8th Five Year Plan (Vol-1)
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Objectives and Orientation || Development Perspective || Macro Economic Dimensions || Policy Framework || Financing the Plan || Employment Perspective


I. The Approach

6.1.1 Expansion of employment opportunities has been an important objective of development planning in India. There has been a significant growth in employment over the years. However, a relatively higher growth of population and labour force has led to an increase in the volume of unemployment from one plan period to another. The Eighth Plan aims at bringing employment into a sharper focus in a medium-term perspective with the goal of reducing unemployment to negligible level within the next ten years. Such an approach is now considered necessary also because it is realised that larger and efficient use of available human resources is the most effective way of poverty alleviation, reduction in inequalities and sustenance of a reasonably high pace of economic growth.

6.1.2 While approaching employment as an objective of the Plan, employment generation and economic growth are to be treated as mutually complementary rather than conflicting processes. Employment has, therefore, to be generated in the process of, and contribute to the acceleration of, economic growth. Employment, to be gainful and sustainable, has, therefore, to be productive in character; it should be able to yield a reasonable level of income to the worker and also generate surplus for further growth and employment generation.

6.1.3 Improvement in the productivity of work-force assumes particular significance in our economy where low productivity and low incomes of a large mass of employed persons constitute a problem of much higher dimension than unemployment, measured conventionally in terms of involuntary idleness. Incidence of poverty is much higher than that of unemployment. - An overwhelming majority of the poor are thus not apparently unemployed, but are engaged for a major part of their time in some activity, albeit, at very low levels of productivity and earnings. The Plan strategy would, therefore, focus not only on the creation of new ^jobs', but also on the augmentation of the existing employment in terms of productivity and incomes through suitable technological, market and institutional interventions.

6.1.4 It must be recognised that the demand for labour cannot always be created to suit the characteristics of labour supply. Shortages and surpluses are found to coexist in the labour market due to the mismatch between skill and other requirements of new employment opportunities and the attributes of available workers. This phenomenon is likely to be more marked in a situation of rapidly changing technologies and work organisation. It would also, therefore, be necessary to intervene on the supply side of the labour market with a view to improving the employability of v/orkers in general, and promoting such institutional structures and arrangements for training and skill upgradation which could speedily respond to rapidly changing requirements of productive activities, in particular. In order that the training and skill formation systems are closely aligned with the trends in labour demand, it would be essential that the users, that is, the employers, have a major role and involvement in planning and running them.

6.1.5 An important aspect that would need careful scrutiny in the Eighth Plan, particularly in the context of economic reforms, is the impact of macro-economic, sectoral and labour policies on employment. It has been pointed out that certain policies, such as credit and labour policies, are not always employment-friendly. Policy of concessional credit for several sectors tends to distort the factor price relativities against labour use; and the labour policy, as manifest in certain labour laws, and labour market ridigities rendering wage mechanism ineffective, it is contended, have introduced a degree of inflexibility in labour use, thus discouraging employment expansion, particularly in the large scale industries. On the other hand, in the unorganised sector, which absorbs an overwhelmingly large majority of workers .'employment is not only completely insecure, but is also devoid of any social security provisions. To the extent this sharp dichotomy in the labour market, characterised by a high degree of protection for a miniscule proportion of the workforce and complete lack of protection for the majority of workers, is coming in the way of a larger and more efficient use of labour, ways would have to be devised to reduce this gap. Similarly, other policies - credit, fiscal and sectoral, would need to be reviewed with a view to making them more employment-friendly.

II. Employment : Growth and Structure

6.2.1 For an assessment of growth and structural changes in employment, the quinquennial surveys of the National Sample Survey Organisation (NSSO) provide the most comprehensive source. Using that source, changes in employment situation have been described here for the 10-year period ending with 1987-88, the year in which the last NSSO survey on employment and unemployment was conducted. The main features of employment growth during the decade 1977-78 to 1987-88 are summarised as follows:

  1. Employment has grown at about 2 per cent per annum during the 10 year period. [Ta-ble6.1]. (This growth, which has been about the same as the rate of growth of labour force, has not been able to absorb the backlog of unemployment of about 10.8 million that existed in 1977-78.)
  2. Growth rates of employment has been relatively high in urban areas, but low in rural areas.
  3. Employment of males and females has grown more or less at the same rate, with the rate for males slightly above that for females.
  4. All major sectors except agriculture, experienced over 3.0 per cent growth of employment per annum over the period 1978-88 [Table 6.2]. Agriculture registered an annual growth of only 0.92 per cent. (and this rate has been just about the same in the two quinquennia)
  5. A deceleration in growth has been observed during 1983- 1987-88 over 1977-78 - 1983; this trend is seen in all sectors, except, agriculture, trade and construction. [Table 6.2]. In manufacturing, the rate of growth has declined sharply from 3.76 per cent to 2.18 per cent; and in services from 4.49 per cent to 2.06 per cent.
  6. Deceleration in the rate of employment growth has been particularly sharp in the organised sector; it has declined from 2.48 per cent during 1977-78 - 1983, to 1.38 per cent during 1983 - 1987-88 [Ta-ble6.3]. Employment in the organised manufacturing sector has virtually stagnated during 1983 - 1987-88; and thus, an increasingly larger contribution to employment growth in manufacturing has been made by the unorganised sector in recent years.
  7. Growth in employment in the organised sector, has primarily been contributed by the public sector.
  8. Despite a slow and declining rate of "ti-ployment growth in the aggregate, e iloy-ment of the educated has shown a relatively high and accelerating growth, particularly among women [Table 6.4].

6.2.2 Differential rates of employment growth in different sectors and of different kinds have led to certain notable changes in the structure of employment overtime. First, there have been some sectoral shifts away from agriculture in the last decade. In 1977-78, 71 per cent of the workers were engaged in agriculture and allied occupations, but by 1987-88, the proportion had declined to 64 per cent [Table 6.5]. Corrspond-ing figure revealed by the 1991 census, though not strictly comparable with NSS estimates, is 64.9 per cent, showing a marginal decline from 66.5 per cent in 1981. Second, there is a change in the structure of the workforce by employment status. The proportion of casual labour increased while that of the self-employed declined over the period 1977-78 to 1987-88 [Table 6.6] -a change which is largely a reflection of the occupational shifts from agriculture to non-agriculture, in rural areas. Third, the share of the unorganised sector in non-agricultural employment has increased from 72 per cent in 1977-78 to 77 per cent in 1987-88, although the share of unorganised sector in overall employment has remained more or less stationary at 90 per cent.

