{"id":129313,"date":"2024-09-02T20:20:36","date_gmt":"2024-09-02T14:50:36","guid":{"rendered":"https:\/\/pwonlyias.com\/stage\/?post_type=current-affairs&#038;p=129313"},"modified":"2024-09-03T16:07:30","modified_gmt":"2024-09-03T10:37:30","slug":"indias-growth-employment-paradox","status":"publish","type":"current-affairs","link":"https:\/\/pwonlyias.com\/stage\/current-affairs\/indias-growth-employment-paradox","title":{"rendered":"India\u2019s Growth-Employment Paradox"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">India is grappling with a paradox of jobless growth, where remarkable Gross Domestic Product (GDP) expansion is not translating into a corresponding increase in employment opportunities.<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Current Scenario of Employment and GDP growth in India<\/b><\/span><\/h2>\n<ul>\n<li aria-level=\"1\"><b>Economic Growth and Employment Trends<\/b>\n<ul>\n<li><b>GDP Growth<\/b><span style=\"font-weight: 400;\">: India has been the fastest-growing major economy in the world, with an impressive GDP growth rate of 6.5-7% annually between 2011-12 and 2022-23.<\/span><\/li>\n<li><b>Employment Growth<\/b><span style=\"font-weight: 400;\">: Despite the strong GDP growth, employment grew at a much slower pace of only 1.9% annually during the same period.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-129273 alignright\" src=\"https:\/\/pwonlyias.com\/stage\/wp-content\/uploads\/2024\/09\/26-66d5c2cce95db.webp\" alt=\"Growth-Employment Paradox\" width=\"460\" height=\"250\" srcset=\"https:\/\/pwonlyias.com\/stage\/wp-content\/uploads\/2024\/09\/26-66d5c2cce95db.webp 692w, https:\/\/pwonlyias.com\/stage\/wp-content\/uploads\/2024\/09\/26-66d5c2cce95db-300x163.webp 300w\" sizes=\"(max-width: 460px) 100vw, 460px\" \/><b>Employment versus Labor Supply Dynamics<\/b>\n<ul>\n<li><b>Employment Growth<\/b><span style=\"font-weight: 400;\">: Employment increased from approximately 466 million in 2011-12 to about 577 million in 2022-23.<\/span><\/li>\n<li><b>Labor Supply Growth<\/b><span style=\"font-weight: 400;\">: The labor supply grew from 477 million in 2011-12 to approximately 595 million in 2022-23.<\/span><\/li>\n<\/ul>\n<\/li>\n<li><b>Unemployment Backlog<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Unemployment Increase<\/b><span style=\"font-weight: 400;\">: The difference between the growth of employment and labor supply led to a rise in unemployment. The number of unemployed individuals grew from around 10 million in 2011-12 to over 19 million in 2022-23.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><b>Unemployment Growth Rate<\/b><span style=\"font-weight: 400;\">: This represents an annual growth rate of over 5.6% in unemployment, which is significantly high and not much lower than the GDP growth rate.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Course<\/a><\/span><\/p>\n<h3><span style=\"font-size: 16pt;\"><b>Key Insights<\/b><\/span><\/h3>\n<ul>\n<li><b>Jobless Growth<\/b><span style=\"font-weight: 400;\">: The data indicates a scenario of &#8220;jobless growth,&#8221; where economic expansion is not accompanied by a proportional increase in employment opportunities.<\/span><\/li>\n<\/ul>\n<table style=\"width: 100.1%;\">\n<tbody>\n<tr>\n<th style=\"border-style: solid; border-color: #000000; background-color: rgba(184, 165, 217, 0.53); text-align: left; vertical-align: middle; width: 100%;\">\n<h3><span style=\"font-size: 16pt; color: #000000;\"><b>About Jobless Growth<\/b><\/span><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"color: #000000;\"><span style=\"font-weight: 400;\">The term <\/span><b>\u2018jobless growth<\/b><span style=\"font-weight: 400;\">\u2019 actually signifies a peculiar state of economic growth whereby a country grows economically, measured by gross domestic product but does not create jobs.<\/span><\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400; color: #000000;\">Despite these high growth rates, employment generation continues to be a worry, which even casts doubt over the social and reproductive nature of this growth path.<\/span><\/li>\n<\/ul>\n<\/th>\n<\/tr>\n<\/tbody>\n<\/table>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Productivity vs. Employment<\/b><span style=\"font-weight: 400;\">: While some divergence between output growth and employment growth is expected due to productivity improvements, the significant gap suggests that economic growth has not been inclusive enough to generate sufficient jobs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Implications for Unemployment<\/b><span style=\"font-weight: 400;\">: The slow pace of employment growth compared to labor supply has led to an increasing unemployment backlog, indicating that economic policies need to focus more on labor-intensive growth and effective job creation strategies.