India's rapid growth during the past decade had one major qualifier. It led to stagnant employment situation in the country. The growth was mostly associated with a rapid rise in labour productivity rather than an expansion in employment. A year before the balance of payments crisis and the onset of India's liberalisation, employment and labour productivity grew at similar rates. However, in the past decade, as global and domestic economic conditions improved, growth became driven by increased labour productivity in the region.
The fact, as has become clear, is that while economic liberalisation pushed up the growth rate, it did not achieve as much in reversing the secular decline in the employment rate output since the early 1970s. Going by estimates provided by T S Papola and Partha Pratim Sahu in a paper done for the Indian Council of Social Science Research, the average annual employment growth was about 2.4% in the 1970s. In the 1993-94 to 2009-10 period, it averaged around 1.65%. According to National Sample Survey Office (NSSO) data, the employment rate has actually declined in the five-year period ended 2009-10 to 39.2% from 42% in 2004-05. In fact, the latest available employment rate is actually lower than the 39.7% reported in 1999-2000 by NSSO.
The first stint of the Congress-led United Progressive Alliance (UPA) generated a mere 400,000 jobs a year, compared with 12 m jobs annually during the tenure of the Bharatiya Janata Party (BJP)-led coalition, the National Democratic Alliance (NDA). During the period 2004-05 to 2009-10, growth in the economy averaged 8.43%, delivering the politically uncomfortable message: jobless growth. The one major change during the UPA regime was the huge transfer of resources to rural welfare schemes, especially NREGA and farm loan waivers. The one thing NREGA did for sure is create a wage-price spiral. It pushed more farmers to opt for farm mechanisation. But it did little for job creation.
These employment statistics do point to a bigger picture. There is a need to recognise the fact that without changes in the economic structure, growth does not guarantee jobs. Inclusive growth is not about cash transfers or job guarantees for unproductive jobs. Instead, it is about ensuring that the growth process itself absorbs more workers in productive jobs.