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Economic census: Has employment growth really declined?news
13 June 2006
Comparisons with past data indicate that the growth rate of employment generation has actually picked-up after a slowdown during the initial years of the economic reforms. By Rex Mathew.

On the face of it, the provisional results of the Fifth Economic Census 2005 released yesterday are sure to provide ammunition to anti-reform groups. The census data, at least on the surface, seems to provide some support to the argument that economic growth following reforms and liberalisation has not resulted in corresponding growth in employment generation

For instance, it shows the growth rate in employment generation to be considerably lower than the growth in the number of enterprises, according to the provisional results.

The survey shows the average annual growth in employment generation in the non-farm sector between 1998 and 2005 to be 2.49 per cent. While job growth in rural enterprises was 3.33 per cent, in urban enterprises it was just 1.68 per cent per annum.

However, a comparison with data from previous census figures reveals that the growth rate of employment generation actually picked-up after a slowdown during the initial years of the economic reforms. The growth in jobs during the latest census period is considerably higher than in the 1990 to 1998 period when the growth rate was just 1.71 per cent per annum.

However, current average growth in employment is still lower than in the pre-liberalisation days. Annual job growth during the period 1980 to 1990 was 2.84 per cent.

Part of this slowdown can be attributed to the high base effect. The total number of workers in the non-farm sector in 1980 was 5.3 crore. Their numbers increased to 7.04 crore by 1990 and to 8.06 crore by 1998. The period 1998 to 2005 saw an addition of more than 1.84 crore jobs, taking the total number of workers to 9.9 crore.

It is now well accepted that economic growth over the last many years was achieved mostly through efficiency gains - many large industries like metals, automobiles, etc, shed a considerable number of jobs in the organised sector. Though job creation in the services sector has remained high, it was not enough to lift overall growth rates.

Rigid labour regulation has also been responsible for the slow rate of growth in job creation in the organised sector. This has prevented labour intensive industries like textiles, food processing, component manufacturing, etc, from expanding. While China emerged as a manufacturing powerhouse and created millions of jobs in the last couple of decades, a similar expansion did not take place in India due to a variety of reasons.

The sheer lack of scale and size of our enterprises is clear from the fact that only 1.4 per cent of the total 4.2 crore enterprises have more than 10 workers. The average number of workers per enterprise is just 2.35; 2.99 in urban areas and 1.94 in rural areas.

The provisional results released yesterday do not give segregated data for the organised and unorganised sectors. It is likely that much of the slowdown in job creation has happened in the organised sector.

The census debunks the claim that liberalisation has affected rural jobs the most. The growth rate of jobs in the rural areas at 3.33 per cent according to the latest census period is much higher than 2.88 per cent during 1980-90 and 2.15 per cent during 1990-98.

The survey also debunks the widely held belief that urban women have more employment opportunities. Far from it; the survey shows that in rural areas women form 24.3 per cent of the workforce as against a much lower 14 per cent in urban areas.

Surge in entrepreneurship

Populist wisdom holds another widely prevalent myth - debunked by the current survey - that rural enterprises are struggling to survive in the era of globalisation. If the survey results are any proof, rural units are, in fact, thriving. Growth in the number of enterprises in rural areas, excluding those engaged in crop production and plantation, during 1998-2005 was 5.53 per cent - double the growth rates of 2.69 per cent and 2.27 per cent reported during 1980-90 and 1990-98 respectively.

Most of these enterprises do not employ hired workers. In rural areas, hired workers form only 41.6 per cent of the total workforce in the non-farm sector.

Growth in the total number of enterprises during the seven-year period 1998-2005 was 4.8 per cent per annum as compared to 3.04 and 2.36 during the previous census periods. The growth rate in urban areas was 3.71 per cent, a considerable improvement from 3.55 per cent and 2.50 per cent for 1980-90 and 1990-98 respectively.

Among the larger states, Tamil Nadu has seen an average growth of 8.49 per cent in the number of enterprises, followed by Punjab at 5.91 per cent and Uttar Pradesh at 5.14 per cent. Growth rates in traditionally more entrepreneurial Maharashtra and Gujarat came in at 4.41 per cent and 3.4 per cent respectively.

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Economic census: Has employment growth really declined?