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-size: 18pt;\"><b>Definition of Employment\u00a0<\/b><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A person is considered employed if they are engaged in any economic activity, defined as any work, whether for wage\/salary, profit, or family gain during the reference period specified.\u00a0<\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Reasons for Economic Growth Not Corresponding with Sufficient Job Creation<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Premature Deindustrialization:<\/b><span style=\"font-weight: 400;\"> India is facing premature deindustrialization, where the manufacturing sector&#8217;s share in GDP and employment is declining at a much lower income level than in developed countries.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Skill Gap Issue: <\/b><span style=\"font-weight: 400;\">There exists a notable disparity between the skills required by employers and those that workers currently possess. Despite efforts like the Skill India initiative, these programs have fallen short of their goals, resulting in high rates of both unemployment and underemployment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Prevalence of Informal Employment: <\/b><span style=\"font-weight: 400;\">More than 90% of India&#8217;s workforce is engaged in the informal sector, which is marked by low productivity, a lack of job security, and minimal social protection.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Although the gig economy presents new employment opportunities, it often lacks stability and career advancement prospects, exacerbating job insecurity.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Challenge in Job Creation and rising working population:<\/b><span style=\"font-weight: 400;\"> With approximately 12 million new individuals joining the workforce each year, India must create 10-12 million jobs annually to harness its demographic dividend and prevent it from becoming a demographic liability. However, the current rate of job creation is insufficient, posing a risk of social unrest and economic challenges.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>&#8216;Missing Middle&#8217; in MSMEs:<\/b><span style=\"font-weight: 400;\"> India&#8217;s industrial structure is polarized between very small firms and large corporations, with a lack of mid-sized enterprises that are typically most effective at generating employment. The MSME sector, crucial for job creation, continues to struggle following demonetization and the COVID-19 pandemic.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Job loss due to AI and automation: <\/b><span style=\"font-weight: 400;\">The rise of automation and AI is reshaping job markets, with the potential to displace up to 9% of India\u2019s workforce by 2030. These advancements typically demand a highly skilled workforce, which could increase unemployment rates among lower-skilled workers.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Misalignment of Academic Curriculums with Industry Needs: <\/b><span style=\"font-weight: 400;\">India&#8217;s education system does not adequately prepare students for modern job markets, leading to a situation where only 47% of graduates were employable in 2019. This mismatch creates inefficiencies, with a significant number of job seekers unable to meet industry demands.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/store.pw.live\/govt-entrance-exams\/upsc-books?utm_source=SEO&#038;utm_medium=PW+Live&#038;utm_campaign=UPSC+CSE+Books\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Check Out UPSC CSE Books From PW Store<\/span><\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Strategies to make Economic Growth More Labor-Intensive<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Lowering Wage-Rental Ratio<\/b><span style=\"font-weight: 400;\">: To promote labor-intensive growth, policies should lower the wage-rental ratio, making labor cheaper relative to capital. Lowering this ratio can make labor-intensive sectors like construction and textiles more profitable, encouraging investment.