Daily Editorial Analysis for 02nd August 2022

  1. Home
  2. »
  3. Editorial Analysis August 2022
  4. »
  5. Daily Editorial Analysis for 02nd August 2022

India’s unique Jobs Crisis

GS Paper 3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.
Important For:
Prelims exam: Kuznets’ curve
Mains exam: Employment problems in India
There are fewer people employed in agriculture today, but the transformation has been weak. Those moving out of farms are working more in construction sites and the informal economy than in factories.

The decline in the agriculture workforce in India

• In 1993-94, agriculture accounted for close to 62% of the country’s employed labour force.
• Between 1993-94 and 2018-19, agriculture’s share in India’s workforce came down from 61.9% to 41.4%. In other words, roughly a third in 25 years.
• Still, this isn’t significant because compared with the average for other countries in the same income bracket – India’s farm sector should be employing 33-34% of the total workforce.

What is the impact of this weak structural transformation?

• The movement of workforce from agriculture over the past decades does not qualify as what economists call “structural transformation”.
• Such transformation (also known as Kuznets Process) would entail shifting labour from agriculture to sectors with better productivity, value addition and higher average incomes, such as manufacturing and modern services (such as IT, business process outsourcing, finance, healthcare, education, etc).
• The share of manufacturing (and mining) in total employment has actually fallen along with that of agriculture.
o This is because, the surplus labour pulled out from the farms is being largely absorbed in construction, services (petty retailing, small eateries, domestic help etc.) and similar other low-productivity informal economic activities.
o This is also reflected in the low share of employment in organised enterprises (those employing 10 or more workers).
• Simply put, the structural transformation process in India has been weak and deficient.
What was the impact of Covid-19 on the agriculture workforce?
• There has been a reversal of the trend in the last two years which has seen the share of those employed in agriculture rise to 44-45%. This has primarily to do with the Covid-induced economic disruptions.
• However, surveys have called this reverse migration of people back to the farms as a temporary phase.

Why is India’s job crisis unique?

• The manufacturing sector is potentially best placed to absorb agricultural labourers. However, there is a lack of jobs in the manufacturing sector.
• The somewhat more educated are not qualified to be programmers or develop software programs which are essential for the IT industry.
• They aim to join the armed forces or to sit for the Railway Recruitment Board’s NTPC (non-technical popular categories) exams.
o However, there is not much recruitment in these sectors these days.
• So, the Indian workforce possesses skill sets for the sectors where there is a lack of job opportunities. And sectors that generate excess jobs require particular skill sets that the majority of the Indian workforce lacks.
• As a result, the Indian economy is unable to absorb excess labour.
Kuznets curve
• The Kuznets curve shows that when a nation undergoes industrialization, the centre of the nation’s economy will shift towards urban centres.
• As internal migration by farmers looking for better-paying jobs in urban hubs causes a significant rural-urban inequality gap, the rural population will decrease and the urban population will increase.
• When a certain level of average income is set and the process of industrialisation is in full swing, inequality is expected to decrease. Kuznets believed that inequality would follow an inverted “U” shape as it rises and falls with an increase in income per capita
• Kuznets curve diagrams show an inverted U curve, although variables along the axes are often mixed and matched, with inequality or the Gini coefficient on the Y-axis and economic development, time or per-capita incomes on the X-axis.

Criticism of the theory

• Critics say that the Kuznets curve does not reflect an average progression of economic development for an individual country.
• Rather it is a representation of historical differences in economic development and inequality between countries in the dataset.
• It suits to the countries that have had histories of high levels of economic inequality as compared to their counterparts in terms of similar economic development.
• The critics hold that when controlling for this variable, the inverted U-shape of the Kuznets curve begins to diminish.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Current Affairs

Recent Posts