III. Unemployment : Trends and Structure

6.3.1 Unemployment, according to the conventional and most commonly used concept, measures involuntary idleness, that is, the time for which individuals are available for and willing to, but are not able to find work. It does not include ^ invisible' unemployment or underemployment,that is, a situation of work with very low levels of productivity and income. The latter, as noted earlier, is a problem of much larger magnitude in India than conventionally measured unemployment. Persons belonging to low income households can hardly afford to remain unemployed, and, therefore, may engage themselves in any work that is available, even if it yields a very low income. For that reason, the rates of unemployment in India are observed to be relatively low.

6.3.2 The structure of workforce with dominance of self- employment and primary sector, where work sharing is common, also tends to depress unemployment rates, in general, and chronic, long period unemployment rates, in particular. Inadequacy of the measure of unemployment in terms of open unemployment has, therefore, been well recognised in the measurement and analysis of unemployment in India. The National Sample Survey Organisation (NSSO) which provides estimates of the rates of unemployment on the basis of its quinquennial surveys, therefore, uses three different concepts. A person is considered unemployed on Usual Status (US) basis, if he/she was not working, but was either seeking or was available for work for a relatively longer time during the reference year. On the basis of a week as the reference period, a person is considered unemployed by Current Weekly Status (CWS), if he/she had not worked even for one hour during the week, but was seeking or available for work. Then, there is an estimate of Current Daily Status (CDS) unemployment, in terms of the total persondays of unemployment, that is, the aggregate of all the unemployment days of all persons in the labour force during the week.

6.3.3 The "Usual status" unemployment rates could be regarded as a measure of chronic unemployment during the reference year; the CWS unemployment rates also measure chronic unemployment but with the reduced reference period of a week. The CDS is a comprehensivemeasure of unemployment including both chronic unemployment as well as underemployment on weekly basis. Unemployment rates are found to be the lowest on UPS basis and the highest on CDS basis. For example, unemployment as percentage of labour force worked out to be 3.77, 4.80 and 6.09 percent according to usual, weekly and daily status respectively, in 1987-88. In absolute terms, the unemployment in that year was estimated to be 11.53 million persons, 14.35 million persons and 6508 million persondays, according to the three concepts, respectively.

6.3.4 A few salient features of the unemployment situation in India may be noted. First, the incidence of unemployment is much higher in urban than in rural areas. Second, unemployment rates for women are higher than those for men. Third, a larger difference between the "usual" and "weekly" status unemployment rates, on the one hand, and "daily status" unemployment rates, on the other, in the case of women than of men suggests that underemployment is of much higher proportion among the former than the latter. Fourth, the incidence of unemployment among the educated is much higher at about 12 percent than the overall usual status unemployment of 3.77 percent. In fact, unemployment rates rise with every successive higher level of education.

6.3.5 The unemployment rates by the three alternative concepts of the "usual status", the "weekly status" and the "daily status" as revealed in the various rounds of NSSO surveys during 1972-73 to 1987-88 are presented in Table 6.7. No clear and consistent trends are discernible in the rates of unemployment over the 15 year period. Considering the short period in the recent past, namely, 1983 — 1987-88, however, certain changes in the structure of unemployment are observed. Open unemployment as measured by UPS has increased from 2.77 in 1983 to 3.77 in 1987-88 and according to weekly status fro.n 4.51 to 4.80 per cent. However, unemployment rate by daily status has declined from 8.28 to 6.09 per cent over this period. These trends suggest that there has been a shift from the state of widespread underemployment towards greater open unemployment.

6.3.6 Within the broad trend towards an increasingly open and chronic character of ub118 employment, the following features may be considered of special significance. One, this trend is seen to be particularly strong in rural areas, where the usual status unemployment has increased from 1.91 per cent of labour force in 1983 to 3.07 per cent in 1987-88 and the "daily status" unemployment has declined from 7.94 per cent to 5.25 percent. In the urban areas, only a small change of a similar pattern was observed. Second, the open unemployment rates increased much faster in the case of women than of men. The "usual status" rate of unemployment increased from 2.14 in 1983 to 4.19 per cent in 1987-88 among women workers but the increase in the case of male workers was from 3.02 to 3.60 per cent.

6.3.7 There are wide variations in the unemployment rates among different States [Table 6.8]. In terms of usual status, the unemployment rates vary between 1.51 percent in Madhya Pradesh and 17.07 percent in Kerala amongst the major States. Other major States with higher than all-India average of 3.77 per cent are West Bengal (6.06 per cent), Haryana (5.86 per cent), Assam (5.62 per cent), Tamil Nadu (5.25 per cent), Orissa (4.66 per cent), Punjab (4.04 per cent) and Andhra Pradesh (3.90 per cent). • Poorer States like Bihar, U.P., Madhya Pradesh and Rajasthan have relatively lower rates of open unemployment. With some exceptions like Orissa at the one end, and Maharashtra on the other, there appears to be a positive relationship emerging between the level of literacy and education and/or of economic development and incidence of open unemployment, across the States.

6.3.8 Even the aggregate of open unemployment and under- employment, in terms of per-sondays of unemployment, shows a similar pattern across the States. Incidence of unemployment measured in these terms was again highest (21 per cent) in Kerala followed by Tamil Nadu, West Bengal, Haryana, Andhra Pradesh and Orissa, each with higher than average figure. On the other hand, Madhya Pradesh with 2.86 per cent, Uttar Pradesh with 3.44 per cent and Bihar with 4.04 per cent were the States with the lowest "daily status" unemployment rates. These low unemployment rates present a rather intriguing picture when juxtaposed with the incidence of poverty, which is found to be amongst the highest in these States. To a certainextent, this phenomenon may be attributed to the limitations of the concepts and measures used in gauging unemployment. But, at a substantive level, it only suggests that the nature of the problem in these States is different. Low income work, rather than involuntary idleness, is the main form of the affliction from which the poor suffer. It obviously calls for a strategy with " augmentation of employment' as its main element.

