted for by education female work participation rates had
female employment has (Kannan, Raveendran 2012). Although shown a marked increase. In contrast,
however, failed to attract low employment growth is indeed a the share of unpaid helpers in the
male workforce has generally hovered
general feature of the liberalization
the attention it deserves era, the starkness of the absolute fall around 15%. It has been argued that for
the purposes of understanding trends in
from policy makers in numbers of workers across the
last half decade or so is specific to employment opportunities for women,
and is yet to become women. The evidence from NSSO’s there is a need to specifically count
employment surveys thus indicates that paid or income earning workers among
an issue of any major we are currently in the midst of a highly women rather than just presenting
public debate gendered employment crisis. Taking a figures that lump paid and unpaid
slightly longer view of the period of workers together. Further, trends in
reforms as a whole, workforce figures unpaid work also require separate and

The author is Senior Fellow and Associate Professor, Centre for Women’s Development Studies, New Delhi.

YOJANA October 2013 65

 Fig. 1 gap in paid work becomes even clearer
when one realizes that less than 10 per
cent of the additions to paid/income
Workforce 1993-94 to 2011-12 (UPSS)
earning jobs from 1993-94 to 2009-
[in millions]
10 went to women, or in other words,
Males Females more than 90 per cent of any additional
paid employment in this period went
to men. National Sample Survey data
thus indicates that two decades of
343.8
331.7 liberalization in India, appear to have
309.3 severely aggravated the marginalization
273.9
252.4 of women in employment.
148.59 Concern regarding marginalization
121.71 123.04 127.5 129.1
of women in employment has of
course been a longstanding issue in
women’s studies since the inception
of the field in the 1970s. Earlier, before
1993-94 1999-2000 2004-05 2009-10 2011-12 specialized women’s studies came into
existence, declines in female work
participation had been noticed, but
specific attention. It is perhaps time that and Neetha, 2011). Fig. 2 provides were generally assumed to be a passing
policy makers and analysts recognize estimations of the numbers of paid or phenomenon during the transition of the
that the separation of paid and unpaid income earning workers from 1993-94 economy from subsistence agriculture
work at the macro-level is additionally to 2009-10, based on such a procedure and household industry to modern
important for focusing attention on of excluding unpaid workers. industry (Sinha, 1967, Nath, 1968).
how developments in women’s work The challenge to such assumptions
and employment are influencing some As may be seen, the absolute fall in
women’s jobs between 2004-05 and came with the report of the Committee
of the qualitative changes taking place on the Status of Women in India
in gender relations at several levels. 2009-10 was less dramatic in the paid
or income earning workforce, although (CSWI, 1975), that highlighted and
The situation of the unpaid women posed the issue as marginalization of
workers assumes particular significane the pattern of an increasing gender gap
across the last two decades remains a women in employment, traced its roots
in times of increased marketisation, to colonial deindustrialization, and
when money incomes have become significant feature. From close to 26
per cent in 1993-94, women’s share brought a new and critical perspective
more and more necessary for even to bear on the post independence
subsistence production/consumption. of the paid/income earning workforce
dropped to short of 22 per cent in 2009- development debate itself. Through
It would be logical to assume that in
10. The increasing depth of the gender the 1980s, women’s studies scholars
such a situation, additional distinctions
would inevitably emerge between Fig. 2
those who bring in money/incomes
and those unpaid workers who don’t Paid or Income Earning Workforce (UPSS)
(as opposed to both working together 1993-94 to 2009-10
in a common production process for
[in millions]
subsistence). These, in turn would
lead to shifting already unequal power Males Females
equations further in favour of men
- within families as well as in the
broader society. Our arguments in this
paper however, are more concerned 293.1
with opportunities or rather lack of 265.5
237.6
opportunities for women in paid 214.4
employment. Given the nature of the
NSS data, some estimation of paid or 73.67 75.22 83.67 82.24
income earning workers can be arrived
at by excluding all unpaid helpers from
among the category of self employed
in the workforce figures (Mazumdar 1993-94 1999-2000 2004-05 2009-10

