The growth slowdown is here with us. Usually, slow growth curtails opportunities for employment. Studies have concluded that employment intensity of economic growth is 0.5 - if the economy expands 10 percent, the number of jobs grows five percent.
Between the years 2000 and 2005, the Indian economy grew 34 percent while the corpus of jobs increased by 25 percent - employment intensity of 0.73, and all was well. Ninety-three million jobs were created in this period, which easily exceeded the growth in the country's working age population, so unemployment may actually have reduced.
Data from the National Sample Survey Organization (NSSO) suggests that half these new jobs were created from self-employment in rural areas. As the main self-employment opportunity in our villages is farming, there must have been a surge of people that took to tilling fields. And I thought people have been flocking to cities seeking jobs and land under cultivation has hardly been growing.
Maybe I was wrong!
But even more interesting is the data made available a year back suggesting that the country added just two million jobs (versus the target of 55 million!) between the years 2005 and 2010. Eighteen million casual jobs were created in this period but the number of self-employed in villages reduced by 24 million. Coincidentally, 18 million is also exactly the number of jobs created by 2010 under the government's rural employment scheme, MGNREGA!
Conclusion: many of those that went back to agriculture found it unviable, and therefore re-invented themselves as daily wage labourers. The government helped these people find employment digging ditches in their native villages. Apart from creating political support, the clamour for employment in our overcrowded cities was reduced in one masterstroke.
During this time, the economy grew 51 percent so the spoils of progress missed the stated objective of wider inclusion. Wage rates increased considerably, further adding to inflation caused by cost pressures from other factors of production - land and capital - and pushing Indian enterprises to look for cheaper locations to expand their domains.
Urbanisation maintained its slow crawl to reach 31 percent, up from 26 percent over the last two decades. And the employment intensity of growth hit a low of 0.04! Now the number of working age people in India is slated to increase by over 200 million over the next 20 years as we hit the sweet spot of the demographic dividend curve.
These people will seek jobs, possibly other than those requiring them to dig holes and fill them. Are we ready for them?
By Shiv Muttoo