Express View on employment data: The elusive jobs

The Reserve Bank of India has pegged the Indian economy to grow at 7.2 per cent this year. Medium term forecasts, such as those by the IMF, expect the momentum to continue over the coming years. However, concern over the lack of quality jobs continues to persist. The recently released periodic labour force survey provides granular information on the state of the labour market in India. Several trends warrant closer examination.

First, at the aggregate level, the labour force participation rate (15 years and above) has risen from 49.8 per cent in 2017-18 to 60.1 per cent in 2023-24. However, much of this is due to the sharp rise in female participation, especially in rural areas, where it has risen from 24.6 per cent to 47.6 per cent over this period. While a rise in female participation should ideally be welcome, some have argued that it may be a sign of distress — women stepping out of the house to augment their household income. As per the survey, the share of women engaged in salaried employment has fallen. More are now engaged in self-employment — across the country, the share of women who are self-employed has risen from 51.9 per cent in 2017-18 to 67.4 per cent in 2023-24 — either as unpaid helpers in household enterprises or as own-account workers. This indicates the absence of alternatives. Second, a large section of the labour force continues to be employed in informal firms. The percentage of workers engaged in informal enterprises (proprietary and partnerships) stood at 73.2 per cent in 2023-24. While it has fallen marginally from 74.3 per cent in 2022-23, it remains higher than the estimate of 68.2 per cent in 2017-18. Third, the share of the labour force engaged in agriculture continues to edge upwards, while that engaged in manufacturing remains almost stagnant. In 2017-18, 44.1 per cent of workers were employed in the farm sector. By 2023-24, it had risen to 46.1 per cent, underlining the reversal of the trend of the falling share of the farm sector seen over the past decades. On the other hand, the share of the labour force engaged in manufacturing remains roughly the same — 11.6 per cent in 2021-22 and 11.4 per cent in 2023-24. Fourth, the unemployment rate (15 years and above) has fallen from 6 per cent in 2017-18 to 3.2 per cent in 2023-24. While youth unemployment has fallen from 17.8 per cent in 2017-18 to 10.2 per cent in 2023-24, it remains high. The unemployment rate is also higher among the more educated, with those with a secondary and above level of education having much higher rates than others.

The labour market data reinforces the key development challenge facing India — of inadequate creation of more remunerative and productive employment opportunities. Addressing this challenge is becoming more difficult with the production process becoming more capital intensive and labour-saving, as the India Employment Report 2024 has also noted. This issue should be at the forefront of the policy agenda.