Jobless growth is a situation when the economy is able to produce more goods and services without a simultaneous increase in employment opportunities. India has the largest young population in the world, therefore it is essential that this demographic dividend is exploited. India went through a phase of jobless growth during the 12th five-year plan (2021-2017). This article will discuss the topic of jobless growth that is essential for UPSC aspirants.

What is Jobless Growth?

• Jobless growth is a dominant issue in the Indian economy more so because of the decreasing window from when the demographic dividend becomes the demographic burden.
• There is the involvement of a greater population in the agriculture sector even though the sector contributes very less to the overall GDP of the country.
• The tertiary sector contributes the largest to the overall GDP of India, however, the job creation by this sector are mostly of formal type due to which inclusion of informal workforce in this sector is reduced.

Past Trends in Job Creation in India

• During 2001-11 the growth rate of the labor force (2.23%) was higher as compared to the growth rate of employment (1.4%).
• According to Census 2011, the average growth rate of the economy was 7.7 percent per annum, while for employment it was only 1.8%.
• According to National Sample Survey Office (NSSO) data on employment in 2011 showed that between 2004-05 and 2009-10, only 1 million jobs were added per year; in a period when the economy grew at 8.43% annually.
• The average annual addition to regular jobs during 2012-16 fell to 1.5 million from 2.5 million in 2004-12.
• The share of regular workers with any form of social security has decreased from 45% in 2011-to 12 to 38% in 2016.
• According to an ILO analysis, the number of unemployed in India climbed from 1.7 crores in 2017 to 1.8 crores in 2018, and the country's 'employment elasticity' fell to 0.15%, meaning a 1% increase in GDP only created 0.15% of jobs. This implies that the country's unemployment rate has risen steadily over the last decade.
• According to data from the Center for Monitoring Indian Economy (CMIE), the jobless rate jumped from 3.9% in April 2017 to 6.1% in February 2018.

Various Reasons For Jobless Growth

• Most of the growth in the economy has been driven by the knowledge-intensive services sector as compared to the labor-intensive manufacturing sector.
• Increased rigidity in the formal manufacturing labor market, rigid labor regulations have disincentivized job creation.
• India did not transition from an import-substituting to an export-oriented development strategy, and as a result, the labor-intensive component of the industrial sector did not experience considerable growth.
• According to a World Bank study, Industrial Disputes Act has lowered employment in organized manufacturing by about 25%.
• Strict employment protection legislation has led employers towards more capital-intensive modes of production than warranted by existing costs of labor relative to capital.
• Although medium and small enterprises have high labor, they are not treated well in India as they have poor access to credit.
• Various incentives provided by the government such as tax incentives, subsidies, depreciation allowance, etc are solely linked to the amount invested and not to the number of jobs created.
• Infrastructural bottlenecks led to a lack of backward and forward linkages between agriculture, industry, and service sectors which failed to create jobs.

Measures to Reduce Jobless Growth

• Various initiatives for livelihood creation important for development strategies should be combined with central initiatives rather than just projecting it as natural fallout of growth.
• Reforming the labor laws due to the stringent as corporates prefer capital intensive mode of production in a country where labor is abundant, such as India.
• Encouraging entrepreneurial instincts with initiatives such as Startup India or Stand-up India missions.
• Reforming the education system to create the desired skill-sets.
• Promoting labor-intensive sectors such as food processing, textiles, apparel, etc.
• The NITI Aayog Action Agenda has presented some viable suggestions for job development, including labor legislation reforms at the state level.
• An industrial policy is needed by the Department of Industrial Policy and Promotion (DIPP). The National Manufacturing Policy, which was introduced in 2011, has yet to be completely implemented.
• Cluster development is needed to help micro, small, and medium-sized businesses create jobs (MSMEs).
• Aligning urban development schemes like AMRUT with employment schemes. AMRUT (Atal Mission for Rejuvenation and Urban Transformation) is a program run by the Ministry of Urban Development that aims to improve infrastructure in small towns. The government's infrastructure investment generates a large number of jobs.
• Emphasis on women’s employment as despite having more education, girls are losing out on employment, or those with more education are unable to find them.

Conclusion

When the economy is able to produce sufficient amounts of goods and services without increasing job opportunities, this leads to jobless growth. It can be caused by various factors in the economy such as structural factors, stringent labor laws, more focus on capital intensive sectors, especially in a growing economy.