66 YOJANA October 2013

attempted to further explain the female population is today completely both the male and female workforce
processes underpinning the decline economically/financially dependent – a falling share of agriculture; a
in female employment rates in India, and without any employment/ income. phenomenal fourfold increase in the
while simultaneously focusing on the Such overwhelming evidence of the share of construction in the male
question of actual underenumeration/ widening gap between male and female workforce and a fivefold increase,
undercounting and the invisibility of employment has however, failed to albeit from a significantly lower
much of women’s work in the national attract the attention it deserves from beginning and end point, in the female
data sets (Saradamoni, 1985, Duvvury, policy makers and is yet to become an workforce; a relatively stagnant share
1989). By the 1990s however, the issue of any major public debate. of manufacturing, with a sudden
imported thesis that globalization led inexplicable increase in the last
The industrial distribution of the two years, although the share of
to feminization of labour became such
male and female workforce over the construction seems to have outstripped
a powerful discourse that even when last two decades brings out several
empirical evidence was decisively manufacturing in the male workforce
additional features and questions that from 2009-10, while manufacturing
contrary, the idea of such feminization have also not been given adequate
was kept alive and still tends to keep remains more significant for women
attention in current discussions. Tables workers. Differences include the
getting reiterated alongside the hype 1 and 2 present the distribution of
regarding expanding opportunities for fact that trade, hotels and restaurants
workers by industry, across four have a considerably larger presence
women’s employment. quinquennial rounds from 1993-94 in male employment and a slightly
The shocking reality is that if to 2009-10 plus the latest results for increased share, while in the female
one removes unpaid labour from 2011-12 for female and male workers workforce, the share of trade, etc. has
the workforce figures, it becomes respectively in the columns on the remained stagnant and the increase in
apparent that less than 14 per cent right side of the tables. The columns numbers of women across an 18 year
of the female population in India, on the left side present the numbers of period, at less than 1 per cent of the
were paid/income earning workers workers after excluding unpaid helpers net addition to employment in trade,
in 2011-12 in comparison to over till 2009-10. etc., remained relatively insignificant;
46 per cent of the males. In other At a broad level, the tables show transport and communications also
words, more than 86 per cent of the some trends that are common to has a larger share in male employment

Table 1: Industrial Distribution of Female Workers (UPSS), 1993-94 to 2011-12 [Rural + Urban]

Industry No. of Paid/Income Earning Female No. of Female Workers

Workers (UPSS) {excluding unpaid (UPSS) including unpaid
helpers} [in millions] [in millions]
1993-94 1999-2000 2004-05 2009-10 1993-94 1999-00 2004-05 2009-10 2011-12
Agriculture 52.76 52.69 52.73 47.76 94.19 92.37 107.77 87.57 81.0
(71.6) (70.0) (63.0) (58.1) (77.4) (75.1) (72.5) (68.7) (62.7)
Mining and Quarrying 0.47 0.31 0.38 0.31 0.48 0.36 0.41 0.38 0.37
(0.6) (0.4) (0.5) (0.4) (0.4) (0.3) (0.3) (0.3) (0.3)
Manufacturing 7.85 7.59 11.64 10.75 11.52 12.38 13.1 13.77 17.29
(10.7) (10.1) (13.9) (13.1) (9.5) (10.7) (11.7) (10.8) (13.4)
Electricity, water etc 0.78 0.45 0.61 1.27 0.86 0.45 0.62 1.27 0.32
(0.7) (0.4) (0.5) (1.5) (0.7) (0.3) (0.4) (0.9) (0.2)
Construction 1.51 1.94 2.70 6.50 1.59 1.97 2.73 6.50 7.86
(2.0) (2.6) (3.2) (7.9) (1.3) (1.6) (1.8) (5.1) (6.1)
Trade, hotels & 2.24 3.15 3.09 3.06 3.89 5.22 6.10 5.48 5.03
restaurant (3.0) (4.2) (3.7) (3.7) (3.2) (4.2) (4.1) (4.3) (3.9)
Transport, storage and 0.26 0.39 0.45 0.48 0.28 0.44 0.53 0.51 0.28
communications (0.4) (0.5) (0.5) (0.6) (0.2) (0.4) (0.4) (0.4) (0.2)
Other services 8.50 9.12 12.61 13.24 9.66 10.29 13.68 13.33 15.69
(11.5) (12.1) (15.1) (16.1) (7.9) (8.4) (9.2) (10.4) (12.2)
All Workers 73.67 75.22 83.67 82.24 121.71 123.04 148.59 127.5 129.1
(100) (100) (100) (100) (100.0) (100.0) (100.0) (100.0)

