Event ReportsPublished on Aug 17, 2004
Appropriately designed strategies could promote growth with employment, Mr AB Bardhan, General Secretary of the Communist Party of India, said, while speaking at a seminar on "Employment and Growth",
Seminar on Employment and Growth
Appropriately designed strategies could promote growth with employment", Mr AB Bardhan, General Secretary of the Communist Party of India, said, while speaking at a seminar on "Employment and Growth", organized by the Observer Research Foundation, on August 17, 2004. While pointing that labour intensive technology can be fruitfully employed in many sectors of production, Mr Bardhan said agriculture should be given top priority because it still remained the biggest employer of labour force in the country.

Session I of the seminar was devoted to a discussion on the determining parameters of economic growth and how the total output could be increased. Because it was only with a high GDP growth that job growth could be raised to a level higher than the current one per cent.

While highlighting the role of economic reforms, Mr. Bardhan said that the public and private sector, as well as the cooperative sector, have an important role in bringing about changes that would lead to a higher rate of production of goods and services. Foreign direct investment that violates India's security and sovereignty should not be allowed in.

He said that while it is true that certain economic reforms were needed, they should be carried forward without the influences of outside interests, especially those coming from multinational firms' board rooms. Appropriately designed strategies could promote growth with employment. He also pointed out that labour intensive technology can be fruitfully employed in many sectors of production and since agriculture still remained the biggest employer of labour force in the country, it should be given top priority. Productivity of agriculture would have to be enhanced through land reforms and redistribution of land. Other types of labour intensive production like handicrafts should also be promoted and the employment guarantee scheme in the CMP would go towards helping in giving some kind of unemployment insurance cover to workers.

Prof. Y. K. Alagh, President, ORF Institute of Economy and Development, pointed out that growth generates employment. In the 1990s, he said that both the agricultural and industrial employment had collapsed due to lower output growth. From 1997-2003, annual agricultural growth was only around one per cent and industrial growth was at 5.5 per cent. But he disagreed with the prevailing view that falling employment elasticity was an alarming issue because it is natural for productivity of labour to go down over time but it has to be made up for by higher economic growth that would ensure more job creation. 

He pointed out that agriculture in the Nineties has seen a decline in profitability, capital formation and diversification. Cotton and sugar production have been falling also. On each of the commodities, appropriate tax policies are needed to reverse the declining trend. He also said that for increasing growth, proper strategies for small scale sector have to be in place. For example, 112 towns account for 80 per cent of India's small industry. Success stories have emerged from nurturing and improving inherited community based artisan skills. More support for such clusters can provide widespread employment opportunities. 

It is important to have high growth for achieving a higher rate of employment, said Mr. N.K. Singh, Distinguished Fellow, ORF and former Member of the Planning Commission. He also drew the attention of the audience to the importance of considering the age composition of India's population. Three-fourths of the population is relatively young. 

Thus, in the next few years if the employment situation did not improve, there would be more youth among the unemployed-a potentially volatile situation. It is thus imperative to aim at job creation in areas such as agriculture and construction where the employment elasticity is high and the incremental capital output ratio is low. 

Dr. Arvind Virmani gave an empirical presentation of the macro economic growth profile of India. Basically he divided the post independence era into two periods: from 1950-80 and 1980 to 2004. He found that in the first period in which there were many controls, poverty increased. This was mainly because the government was appropriating the public resources as a result of which the benefits accruing to the people were low. But Dr. B.B. Bhattacharya pointed out that the first period also had very high industrial growth (not shown by Dr. Virmani). There was a spirited discussion between Prof Amit Bhaduri and Dr. Virmani about the findings. 

Prof Bhaduri pointed out that employment is no longer a responsibility of the government like in the Thatcher years and all that can be done is to persuade the private sector to employ more. But employment growth remained important for achieving international competitiveness. This is because demand is important and employment generates purchasing power in the hands of the people. For generating more jobs, infrastructure is important as well as a high growth in the services sector.

According to Dr.Bhattacharya, a higher industrial growth also provides employment and if there is high industrial growth, more jobs would be created. Fiscal deficits however are responsible for siphoning off money from job creating investments of the government and therefore adversely impact employment growth. 

Mr Manish Tewari pointed out the need for educating the youth in employable skills for increasing employment growth. 

Speaking during Session II, Mr Digvijay Singh, former Chief Minister of Madhya Pradesh, was in favour of giving purchasing power in the hands of the people especially in agriculture and pointed out that this is not happening and there has been an increase in the number of landless labour in agriculture. Also, farm workers continued to be malnourished and general agricultural stagnation led to people to migrate from villages to towns or join the ranks of landless labour. He said that there is an obvious need for improving the delivery systems and diversification of crops for higher productivity growth.

He pointed out that giving vocational training is important and there seemed little justification for subsidizing higher education. Training has to be given in professional colleges and incentives have to be offered to health and educational workers to deliver their services better. Many activities like sericulture also possessed a high employment potential as also agriculture forestry like bamboo plantation. Agro processing industries in MP, and especially Khadi industries, were doing well and had a high potential for job creation. But appropriate technology has to be used in these industries. The marketing, branding and packaging of products is also important for realizing higher value addition. Basically the problem centred around how to make unviable holdings viable and how to involve the community in the preservation of forests and natural resources. The employment guarantee scheme along with food security would benefit marginal workers, and it would lead to an increase in the welfare of the poor sections of population in general. 

