Context: India’s labour market is witnessing a shift from jobless growth to rising employment across sectors. Various surveys highlight increasing job creation, especially in manufacturing, MSMEs, and rural non-farm employment.
Relevance of the Topic: Prelims: India’s labour market- Trends.
Survey findings on Employment Trends
- MSME Udyam Portal: Jobs increased from 121 million (2023) to 201.9 million (2024).
- Annual Survey of Industries (ASI) FY23: Manufacturing employment rose by 7.5% (from 17.2 million in FY21 to 18.4 million in FY23).
- Periodic Labour Force Survey (PLFS): Manufacturing employment growth increased from 1.15% p.a. (2017/18-19/20) to 5.8% p.a. (2019/20-22/23).
- RBI KLEMS Database: 46.7 million jobs were created in FY24, more than double the 19.1 million in FY23.
Women's Labour Force Participation Rate
- Rural Job Diversification and Women's LFPR:
- Increasing shift of males to rural non-farm employment (RNFE) has led to higher women’s labour force participation rate (LFPR).
- PLFS 2023-24:
- 59.8% of rural workers are in agriculture, with the rest in RNFE.
- The share of male workers in agriculture fell to 49.4% and that of females rose to 76.9%.
- Study in Eastern UP (2006-2023):
- Agricultural income growth: 0.1% p.a.
- RNFE (including remittances) growth: 7.3% p.a.
- Agriculture’s share in household income: fell from 22% to 8%.
- Rural manufacturing employment grew at 4%, exceeding urban manufacturing growth of 3.8%.
- Urban women’s LFPR is rising due to higher incomes, availability of household help, and reduced household constraints.
Wage growth and Income patterns
- PLFS 2023-24:
- The self-employed had the highest wage growth (9.6%).
- Casual workers saw 7.4% growth, with a daily wage of ₹433.
- Regular wage earners had a lower wage growth of 5.5% (₹21,103 monthly).
- ICRIER Analysis of PLFS Data:
- Since 2019, urban nominal wages grew at 6% p.a., while real wages rose by only 0.5% p.a.
- Real wages remain largely constant due to labour absorption trends.
- Higher real wage growth without productivity rise could lead to inflationary pressures.
- Lessons from previous wage growth:
- 2010-2013: Real wage growth in rural areas peaked at 7% due to high post-GFC fiscal deficits and food inflation.
- Post-2013: Real wages stabilized due to financial tightening and economic corrections.
- Wage growth must align with productivity to remain sustainable.
- Real Private Final Consumption Expenditure (PFCE):
- Fell after the pandemic but recovered to 7% growth in FY25.
- A slight dip to 6% in Q2 was cyclical and expected to reverse with financial easing.
- Sustaining consumption requires continued income growth and employment generation.
Economic growth and Job creation:
- Growth averaged 8.3% (2021-24), providing stability for job creation. Earlier periods of jobless growth were marked by economic volatility.
- Labour Market Trends (FY25):
- Q2 FY25 saw GDP growth dip to 5.4% and unemployment rise to 6.6%.
- Q3 FY25: Government capital expenditure revival led to UR falling to 6.4%.
Youth Unemployment:
- High youth unemployment often results from aspirational job-seeking. Above 35 years, unemployment declines as job-seekers settle for available opportunities.
- Government jobs remain highly sought after due to higher entry-level pay, job security, and lesser workload.
- If government jobs shift to contract-based hiring, youth unemployment may decrease significantly.
Corporate Investment and Productivity:
- The post-reform period saw rising labour productivity benefiting corporate margins more than wages.
- Policy tools needed:
- Incentives (Carrots): Encouraging investment and job creation.
- Regulations (Sticks): Ensuring wage growth aligns with productivity.
- External shocks create uncertainty, affecting business expansion.
- India’s post-pandemic policies have helped sustain growth despite global volatility.
Policy recommendations for Job sustainability
- Skilling and Training: Enhancing workforce capabilities for higher productivity.
- Job-specific training: Ensuring alignment with industry demands.
- Labour market flexibility: Balancing worker security with employer needs.
- Macroeconomic stability: Maintaining steady growth to encourage hiring.
- Continued policy support: Implementing countercyclical policies to absorb global shocks.