YOJANA October 2013 67

 Table 2: Industrial Distribution of Male Workers (UPSS), 1993-94 to 2011-12[Rural + Urban]

Industry No. of Paid/Income Earning Male No. of Male Workers (UPSS) including unpaid
Workers (UPSS) [in millions]
{excluding unpaid helpers}
[in millions]
1993-94 1999-00 2004-05 2009-10 1993-94 1999-00 2004-05 2009-10 2011-12
Agriculture 114.6 118.2 119.2 124.08 144.6 145.6 151.1 156.2 149.9
(53.5) (49.7) (44.9) (42.3) (57.3) (53.1) (48.9) (47.1) (43.6)
Mining and 2.2 1.8 2.2 2.55 2.2 1.9 2.2 2.7 2.7
Quarrying (1.0) (0.8) (0.8) (0.9) (0.9) (0.7) (0.7) (0.8) (0.6)
Manufacturing 25.7 28.5 34.6 34.85 28.3 31.6 38.6 36.8 42.29
(12.0) (12.0) (13.0) (11.9) (11.2) (11.5) (12.5) (11.1) (12.30)
Electricity , water 1.3 1.1 1.2 1.14 1.3 1.1 1.2 1.1 2.1
etc (0.6) (0.5) (0.5) (0.4) (0.5) (0.4) (0.4) (0.3) (0.6)
Construction 10.3 15.5 22.9 37.07 10.4 15.5 23.3 37.5 42.4
(4.8) (6.5) (8.7) (12.6) (4.1) (5.6) (7.5) (11.3) (12.33)
Trade, hotels & 20.9 31.2 37.6 39.83 24.6 35.9 43.4 44.4 39.1
restaurant (9.8) (13.2) (14.2) (13.6) (9.8) (13.1) (14.0) (13.4) (11.4)
Transport, 10.3 13.9 17.6 19.72 10.4 14.2 17.9 19.7 19.0
storage and (4.8) (5.9) (6.6) (6.7) (4.1) (5.2) (5.8) (5.9) (5.5)
communications
Other services 28.9 27.3 30.1 33.76 30.4 28.2 31.4 33.7 40.2
(13.5) (11.5) (11.3) (11.5) (12.0) (10.3) (10.2) (10.1) (11.7)
All Workers 214.4 237.6 265.5 293.1 252.4 273.9 309.3 331.7 343.8
(100.0) (100.0) (100.0) (100) (100.0) (100.0) (100.0) (100.0) (100.0)

and is negligible as far as women are of falling female work participation in agriculture on the other hand, have
concerned. Finally, the share of other rates as well as the aggregate trend not shown any such fall and at the end
services (which includes finance, of marginalization of women in of the two decades, were still more
real estate, community, social and employment lies in agriculture. than they were at the beginning. If one
personal services, {including public considers the distribution of only paid/
Despite the common trend of a
administration, education, domestic income earning workers, then the share
falling share of agriculture, the fairly
workers, etc.}) does appear to be of agriculture in the female workforce
persistent and distinguishing feature of
increasing among women workers and fell by 13.5 percentage points between
a relatively higher share of agriculture
more so in the paid female workforce - 1993-94 and 2009-10 in comparison to
in the female workforce (evident in the
probably because of major increases in above two tables), is by now widely 11.2 per cent for the male workforce,
the numbers of paid domestic workers accepted. And yet, a closer look at the and where the numbers of paid/income
and school teachers. In the male figures shows us that while the share earning women workers in agriculture
workforce, while increasing numbers of agriculture in women’s employment dropped by 5 million, the number of
of workers in other services is well has remained consistently higher paid/income earning male workers in
in excess of the increase for women than in male employment, the fall in agriculture increased by a little over
workers, the share of other services share of agriculture has been more 10 million. In other words, whichever
has remained more or less the same. In among women workers. Further, in way one looks at it, the employment
general, the tables make clear that even 2011-12, the estimated number of survey data shows that the gender
in those industries that have increased women workers in agriculture was gap is increasing even in agriculture.
their share in women’s employment, 81 million in comparison to over Interestingly, although the 2011
women’s share of the net increases 94 million than in 1993-94, having census count of workers in agriculture
in employment have remained of a reduced in numbers by more than (cultivators + agricultural labourers),
marginal nature. However, it does 13 million across two decades. The gives us a somewhat higher figure than
appear that the prime determinant estimated numbers of male workers the NSSO estimates for 2011-12 (for