6.3.9 The above brief review of the trends in the structure of unemployment suggests that over the years, the problem of open unemployment is gaining and that of underemployment is declining in importance. In 1977-78, underemployment as reflected in the difference between unemployment by the "usual status" (4.23 per cent) and the "weekly status" (4.48 per cent) on the one hand, and the "daily status" unemployment (8.18) was much larger than in 1987-88, when the two open unemployment rates were 3.77 per cent (UPS) and 4.80 per cent (CWS) and the daily status rate only 6.09. These features suggest that the strategy of employment generation would have to lay greater emphasis on augmentation of productivity and income levels of the working poor and the creation of new full time employment opportunities on wage. or self employment basis, rather than on schemes for short-term employment generation.

IV. Towards the Goal of Full Employment

Requirements of Employment Generation

6.4.1 For the purpose of estimating additional employment needed to achieve the goal of "employment for all" over a period, an assessment of the backlog of unemployment in the base year and the likely additions to the labour force during the reference period is needed. For this exercise, the backlog is estimated in terms of open unemployment with some adjustments for those who are severely underemployed and therefore, are very likely to be looking for alternative new full time employment opportunities. In other words, unemployment measured in "usual" or "weekly" status terms would be relevant. "Weekly status" is preferable because the unemployed, according to this concept, were clearly without work for the entire period under reference (i.e. did not have work even-for one hour during the week). Use of this concept also enables an assessment of the magnitude of severely underemployed as those having work for half or less than half the time during the reference week.

6.4.2 The latest survey based estimates available for this purpose, are for 1987-88 only, when the last quinquennial survey was conducted by NSSO. In order to arrive at a figure of unemployment in the beginning of the Eighth Plan, that is on April 1, 1992, independent estimates of labour force and employment on that date have been made, the difference between the two yielding the magnitude of unemployment. Total employment at the beginning of 1992-93 is estimated to be 301.7 million on "weekly status" basis. The Labour force is estimated to be 319 million. Thus backlog of open unemployment according to "weekly status" is estimated to be 17 million on April 1, 1992. According to the NSS, about 2 per cent of those recorded employed by "weekly status" had work for half or less than half the time. Taking them as v severely underemployed', they are included in the estimates for backlog for purpose of employment planning. Thus the number of persons in the labour force on April 1, 1992, who will be looking for full time new employment opportunities is estimated to be around 23 million.

6.4.3 The labour force is projected to increase by about 35 million during 1992-97 and by another 36 million during 1997- 2002. Thus, the total number of persons requiring employment will be 58 million during 1992-97 and 94 million over the ten year period 1992-2002. The employment growth in the aggregate will have to be about 4 per cent per annum if the goal of providing employment to all is to be achieved by the end of the Eighth Plan, and around 3 per cent per annum if it is to be attained by 2000 AD.

6.4.4 Experience in the recent years suggests that the goal of a 4 per cent rate of employment growth will be rather unrealistic. But, an average employment growth of around 2.6 to 2.8 per cent per annum may be within the realm of feasibility, which if achieved over the next ten years will bring the economy to a near full employment situation by 2002 AD. This itself will be contingent upon the attainment of a higher average rate of growth of GDP than achieved in the past, derived to a larger extent from sectors and areas which are inherently more employment-intensive.

V. Elements of Employment Strategy

6.5.1 A high rate of output growth is necessary, but not always a sufficient condition for high growth of employment. A structure of growth with larger contribution of sectors having high employment content of output and use of production techniques favouring use of labour greatly enhance the employment generation potential of growth. The scope for varying techniques, without lowering efficiency and productivity levels and reducing the competitiveness of the products, is found limited in most lines of production. On a realistic plane, it must also be admitted that in a large part of the economy, in agriculture, unorganised manufacturing and service sectors, technological upgra-dation involving some increase in the use of capital per worker may be necessary to raise productivity levels. Improvements in the productivity levels in all lines of production, including organised manufacturing sector, will be necessary for expansion of employment opportunities.

6.5.2 Employment growth has, therefore, to result primarily from the growth of the economy and restructuring of output composition of growth. There is no doubt that a larger and more efficient use of labour will accelerate the rate of growth itself, but the latter would largely depend on the availability of other resources like capital and internal and external demand. The employment potential of growth can be raised by readjusting the sectoral composition of output in favour of sectors and sub-sectors having higher employment elasticity. It is with this perspective that an attempt is made to review the past trends in different sectors and also to assess the potential of each of them for faster employment generation in the process of their growth. This may enable us to indicate the broad directions of strategy and policies that can lead to the realisation of the assessed potential in different sectors.

A. Agriculture and Allied Sectors

6.5.3 Even after some shirts in the occupational structure during the last two decades, agriculture still occupies a predominant place in employmerit structure, employing about two-thirds of the total workers. It is agriculture which has shown the lowest and rapidly declining employment-potential in the recent past. A major reason for this lies in the sharply declining employment potential in the regions with high output growth. Employment growth, accompanying a one per cent growth of output was found to be as low as 0.00, 0.07 and 0.19 in Punjab, Haryana and UP respectively. In these areas, the sources of growth are now turning to be labour substituting.

6.5.4 Despite an overall declining trend in employment elasticity, there appears to be considerable scope for raising employment in agriculture in those regions of the country which have so far generally lagged behind in agricultural development. A strategy of agricultural growth aimed at deriving a larger part of the additional output from these regions should help arrest and even reverse the overall decline in labour absorption in agriculture. A faster growth of employment in these areas, where the incidence of poverty is often relatively high, at the same time, will lead to a positive effect on wage rates and incomes of the rural workers. It may be noted that eight States, viz., Andhra Pradesh, Bihar, MadhyaPradesh, Maharashtra, Orissa, Tamil Nadu, U.P and West Bengal account for 80 per cent of the people below poverty line and 70 per cent of the unemployed. A strategy focussed on stimulating agricultural growth in these States will thus be able to meet three important objectives simultaneously, namely, employment, poverty alleviation and reduction in regional disparities, besides acceleration and greater stability in the growth of agricultural output.

