By Sarah Watson —
India’s Labour Bureau released its quarterly report on job creation in eight key industries on October 19. The news was not good: it does not appear Modi’s India is creating anywhere near enough jobs to employ the millions who enter the job market each year. The sectors under review created a net total of only 64,000 jobs in the three-month period beginning January 1, 2015. Although it is an improvement over the first quarter of 2014, when the sectors surveyed lost jobs overall, this number is otherwise the worst first quarter since the Labour Bureau first began conducting the survey in 2009. It’s also the fifth-worst quarter of the 24 for which data is available. And while 2014 was (just barely) a better year for job creation than 2013, the industries surveyed have added fewer jobs in each of the last four quarters.
The data in the report must be read in context. India’s quarterly jobs report does not intend to be a comprehensive survey of the economy. It covers only eight industries (textiles/apparel, leather, metals, automobiles, gems & jewelry, transport, information technology (IT)/business process outsourcing (BPO), and handloom/powerloom) and ignores important sectors like agriculture. The industries it covers are heavily concentrated in India’s relatively small industrial sector, with only two representatives (IT and transport) from the much larger service sector. Finally, the categories the Labor Bureau employs, such as IT/BPO, while they make sense in the Indian context, often lack exact parallels with those used by other Indian ministries or other countries’ statistical agencies, making comparison difficult.
But the report is still a valuable source of information. It is one of the few sources of quarterly data about India’s economy, and its granularity is unusual; publicly available data on employment in India is generally broken down by broad sectors rather than specific industries. And the report does provide a very valuable look at some industries that are crucial to India’s future: not just IT/BPO, but important manufacturing-based industries such as textiles and automotive.
One way of putting the 64,000 jobs figure in context is by looking at how much of India’s gross domestic product (GDP) the included industries represent. There is no single source of timely data on what different industries (as opposed to broad sectors) contribute to India’s GDP. Some government ministries, however, do provide estimates for the industries they supervise, and using their data we can estimate that the industries surveyed contribute more than a third of India’s GDP. These industries added only 64,000 jobs in the first quarter of the year and 521,000 in the year from April 2014 to March 2015. This last figure represents just one-tenth of 1 percent of India’s current workforce.
The International Labor Organization estimates that the Indian workforce will grow from 511 million in 2015 to 553 million in 2020—an increase of 42 million people, requiring that India create on average 8.4 million jobs per year for five years. Unless the industries not surveyed by the report are creating jobs at about eight times the rate of those covered, over the past year India has lost significant ground in its quest to create jobs for its citizens.
There is a possibility that other industries are adding employees more quickly, but it is very unlikely that any industry is adding enough jobs to make up the shortfall. Agriculture, which employs 49 percent of Indians but accounts for under 14 percent of GDP, grew at only 1.1 percent in 2014-15—far less than manufacturing (6.8 percent) or services (10.6 percent). Anecdotal evidence suggests that the construction sector — an important employer that offers jobs for low-skilled workers—is experiencing a slowdown. Moreover,the fastest growing area of the entire economy — financing, insurance, real estate and business services—employs only .7 percent of all Indian workers. Growth in this area would have to be truly enormous to make up the shortfall.
Prime Minister Narendra Modi won a historic majority in the lower house of parliament by running on a platform of jobs and development and has made job creation one of his administration’s top priorities. The evidence suggests that he is falling behind on this goal.
Ms. Sarah Watson is an associate fellow with the Wadhwani Chair in U.S.-India Policy Studies at CSIS.
Sources: The Department of Industrial Policy and Promotion’s 2014-2015 Annual Report puts IT/BPO’s share of GDP at 8.1 percent and the leather industry’s at .5 percent. The Ministry of Textiles values textile production at 4 percent of GDP. In 2011-12, the most recent year for which data is available, road transport contributed 4.8 percent of GDP; the figure for the entire sector would thus be somewhat larger (India’s Planning Commission estimated it at 6.4 percent in 2004-5). The Department of Heavy Industry, in its 2013-14 Annual Report, reports that the automotive sector’s share of GDP is 6.7 percent. The draft of the never-completed 12th Five Year Plan estimates that basic metals accounted for 9.7 percent of manufacturing GDP in 2009-10, or 2.7 percent of overall GDP. Finally, the India Brand Equity Foundation (IBEF), a trade group, estimates that gems and jewelry are responsible for about 6.5 percent of GDP.
Sarah Watson is an associate fellow with the Wadhwani Chair in U.S.-India Policy Studies at CSIS.
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