68 YOJANA October 2013

 Fig. 3 24 per cent in 2011. NSS estimates
indicated the share of women in
non-agricultural employment to be a
Main & Marginal Workers in agriculture (in millions)
Census 1991 to 2011
little over 20 per cent in 1993-94, a
little over 19 per cent in 1999-2000,
180 close to 21 per cent in 2004-05 and
160 165.4
just short of 20 per cent in 2011-
140 136.7 143.7
12. In other words, NSS estimates
120
show a stagnant share of women in
Axis Title

100 97.6
80
91.4 Males non-agricultural employment over
74 the past two decades. However,
60 Females
40 despite the census showing an
20 increasing share of women in non-
0 agricultural employment, female
1991 2001 2011 work participation rates between
dropped marginally by 0.1 per cent
from 25.6 per cent in 2001 to 25.5
Fig.4
per cent in 2011, while male work
participation rates increased by 1.6
Main & Marginal Male and Female workers per cent from 51.7 per cent to 53.3%.
(in millions)
As such, the census also shows an
Census 1991 - 2011
increasing gender gap in employment
350
331.8 from 2001, albeit of a lesser order
300 than appears from NSS employment
275.5
250 surveys.
224.4
200 It is difficult to reconcile the
150 149.9 differences between the two datasets,
127.1
100 particularly as far as non-agriculture is
89.8
concerned, even though the differences
50
in proportions are minimal from 2001.
0 An additional difficulty for those
1991
Male workers
2001
Female workers
2011 interested in separating paid and
unpaid work, is that the census data
both males and females), and does not while as per the 2011 count, they were offers no scope for such separation.
show any absolute fall in the female 37 per cent. Nevertheless, the aspect that both data
agricultural workforce from 1991 or sets share at this point is that they
even from 2001, it does show that the Census figures for non-agricultural
employment on the other hand, show both show a widening gap between
gap between men and women in the men and women in employment and
agricultural workforce has widened that the share of women jumped from
a little over 15 per cent in 1991 to a both indicate that developments in
from 2001. Based on the census count agriculture is the key.  q
of 2001, women constituted around 39 little over 21 per cent in 2001 and
per cent of the agricultural workforce, continued to increase to close to (E-mail:indrani.mazumdar@gmail.com)

Yojana Web- Exclusives

Yojana has launched a new service named 'Web-Exclusives' for the benefit of its readers under which selected
articles are put up on the website of Yojana : www.yojana.gov.in. Announcement about the articles under the
Web-Exclusives section are carried in the Yojana magazine of the month but these articles are not published in the print
version of Yojana.
We are carrying the following articles under the Web-Exclusives section of Yojana on its website:
1. Commercialization of Agriculture in Arunachal Pradesh - Dr. Rajesh Verma
2. The Collegium Syndrome: A Critical Appraisal - Saurabh Sinha
3. Growth and Development Dynamics of Indian States: A Comparison - Dr. Sanjay Tiwari
4. CPRs in Everyday Life of Rural People in Assam’ - Gautam purkayastha
Please send in your comments and suggestions to us on yojanace@gmail.com