6.5.5 An acceleration in the rate of growth of agricultural output in the regions lagging behind others should come primarily from an increase in the yield levels of individual crops and an increase in cropping intensity and, to some extent, from changes in cropping pattern in favour of high value crops. The most important factor contributing to such changes would be the availability of assured irrigation, followed by provision of modern inputs and appropriate price policies. Irrigation, besides leading to increase in yield and cropping intensity, also facilitates changes in cropping pattern in favour of high value crops, most of which also happen to be more labour using. Such shifts in the cropping pattern are important from the view point of employment, particularly in the long run, in so far as yield increases in staple crops beyond a stage involve technologies using less labour.

6.5.6 An activity naturally allied to agriculture and crucial for rural income and employment generation is animal husbandry. The potential of this sector for income and employment generation can hardly be over-emphasised. Based on some recent studies by the National Dairy Development Board (NDDB) and the earlier estimates by the National Commission on Agriculture, it is estimated that the animal husbandry sector, even with the existing stock, can generate employment equivalent to 86 million person years inclusive of employment in processing and marketing of milk and milk products. It is claimed by experts that a much higher growth than in the past can he attained in this sector, raising productivity and income levels of thosi. engaged in it as well as creating new employment opportunities. Fishery, it is maintained, can grow as fast as 7 per cent per annum because about two-thirds of the existing marine and inland potential is unexploited. In fact, a high growth of value-added agri-business, including animal husbandry, fishery, horticulture and aquaculture, offers scope for employment expansion in the immediate future.

6.5.7 Another area with large scope for employment generation, that has only been marginally recognised so far, relates to regeneration of natural resources such as land and forests. Programmes of afforestation, regeneration and restoration of degraded land are not only likely to generate large volumes of employment in general, but also benefit, in particular, such disadvantaged sections of the society as tribals and women who are most adversely affected by the degradation of eco systems. The extent of culturable wastelands is estimated to be around 130 million hectares. It is estimated that development of one hectare of wasteland will generate 128 mandays of employment with a wage component as high as 70 per cent of the outlay. Importance of wasteland development from the point of view of employment generation arises not only from the employment intensity of the development phase involving earth work, etc., but also from the sustained employment opportunities likely to be generated in the utilisation of the reclaimed land for afforestation and watershed development. A study by the National Council of Applied Economic Research (NCAER), for instance, shows that one hectare of planted area provides employment of the order of 600-700 mandays per year. However, if wasteland development has to achieve these objectives beyond the stage of asset formation, due attention should be given to (a) securing the active participation of the rural poor in wasteland development and (b) allocation of the developed land to the rural poor with legal titles.

B. Rural Non-Agricultural Employment

6.5.8 In the long run, however, it must be recognised that agriculture and other land -based activities, even with a reasonably high rate and possible diversification of growth, will not be able to provide employment to all the rural workers at adequate levels of incomes. Fur-ther,technological and organisational changes accompanying agricultural growth are likely to lead to, first, a declining employment potential of farther growth, and second, conversion of a substantial number of those underemployed in agriculture into openly unemployed seeking work elsewhere. 'Even allowing that some of them will be able to find adequately remunerative jobs on migration to urban areas, it is not only desirable but necessary that the rural economy gets diversified into non-agricultural activities to provide productive employment to the growing rural labour force and also to reduce the wide economic differences between rural and urban areas.

6.5.9 Over one-fifth of the rural workers are engaged in non-agricultural activities. This proportion has shown a remarkably rapid increase in recent years. Available evidence suggests that this shift is attributable to the growth of productive employment opportunities in the non-farm sector in rural areas, and is not a result merely of the overcrowding in agriculture. Appropriate strategies and policies need to be evolved to strengthen this trend towards diversification of the rural economy. Practically all non- agricultural activities have shown a steady increase in employment. Manufacturing and services respectively accounted for 32 and 24 per cent of rural non-agricultural employment;trade accounted for 18 per cent and construction 15 per cent in 1987-88. Manufacturing has shown a reasonably high (about 3 per cent perannum) growth in employment during 1978-88. But construction, transport and trade have shown an annual growth in employment of 11, 7 and 4 per cent per annum respectively during this period.

6.5.10 It must be recognised that an increasingly larger component of rural industrial activities now consist of non traditional activities with forward and backward linkages with agriculture as well as those with little relation to agriculture. Unlike many traditional village industries which constituted only secondary or supplementary occupations, these activities are pursued as main occupations. Most of them are also producing commodities with reasonably high income elasticity of demand and thus are not likely to face any serious demand constraint. These include textile-based and agro-based industries, and those producing construction materials like bricks, tiles, pipes and cement. Some of these activities are now getting located, for economic reasons, in smaller towns in the rural hinterland, providing employment to the rural workers. With suitable promotional policies, including those relating to location and infra-structural development in rural towns, considerable expansion of such activities with a high employment potential for rural workers is feasible. Such policies should include measures for orientation of credit and lending practices of banks to suit small business and manufacturing enterprises, strengthening of producers' cooperatives and assistance in marketing and technology.

C. Industrial Sector

6.5.11 A decline in employment elasticity of the industrial sector has primarily been caused by the declining employment potential of output growth in the organised sector. Employment elasticity is estimated to be as low as 0.15 per cent for the organised manufacturing sector, but it is between 0.5 to 0.6 for the unorganised sector. A larger contribution of the small and unorganised sector is, therefore, likely to raise the employment elasticity and employment growth in the manufacturing sector significantly. The small industry sector currently contributes about one- half of value added and four-fifths of the total employment in manufacturing. If this segment of manufacturing can be made to grow at 10 per cent per annum, with the organised sector growing at about 5 per cent,the overall employment growth in the manufacturing sector will be about 4 per cent as against 2 per cent in the recent past. It needs to be recognised that the small and unorganised manufacturing sector consists of different highly variegated segments. Employment in the cottage and household industry has experienced a relative decline, due to shrinking markets on account of competition from modem products and often due to lack of technological upgradation to meet the new demands. Non-household, tiny sector has shown potential for growth, but suffers from the lack of financial and marketing facilities. The modem small scale sector has shown significant growth in output, employment and also exports. It is this sector which has also received the major part of the benefits of the promotional policy towards the small sector.