Dr.T.S. Papola observed that one fourth of the labour force is experiencing some form of unemployment in India today. There are also many who remain underemployed or are producing poor types of goods that are not in demand and consequently, these people too are looking for alternative avenues of employment. He felt that there was little scope for increasing employment in agriculture and only if higher agricultural growth bolstered by proper infrastructure could be achieved, the problem of unemployment would be solved in rural areas. Manufacturing sector on the other hand could create employment as also the services sector but the cost of creating jobs in the services sector is higher as investment has to be undertaken on technical education first. He reiterated that aggregate employment elasticity has indeed declined. 

Dr. G. S. Bhalla emphasized that agricultural growth remained most important because only high growth of agriculture could lead to the absorption of labour during the Green Revolution even though mechanization was a result of rising wages. But negative elasticity of employment is being experienced in agriculture in Andhra Pradesh, Kerala and UP and the employment potential is low as also in highly irrigated regions like Punjab and Haryana. But in Orissa, MP, Rajasthan, employment could be increased in agriculture through a higher rate of investment. There has to be a demand led strategy of growth according to Dr. Bhalla and demand for cereals is likely to go up also with higher economic growth because as the country prospers, there would be demand for more grains as animal feed. Today, Indian wheat has become price competitive in the world markets but not oil seeds. The technology therefore has to be improved greatly. He felt that the minimum support prices had to be maintained for the benefit of the poorest farmers. He said that the government could start with agricultural infrastructure and invest in the diversification of crops for higher productivity growth. Basically, higher productivity growth would increase agricultural employment. 

In Session III, Dr. Jagdish Shettigar delineated the hurdles in the way of increasing employment in the organized sector and pointed out the need for labour law reforms. He stated that fiscal incentives to generate employment in the organized sector could be considered. He pointed out that the promotion of non farm sector along with the farm sector and agro- related and agro- based industry is important for increasing employment. Demand for khadi etc. should also be created and the benefits of marketing these products should percolate down to the artisans. Skill related clusters of villages could be developed. An integrated approach to rural development was therefore required. 

Mr. B.N. Goldar presented an empirical study of the 1980s' labour market when India experienced jobless growth and pointed out that trade reforms have increased employment through higher export growth. In the 1990s however, wages did not grow fast and there was a slow down in real wages. Also, trade union disputes were fewer and the result was a growth in employment. But after 1997, there has been a downward trend again and one million jobs were lost between 1997 and 2001. This was due to the use of services in manufacturing sector and factories were outsourcing services from outside the factory gate.

Mr. Tapan Sen of the Center for Indian Trade Unions (CITU) pointed out that the reason for the decline was the diversification by firms from the core area of commodity production to speculative ventures like increasing their stake in the stock market and this led to a fall in employment generation. During the 'reforms' period, public investment also went down and employment as a result, plummeted, specially, non farm employment. Imports also affected the agro based economy as it led for loss of jobs in competing industries. Besides, during these years, downsizing in both public and private sectors has also taken place in a big way resulting in job losses. Jobs shifted to the informal sector and the share of wages in the GDP has gone down. Besides, most of the FDI that came in during this period was earmarked for takeovers and mergers. These types of foreign investment flows were not employment generating and in fact led to retrenchment of labour after the completion of takeover. 

In Session IV, Dr. Arjun Sengupta pointed out that employment should be treated as a human right and the government in power has to prove its legitimacy by respecting such rights. But the right has to be feasible and real wage growth was crucial to growth of productivity. The Employment guarantee scheme according to him, should give entitlements to the poorest section of the population and there has to be monitoring of poor schemes at the district and local level groups for better delivery. 

Dr. Abusaleh Shariff pointed out that health is a catalyst for economic growth. It affects the productivity of labour and improvement in health care improves the labour efficiency of the workforce at every level. Thus, access to food, nutrition, environmental sanitation and improvement in female literacy were important for achieving a higher quality of the labour force. The problem of quality starts with the low weight at birth of babies followed by high infant mortality rates. Women suffering from anemia also had more low weight babies and an increase in morbidity and low productivity, later in life. Investment in health would be a sure way to assure a labour force for the country which is able to earn more and perform better.
Mr. D. Raja emphasized that employment should be seen as a right and the central and state governments have a role and responsibility in ensuring this right. He pointed out that land reforms were the key to employment growth and that more investment in agriculture as well as change in agrarian relations is required. Also the small-scale sector needs to be supported. 

The seminar ended with a unanimous opinion that growth is very important for creating jobs but it is not the only factor in raising employment growth from the current abysmal level. Government intervention in providing appropriate infrastructure and delivery systems, especially in the rural areas, is important and essential for higher job growth. 

Repoprt prepared by Jayshree Sengupta, Senior Fellow, ORF, with inputs from Rama Goyal, Research Fellow, ORF.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.