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">However, lowering wages is not feasible in India due to<\/span><b> already low wage levels<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Focus on Labor-Intensive Sectors<\/b><span style=\"font-weight: 400;\">: Labour intensive sectors like construction, trade, transport, and textiles, which currently employ about 240 million people, could benefit from a shift in resource allocation if the wage-rental ratio is reduced.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Employment-Linked Incentives:<\/b><span style=\"font-weight: 400;\"> Implementation of a robust employment-linked incentive (ELI) scheme, like the Production-Linked Incentive (PLI), to promote job creation in labor-intensive sectors.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Addressing Labor Market Rigidities:<\/b><span style=\"font-weight: 400;\"> Simplify labor laws and reduce the compliance burden, which currently hinders employment growth, by drawing on comparative evidence from different states.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Raising the cost of Capital:<\/b><span style=\"font-weight: 400;\"> In India, government-controlled low capital costs, influenced by artificially low interest rates, fail to reflect true scarcity. This discourages labor-intensive investments. Raising capital costs could shift focus towards more labor-intensive sectors, promoting job creation.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Adjusting exchange rates<\/b><span style=\"font-weight: 400;\"> to make imports more expensive and exports cheaper, though this could lead to accusations of currency manipulation.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-size: 18pt;\"><b>Challenges to Lowering Wage-Rental ratio<\/b><span style=\"font-weight: 400;\">\u00a0<\/span><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Low Wage Levels: <\/b><span style=\"font-weight: 400;\">The wages in India are extremely low, with regular employees earning about \u20b91,000 monthly, casual laborers earning \u20b94,500 monthly, and self-employed individuals making around \u20b97,000 monthly in 2022-23. The already depressed wage scenario limits the option of reduction of wages..<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Controlled Capital Costs:<\/b><span style=\"font-weight: 400;\"> Capital costs are indirectly controlled by the government\u2019s dominant borrowing and lending practices.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">For instance, the yield on 10-year government securities has remained stable at 7-7.5%, and the real interest cost of capital is around 2%, which is relatively low and sometimes negative, not reflecting the true scarcity of capital.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Import Dependent Nation:<\/b><span style=\"font-weight: 400;\"> However, as an import-dependent nation, currency depreciation could lead to significant negative externalities.<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><span class=\"vc_button\"><a href=\"https:\/\/www.pw.live\/batches\/upsc\/pw-only-ias?utm_source=seo+upsc+batch&#038;utm_medium=seo+upsc&#038;utm_campaign=seo&#038;utm_id=upsc\" target=\"_blank\" rel=\"noopener\">Enroll now for UPSC Online Classes<\/a><\/span><\/p>\n<h2><span style=\"font-size: 18pt;\"><b>Way Forward<\/b><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Efforts for developing Skilling Ecosystem<\/b><span style=\"font-weight: 400;\">: Focus on developing localized skill hubs that provide training aligned with local industry needs, creating a direct pathway for skilled workers to meet regional employer demands.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Empowering Gig Workers through Cooperatives<\/b><span style=\"font-weight: 400;\">: Promote the creation of cooperatives owned by gig workers to strengthen collective bargaining, optimize resource sharing, and provide financial stability, all while maintaining the flexibility that gig jobs offer.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>AI Skills Enhancement Initiative<\/b><span style=\"font-weight: 400;\">: Develop a national program to train the workforce for roles that incorporate AI technology, focusing on emerging job sectors where human abilities are complemented by AI, thereby increasing efficiency and employment opportunities.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Jobs in Circular Economy Hubs<\/b><span style=\"font-weight: 400;\">: Create dedicated hubs for circular economy practices, offering employment in recycling, repurposing, and sustainable design, thereby fostering job growth while also promoting environmental conservation.<\/span><\/li>\n<\/ul>\n<table style=\"width: 99.9272%;\">\n<tbody>\n<tr>\n<td style=\"width: 137.814%; 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