6.5.12 It has, however, been observed that the policy for the promotion of small scale industry has not been very effective in serving the employment objective. It is not directly related to employment in so far as the eligibility for preferential treatment in terms of incentives and other assistance is related to fixed capital investment. The assumption that small capital necessarily implies high employment per unit of capital has not always been found valid. Thus, while the criterion of capital size may be necessary for other socio-economic objectives, it is felt that employment criterion should be superimposed on it. In fact, some studies point out that in the absence of such a criterion, many small industries have tended to become unnecessarily capital intensive. To the extent such a tendency is observed, it suggests the need to examine the relative factor prices and changes in them over time, so as to check the tendency towards avoidable capital intensification.

6.5.13 The other problem of the small scale industry policy is that it has not benefitted the really small units. Due to the cumbersome procedures and non-existence of the promotional and service net-work in smaller towns and villages, the concessions and assistance have only reached the not-so-small sector. It is realised that the existing administrative and service agencies are not well suited to meet the requirements of the decentralised sector, which has substantial growth and employment potential. Therefore, it is desirable that the tiny or the micro-enterprise sector is recognised as a separate segment for evolving and implementing promotional policies.

D. Other Sectors

6.5.14 Among the major sectors of economic activity, construction recorded the highest growth in employment of over 10 per cent per annum during the period 1977-78 to 1987- 88, Both road construction and housing are a part of the basic needs of the people and, therefore, deserve to be given priority, as they will create the necessary assets and generate large-scale employment in the short run. It is estimated that connecting the 31 percent of the villages in the population group 1000-1500 and 10 per cent of those with larger size still unconnected by road will mean construction of 8 lakh kms. of road with an employment potential of 22.8 million person years. It is also observed that there is a concentration of these unconnected villages in the States with a high incidence of rural poverty and unemployment and hence it will be appropriate to give priority to construction of roads in these areas. Similarly, a high priority to housing and development of appropriate legal, institutional and financial mechanisms to encourage larger investment in this sector would meet the objectives of employment and provision of shelter simultaneously.

6.5.15 The growth of the services sector in recent years has been relatively fast but employment growth in this sector has been rather sluggish. It experienced a GDP growth of about 6 per cent during 1980-81 to 1986-87 (as against around 4 per cent during the 1970s) but employment growth during this period has been of the order of around 2.5 per cent only. This trend suggests that productivity has shown an increase and the service sector has not grown merely as a residual low productivity sector. Still, this sector has significant potential for employment generation both in rural and urban areas. Tourism, rural transport and repair services are sub-sectors identified as having relatively high growth as well as employment potential. In the rural areas, employment in the services sector can be expected to grow with the faster development of agri-business resulting in increasingly larger volume of goods to process, trade and transport.

6.5.16 In general, one may not expect any significant increase in public sector emp]oymentas there is already a high degree of overmanning both in the public enterprises and the Government Departments. But, in line with the aim of meeting certain basic objectives in areas like education and health, it would only be logical that more manpower is utilised for strengthening educational and health institutions, particularly in rural areas. Strengthening of teaching staff in rural areas, particularly single-teacher schools, and adequate manning of the health system, particularly in technical and para-medical occupations are likely to generate considerable job opportunities for the educated.

6.5.17 The urban informal sector has exhibited a high rate of growth of employment of around 6 per cent per annum. Manufacturing and services sector activities, including trade and transport constitute important segments of the urban informal sector with large employment potential. Recent studies indicate that there is a large unsatisfied demand for a number of services;that the quality of existing services needs to be improved; and that the major constraints on fuller development of this sector are the lack of inputs like credit and raw materials, facilities for skill development and space for carrying on such activities. Steps and policies including streamlining of existing municipal and other laws and regulations would be necessary to overcome these constraints. In general, a policy environment favourable for the growth of entrepreneur-ship and self- employment in medium and large towns and cities requires to be created. Besides streamlining existing schemes like Self- Employment Programme for Urban Poor (SEPUP), Self-Employment for Educated Unemployed Youth (SEEUY) and Nehru Rozgar Yojana (NRY) (Micro-entreprises scheme), it would also be useful to adopt the approach of the Society for Employment Promotion and Training in the Twin Cities of Hyderabad-Secundra-bad (SETWIN) on the basis of the experience gained.

6.5.18 As observed earlier, employment generation needs to be seen not merely in terms of creation of new opportunities for wage employment; an equally important thrust will need to be laid on creation of necessary conditions for an increasingly larger number of people to undertake activities on a self-employment basis, as well as raise the productivity and income levels of those already self-employed so as to see that they are not compelled to leave them and join the ranks of the openly unemployed. Infrastructure, access to credit and market linkages are found to be the most crucial factors in the development of a vibrant self-employment sector. Institutional arrangements for supply of these services along with suitable programmes for the development of technical skills and en-trepreneurship would need to be evolved.

6.5.19 Given the variegated nature of work requirements of different workers, particularly the underemployed, and also the varied nature and structure of work in different activities, the goal of providing work to all can only be achieved on the basis of detailed local level planning. Since a major part of unemployment and underemployment is to be found in rural areas where variations of these kinds are particularly marked across regions and areas and among activities, employment planning on a decentralised basis assumes special significance. While a certain degree of mobility, particularly among the openly unemployed and the educated, should be expected and even be encouraged, for a large mass of underemployed and unemployed, particularly, women, marginal farmers and those engaged in seasonal activities,.work needs to be generated locally, in the villages or nearby small towns. An exercise to assess and plan for work opportunities within an area to match the labour supply characteristics of the unemployed and the underemployed workers can only be effectively undertaken on an area-specific basis.