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70 YOJANA October 2013

 North east diary
New farming scheme boosts Mizoram’s growth

M
izoram’s Govt ’s new flagship scheme, New Land Use Policy (NLUP) has boosted the Gross Domestic Product
(GDP) rate to 11 per cent during the 11th Plan Period(2007-12) against the National Growth rate of 7.8 per cent. In
the NLUP, over 1,25,000 Jhumia families would be given financial assistance and training for a permanent farming,
in four phases so that they settle under stable agriculture. The scheme launched in 2010 with Rs.2,873 crore also aims to make
all farmers self-sufficient in rice and vegetables .The per capita income in Mizoram for the year 2010-11 at current prices is
Rs. 50,956 as the scheme has made significant impact on the economy by providing alternative and sustainable livelihood
opportunities to farmers by reducing their dependence on ‘Jhum Cultivation’.
Packages of commercial farming, primary processing , promotion of livestock, pisci-culture, sericulture, plantation of cash
crops have already contributed to uplift the beneficiaries. In the first phase of NLUP, 45,139 beneficiaries have been covered
and in the ongoing second phase, 45,000 families would be covered, while in the third phase 19,861 tribal families are expected
to be covered and in the fourth and final phase 15,000 beneficiaries would come under this scheme.  q

Naga villages pledge to save Amur Falcons, MoU signed

T
hree villages in Wokha district in Nagaland, have pledged to save the Amur Falcons in Doyang Reservior, its
largest roosting site in the country. They have reportedly been hunted annually for their meat, when they cross
this region en route to Africa from Siberia .Youth from the villages will keep a watch to ensure enforcement of
the resolution to protect the birds this season. Wildlife Trust of India(WTI) has worked in tandem with Nagaland Forest
Department by initiating a Rapid Action Project to spread awareness about the plight of the species. Salient points of
the Tri-Partite MoU are: 1. Awareness generation through targeted campaign by signage, collaterals ,wildlife films etc.
2. Engaging locals in protecting Amur Falcons, formulating watch squads to protect roosting or foraging sites, watch
tower constructions to promote bird-watching. 3. formulate laws and guidelines with Village Council Members (VCM)
to prohibit hunting and poaching of Falcons. 4. Help mitigate Human-Wildlife conflicts.  q

National Ambulance Service launched in Assam under NRHM

T
he National Ambulance Service(NAS) was launched in Assam under the National Rural Health Mission by
Ministry of Health and Family Welfare. The service has been launched with a fleet of 805 ambulances in
service of the citizens of Assam, along with the state launch of Free Drugs Initiative , National Iron + Initiative
, Tele-Radiology Scheme, Rashtriya Bal Swasthya Karyakram and MCH special wings in 14 state hospitals. NAS
has nationwide ambulance network with over 18,000 ambulances operating in 29 states/UTs with patient transport
services focusing on pregnant women and children.  q

‘Vigyan Gram’ to promote scientific culture in Tripura

F
irst of its kind in North-eastern India , the ‘Vigyan Gram’ is set to come up at Nimbark village in western Tripura
to facilitate’edutainment’ and to promote, nurture and induce a scientific temperament specially among the youth.
Amidst greenry ,’Vigyan Gram’ will have a space theatre-cum-planetarium, a botanical garden, a bird sanctuary,
a modern laboratory, a museum, a library,a heritage and a theme park on 12.42acres of land.Films will be screened on
geography, earth sciences and the universe.The Central Government is expected to provide Rs.62 crore for the project, to
be built within five years from now .The project’s Nodal Authority is the Tripura State Council for Science and Technology
(TSCST). The NCSM, under the Union Culture Minsitry is supporting the project and is also expected to attract students
and science enthusiasts from Bangladesh with India planning to improve connectivity with the neighboring country.q

Tripura attains first position in Literacy

T
ripura jumped to first position among the States of the country in literacy from the 12th position in the 2001 Census
and the fourth position in the 2011 Census with 87.75 per cent literacy. The final evaluation of the neo-literate people
was conducted across the state under the supervision of the Indian Statistical Institute stating that State’s literacy had
now risen to 94.65 per cent from 2011 census .The increased rate is attributed to involvement of local government bodies like
gram panchayats, NGOs, local clubs under the close supervision of the State Literacy Mission Authority (SLMA).  q

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72 YOJANA October 2013