The Hindu Business Line : Trends in employment and poverty

To tackle poverty, there is a need to foster the growth of rural enterprises by involving self-help groups and microfinance institutions on a much bigger scale.

The generation of employment opportunities in manufacturing and services sectors has been far from adequate to induce migration of excessive labour force from agriculture to other occupations and reduce the overwhelming proportion of disguised unemployment in agriculture and related activities.

THERE IS a need to examine new sources of non-agricultural employment, their productivity and earning levels, especially in the context of widespread agrarian distress. — K. K. Mustafah

The provisional results of the Fifth Economic Census 2005 released on June 12 have revealed interesting trends in the growth of non-agricultural enterprises and employment in these between 1998 and 2005. The new data show that while there has been a pick-up in the growth of the enterprises and employment, the unemployment rate has also increased over the period and there has been no appreciable decline in poverty.

The Economic Census carried out by the Central Statistical Organisation (CSO) is a complete count of all entrepreneurial units within the country except those engaged in crop production and plantation. Almost 85 per cent of these enterprises are found to be engaged in non-farm activities.

The latest Census shows that the employment growth in the non-farm sector has picked up to 2.49 per cent per annum over the period 1998-2005 from 1.71 per cent in the previous Census period (1990-1998). More important, this job growth has been higher than the annual growth of two per cent in the workforce during the period and the annual job growth during the latest period has been much higher in rural enterprises at 3.33 per cent compared to 1.68 per cent in the urban enterprises.

READING THE FINE-PRINT

While the higher growth in rural non-agricultural employment during the period has prompted many commentators to call this a reversal of the earlier trend of jobless growth with rural India outshining the urban areas, a closer look at the fine-print tells a different story. For the latest data also show that despite all efforts, crop production and plantation sector still employ 73 per cent of the total labour force of 375 million in the country, though it contributes just around 22 per cent to GDP.

Also, going by the current daily status unemployment, there has been a significant increase in the overall unemployment. The unemployment rate in 2004 was around 9 per cent for males (up from 5.6 per cent in 1993-94) in rural areas and 8 per cent (up from 6.7 per cent in 1993-94) in the urban areas. The corresponding figures for females were 7.3 per cent (up from 5.6 per cent) in rural areas and 11.7 per cent (up from 10.5 per cent) in the urban areas.

The number of people employed in industrial and service sectors of the economy is only 98.97 million. Evidently, the higher growth rate in non-farm sector employment in the recent period has not resulted in a reduction of workforce engaged in agriculture and plantation sectors, because of the continuing lack of suitable employment opportunities for the growing rural labour force outside agriculture.

While there has been a small increase in its growth rate, the average employment growth in the latest period is still lower than the annual growth rate of 2.84 per cent achieved in the 1980s. Within the farm sector, job growth has remained virtually flat over this period.

While the enterprises engaged in non-agricultural activities have grown at a higher rate of 4.8 per cent per annum in 1998-2005 compared to 2.36 per cent during the previous Economic Census, the growth in employment has been much slower. Evidently, the capital intensity of the units seems to be on the rise. Moreover, most of the units are of small size with only 1.4 per cent of the total number of enterprises (42.12 million) employing more than 10 persons. Also, at the country level, hired workers account for only about 52 per cent of the total workforce employed in these enterprises. The other bad news is that the ongoing growth process has led to a further widening of regional disparities. The five States of Andhra Pradesh, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal account for 53 per cent of 42.12 million enterprises in the country and provide employment to almost 50 per cent of the non-agricultural workforce in the country.

As Mr Alakh N. Sharma, Director, Institute for Human Development points out, while there seems to be an improvement, at least in terms of growth in employment, there is a need to examine the sources of new employment, their productivity and earning levels to know its nature, particularly in rural areas — whether it is growth-led or distress-induced. This question arises in the context of widespread agrarian distress and growing instances of farmer suicides in many parts of the country in recent years.

POVERTY TRENDS

It is a well-know fact that most of the employment growth in the 1990s and, in recent years, has occurred in the unorganised sector, which is of low quality and characterised by vulnerabilities. Not surprisingly, the growth in employment over this period has not helped in alleviating poverty to the desired extent.

As per the preliminary estimates of 2004-05 NSS sample survey, while the percentage of people living below the poverty line has gone down from 36 per cent in 1993-94 to 26 per cent in 1999-2000 and further to 22 per cent in 2004-05, in absolute terms, some 230 million people in the country continue to live below the poverty line even today. Even here, doubts have been raised about the comparability of figures over time.

Thus, the problem of hardcore poverty continues to remain formidable. This shows that the series of poverty alleviation programmes undertaken by the government between 1993-94 and 2004-05 have had only a limited impact in improving the situation.

A major reason for this is the deceleration in the growth rate of agriculture and the big drop in the generation of new employment opportunities in the sector.

POLICY IMPLICATIONS

What emerges from the findings of the Census is that the generation of employment opportunities in manufacturing and services sectors, both in rural and urban areas, has been far from adequate to induce migration of excessive labour force from agriculture to other occupations and reduce the overwhelming proportion of disguised unemployment in agriculture and related activities.

The findings of the Census results have important policy implications. They not only hold the key to future economic reforms but will also have an impact on the Approach Paper to the Eleventh Plan, now under preparation.

The Planning Commission sources have already indicated that the next Plan should aim at farm growth rate of four per cent and manufacturing growth of 12 per cent per annum with much greater accent on employment-intensive growth.

If economic reforms are to gain wider popular support, the benefits of growth have to reach the poor and the marginalised. To tackle hardcore poverty, there is a strong case to foster the growth of rural enterprises by involving, among others, self-help groups and microfinance institutions on a much bigger scale, apart from stepping up public investment in agriculture on a big scale.

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