VI. Skills, Training and Employment

6.6.1 A part of the unemployment problem emanates from the mismatch between the skill requirements of employment opportunities and the skill base of the job-seekers. The mismatch is likely to become more acute in the process of rapid structural changes in the economy. It is, therefore, necessary to orient the educational and training system towards improving its capability to supply the requisite skills in the medium and long terms, and introduce greater flexibility in the training system so as to enable it to quickly respond to labour market changes in the short run. Besides, the system should also be in a position to impart suitable training to the large mass of workers engaged as self-employed and wage earners in the unorganised sector for ud-gradation of their skills, as an effective meaps for raising their productivity and income levels".

6.6.2 The existing training institutions like the ITIs have, no doubt, been meeting a significant part of the requirements of the skilled manpower of the organised industry. It, however, seems necessary that the processes of restructuring and reorientation of their courses are made more expeditious with a view to quickly responding to the labour market. A greater involvement of industry in planning and running the training system would also be necessary for this purpose. For skill upgradation of the workers in the unorganised sector, flexibility in the duration, timing and location of training courses would need to be introduced. To the extent a sizeable proportion of employment would have to be self-employment in tiny and small units in various sectors, the training system should also gear up not only forproviding " hard' skills in suitable trades, but also the 'soft' skills of entrepreneur-ship, management and marketing, as part of training courses.

6.6.3 It is widely recognised that the rapid expansion of education, particularly of higher education, has also contributed to the mismatch in the labour market. While shortages of middle level technical and supervisory skills are often experienced, graduates and post-graduates in arts, commerce and science constitute a large proportion of job- seekers. High private rates of return on higher education, to a large extent resulting from low private cost, is an important reason for the rush for higher education despite high incidence of educated unemployment. At the same time, efforts to divert the school leavers to vocational stream have so far been too little in relation to the size of the problem. While these efforts need to be strengthened, appropriate mechanisms also need to be evolved in the training and employment system to ensure that those graduating out of the vocational and middle level technical training courses, have the route to higher ladders open to them, through upgradation of their qualifications and skills by undergoing training in higher level courses during their employment career.

VII. Labour Policy and Employment

6.7.1 A few important aspects of labour policy also need to be addressed from the viewpoint of employment expansion. First, excessive regulation of conditions of employment making labour adjustment highly difficult, has often been cited as a factor restricting employment expansion. To the extent it is so, it also seems to reduce the overall degree of protection to labour as only a small number are engaged in the highly protected segments leaving an overwhelming majority of workers to work in completely insecure and unprotected conditions in the unorganised sector. It would, therefore, be desirable to rationalise the regulatory framework with a view to providing reasonable flexibility for workforce adjustment for effecting technological upgradation and improvement in efficiency.

6.7.2 On the other hand, it would be necessary to ensure that the quality of employment in the unorganised sector units improves in terms of earnings, conditions of work and social security. Technological upgradation and development of markets for products would lead to an increase in their productivity and wage paying capacity. But, suitable organisational arrangements would need to be developed to provide a minimum measure of social security for workers in the unorganised sector. The Welfare Boards for mine workers, beedl and cigar workers etc. set up by the Government of India and financed out of the cess levied on the production of the commodity concerned and the Welfare Boards for cashew workers, coir workers set up by the Government of Kerala are one set of examples of such arrangements. Other models are the Mutthadi Workers Board in Maharashtra, similar Boards in Kerala for unorganised workers and the Mutta and Jattu Hamal Boards being set up in Andhra Pradesh. Another model is the set of insurance schemes launched by the Government of India and State Governments of Gujarat, Kerala, Karnataka and Madhya Pradesh for landless agricultural labourers. All these need to be reviewed and a suitable model adopted. Alternatively, feasibility of a Central Fund, with tripartite contribution (or bipartite in the case of the self-employed) should also be examined.

6.7.3 A rational and equitable wage policy has been conspicuous by its absence for quite some time. Statutory provision of minimum wages for workers in the scheduled employments exists, but its coverage and implementation has been inadequate, so that a large part of the workforce is still outside the purview of wages fixed under the Minimum Wages Act, and the actual wages on the ground are often muct^lower than those fixed by the appropriate Governments under the Act. While the tendency to fix minimum wages at unreaslistically high level should be checked, implementation of wages once fixed must be ensured. The implementation machinery which consists of the labour administration machinery in the States has been far from effective. It is desirable that a greater role is played by the workers' organisations, non-governmental voluntary organisations and organised trade unions, in ensuring implementation of minimum wages, instead of enlarging the army of 'inspectors' for this purpose.

6.7.4 It is necessary to evolve a wage policy which guides the changes in wage and salary levels and wage structure. Wide differences in wages prevail between the organised and the unorganised sectors even in similar activities and occupations and among different regions. Even minimum wages fixed statutorily vary widely among States and regions. Further, changes in wage rates and wage levels over time vary significantly, mostly in the direction of increasing wage disparities. The levels of and changes in wages and salaries often have no relation with productivity and wages thus do not function as instruments that induce efficiency. It is, therefore, necessary that a national wage policy is evolved to guide steps in the direction of removing irrational and inequitous disparities in wage and salary levels and inducing efficiency; and also to streamline institutional mechanisms for wage fixation. In the past, besides the minimum wage fixation machinery, tripartite Wage Boards and collective bargaining at industry and unit level have been the major mechanisms for wage fixation and revision. It is desirable that tripartite bodies at all levels, starting from the Indian Labour Conference at the national level to region-cum- industry level, are constituted and utilised for consultations and agreements on wages and other matters of labour policy. In the past, such bodies either at the national and regional level or at the industry level have been confined to the organised sector only. Besides developing mechanisms to relate wage levels and wage increases to some measure of efficiency in the high wage sectors of the economy, efforts also need to be made to see that the unorganised sector is also brought under the purview of tripartite machinery.

VIII. Special Employment Programmes


6.8.1 It is recognised that the adoption of an employment-oriented strategy will enable attainment of the goal of near full employment, but only over a period of time. According to the present estimates, such a goal could be realistically fixed for 2002 AD. Provision of short-term employment for those still unemployed and underemployed, particularly among the poor and the vulnerable, would be necessary in the interim period. Special Employment Programmes as in the past would, therefore, have to be continued. It may, in fact, be necessary to suitably extend such programmes with a view to providing a measure of guarantee of work, particularly as a safety net to the poor. It would, therefore, be all the more necessary that these programmes are recast with a view to making them more effective in meeting not only the short-term objective of providing temporary work to the unemployed, but also in contributing to the productivity of local resources and productive capacity of individuals to lead to generation of larger employment opportunities on a sustained basis.

6.8.2 It is important, in any case, to recognise that the Special Employment Programmes could be only an interim measure, to provide supplementary employment and assistance to build capabilities for sustained employment, to the underemployed and the unemployed, particularly among the poor, till they are able to secure stable employment generated in the development process. Therefore, the main thrust should be on the acceleration of the rate of employment growth over the years so that the need for special programmes declines in successive years and tapers off by the end of the decade. Continuing necessity of such programmes on a large scale would, in fact, imply failure of the employment oriented development strategy that is envisaged as the main plank of the Eighth Plan.

IX Summing-Up

6.9.1 The main elements of the strategy, policies and programmes towards expansion of employment opportunities during the Eighth Plan, as described in the preceding Sections of this Chapter, may be summarised as follows : ,

  1. A faster and geographically diversified growth of agriculture, so that the hitherto lagging regions have a larger share in agricultural growth; and diversification of agriculture into high value, more labour intensive crops like vegetable and fruits, particularly in the agriculturally better developed regions;
  2. Development of infrastructure and marketing arrangements for agro-based and allied activities like dairy, poultry, fishery and sericulture to accelerate growth of these sectors;
  3. An expanded programme of development and utilisation of wasteland for crop-cultivation and forestry;
  4. Development of an appropriate support and policy framework for the growth of non-agricultural, particularly manufacturing activities, in rural areas, including rural towns;
  5. Greater attention to the needs of the small and decentralised manufacturing sector as a major source of industrial growth, particularly in the production of consumption goods and manufactured exports;
  6. Large scale programmes of construction of infrastructure and residential accommodation, the latter to be encouraged particularly in the private sector through appropriate land, financial and fiscal policies;
  7. Strengthening of basic health and education facilities, particularly in the rural areas;
  8. Facilities for faster growth of the services and informal sector activities through greater ease of entry and suitable support systems;
  9. Identification and relaxation of legislative and policy measures found to restrict growth of employment;
  10. Greater flexibility in special employment programmes and their integration with sectoral development with a view to ensuring their constribution to growth and sustain-able employment, and;
  11. Revamping of training systems to introduce greater flexibility and responsiveness to labour market trends,, and larger involvement of users of the system's output, and to provide opportunities for upgradation of skills of the employed workers and also, for the development of entrepreneurship for the actual and potential self-employed.

6.9.2 These measures are expected to contribute to the faster growth of the economy and, at the same time, increase the overall employment content of growth. It is assessed that the relatively faster growth of the sectors identified above can raise employment elasticity close to 0.5, side by side leading to perceptible improvements in labour productivity. The envisaged GDP growth rate of 5.6 per cent during the Eighth Plan, would thus result in an employment growth of around 2.6 to 2.8 per cent per annum, or an average of about 8 to 9 million additional employment opportunities per year. A continuation of employment growth of the Eighth Plan into Ninth Plan, implying an average of 9.5 million employment opportunities per annum, should be able to reduce unemployment to a negligible level by 2002, by and large taking care of the backlog alongwith the addition of 36 million in the labour force during 1997-2002.

6.9.3 It must, however, be admitted that the ongoing structural reforms may entail a slow down in the growth rate of GDP and, therefore, of employment during the initial one or two years of the Eighth Plan. Institutional arrangements for retraining and redeployment and various measures of safety net for the workers affected by contraction in employment and erosion in the real income of those with non-indexed incomes are being considered. But the most effective way to deal with the problem would be to create conditions, particularly in the informal sector, to generate larger productive employment by making entry of individuals and tiny units into processing, repair, transport and other services sectors easier, and access to credit, space and other inputs wider. Such a strategy would not only provide a temporary saftey net but will also provide employment on a sustainable basis.

Table 6.1 Growth of Employment* 1977-78 to 1987-88

Rural Urban Total
Employment (million)
977-78 136.2 59.8 196.0 36.1 7.7 43.8 172.3 67.5 239.8
1983 147.9 65.9 213.8 45.4 9.6 55.0 193.3 75.5 268.8
1987-88 157.7 70.5 228.2 51.7 11.0 62.7 209.4 81.5 290.9
Annual Rates of Growth(%)
1977-78 to 1983 1.51 1.77 1.59 4.23 4.18 4.22 2.11 2.06 2.10
1983 to 1987-88 1.43 1.52 1.46 2.97 2.95 2.96 1.80 1.71 1.77
1977-78 to 1987-88 1.48 1.66 1.53 3.66 3.62 3.66 1.97 1.90 1.95

* Usual Principal Status (UPS).
M - Male F-Female T-Total
Source : NSSO (32nd, 38th and 43rd Rounds) and Estimates of Population based on 1971 and 1981 Census population and provisional population totals of 1991 Census.

Table 6.2 Growth Rates of Employment* by Major Sectors

Sl. No. Sector 1977-78 to 1983 1983 to 1987-88 1977-78 to 1987-88

( per cent per annum )

1.Agriculture 0.91 0.94 0.92
2.Mining 6.32 5.68 6.03
3. Manufacturing 3.76 2.18 3.05
4. Construction 7.93 13.03 10.19
5. Elect. Gas and Water Supply 6.01 3.15 4.71
6.Trade 3.52 3.83 3.66
7. Transport, Storage and Communication 6.66 2.35 4.70
8.Services 4.49 2.06 3.39
Total : 2.10 1.77 1.95

* UPS; Source: ibid

Table 6.3 Growth in Organised Sector Employment: 1978-88

Sl. No. Sector 1978-83 1983-88 1978-88

(per cent per annum)

1. Agriculture 1.30 1.11 1.21
2. Mining and Quarrying 2.56 0.88 1.71
3. Manufatureing 2.07 (-) 0.09 0.99
4. Elec.,Gas and Water 3.67 3.26 3.47
5. Construction 1.92 1.25 1.59
6. Trade 1.94 1.43 1.69
7. Trans., Storage and Communication 2.25 1.20 1.72
8. Services 2.96 2.25 2.60
Total : 2.48 1.38 1.93
Public Sector 2.99 2.17 2.58
Private Sector 1.41 (-)0.43 0.48

* Based on data from Employment Market Information Progmmme of the Ministry of Labour.

Table 6.4 Average Annual Rates uf Growth of Employment * of the Educated: 1977-78 -1987-88

Sex/Residence 1977-78 to 1983 1983 to 1987-88 1977-78 to 1987-88

(per cent)

Rural 6.61 8.35 7.39
Urban 4.88 6.21 5.48
Male 5.51 6.76 6.07
Female 6.58 11.08 8.58
Total 5.59 7.14 6.29

* Usual Principal Status (age group 15 +); Based on NSSO 32nd, 38th and 43rd Rounds.

Table 6.5 Percentage Distribution of Workers * by 9 Major Sectors

Sector 1977-78 1983 1987-88
1. Agriculture 70.70 66.31 63.90
2. Mining and Quarying 0.52 0.65 0.77
3. Manufacturing 10.00 10.93 11.13
4. Electricity,Gas and Water Supply 0.26 0.32 0.34
5. Construction 1.82 2.47 3.96
6. Trade 6.18 6.67 7.30
7. Transport 2.13 2.71 2.78
8. Financing, Real Estate, Insurance and business services 0.55 0.73 0.83
9. Community, Social and Personal Services 7.82 8.78 8.80
Total 100.0 100.0 100.0

* UPS; Notes : 1. Total includes a negligible group industry not recorded'; 2. Based on NSSO 32nd, 38th and 43 Rounds.

Table 6.6 Percentage Distribution of Workers * by Category of Employment

Rural Urban Total
Male Female Total Male Female Total Male Female Total
Self Employment
977-78 62.2 56.3 60.4 39.9 42.2 40.3 57.9 54.8 57.0
1983 59.5 54.1 57.8 40.2 37.3 39.7 55.0 52.0 54.1
1987-88 57.5 55.1 56.7 41.0 38.6 40.5 53.8 53.1 53.6
Regular Salaried Employment
1977-78 10.9 3.7 8.6 47.2 30.8 44.2 17.9 6.6 14.6
1983 10.6 3.7 8.5 44.5 31.8 42.2 18.5 7.3 15.3
1987-88 10.4 4.7 8.6 44.4 34.7 42.7 18.0 8.3 15.2
Casual Wage Employment
1977-78 26.9 40.0 31.0 12.9 27.0 15.5 24.2 38.6 28.4
1983 29.9 42.2 33.7 15.3 30.9 18.1 26.5 40.7 30.6
1987-88 32.1 40.2 34.7 14.6 26.7 16.8 28.2 38.6 31.2

* UPS; Source: ibid

Table 6.7 Unemployment Rates * by Sex, Residence and Status

Sector/ Status





UPS - - - 2.22 5.52 3.26 2.12 1.41 1.91 2.87 3.52 3.07
UPSS 1.16 0.48 0.92 1.28 2.01 1.54 1.41 0.66 1.13 1.81 2.27 1.98
cws 3.02 5.51 3.86 3.57 4.13 3.74 3.72 4.26 3.88 4.16 4.27 4.19
CDS 6.83 11.22 8.21 7.12 9.18 7.70 7.52 8.98 7.94 4.58 6.91 5.25
UPS - - - 6.48 17.76 8.77 5.86 6.90 6.04 6.07 8.77 6.56
UPSS 4.79 6.05 5.03 5.40 12.40 7.01 5.08 4.85 5.02 5.16 5.93 5.32
cws 5.96 9.09 6.53 7.12 10.93 7.86 6.69 7.46 6,81 6.71 8.93 7.12
CDS 8.02 13.67 8.99 9.40 14.55 10.34 9.23 10.99 9.52 8.79 12.00 9.36
UPS - - - 3.07 7.01 4.23 3.02 2.14 2.77 3.60 4.19 3.77
UPSS 1.90 1.02 1.61 2.09 3.19 2.47 2.28 1.16 1.90 2.56 2.72 2.62
cws 3.61 5.87 4.32 4.29 4.97 4.48 4.44 4.70 4.51 4.75 4.92 4.80
CDS 7.07 11.46 8.35 7.59 9.86 8.18 7.93 9.26 8.28 5.54 7.61 6.09

* Unemployed as percentage of labour force.; UPS : Usual Principal Status; UPSS : Usual Principal and Subsidiary Status;
CWS : Current Weekly Status ; CDS : Current Daily Status; M-Male F-Female T-Total
Source : NSSO: 27th, 32nd, 38th and 43rd Rounds.

Table 6.8 State-wise Unemployment Rates * 1987-88

Usual Principal Status Current Weekly Status Current Daily Status
l.Andhra Pradesh 3.90 5.10 7.35
2.Assam 5.62 5.02 5.09
3.Bihar 2.84 3.77 4.04
4-Gujarat 2.57 4.03 5.79
5-Haryana 5.86 6.57 7.59
6.Himachal Pradesh 3.19 3.05 3.12
7Jammu and Kashmir 2.67 5.36 5.57
S.Kamataka 2.44 3.28 5.06
9.Kerala 17.07 17.62 21.19
lO.Madhya Pradesh 1.51 2.51 2.86
ll.Maharasthra 2.86 3.63 4.67
12.Manipur 2.20 2.03 2.10
13-Meghalaya 0.31 0.32 0.32
14-Nagaland 4.45 4.41 4.41
15-Orissa 4.66 5.16 6.44
16. Punjab 4.04 4.28 5.07
17.Rajasthan 2.68 4.21 5.74
IS.Sikkim 3.83 2.77 2.88
19.Tamil Nadu 5.25 7.61 10.36
20-Tripura 4.41 4.31 4.66
21.Uttar Pradesh 1.83 2.78 3.44
22. West Bengal 6.06 6.69 8.13
23.A and N. Islands 4.01 4.52 5.77
24.Arunachal Pradesh 0.20 0.28 0.28
25.Chandigarh 8.55 8.91 8.80
26. D and N Haveli 0.42 0.68 0.95
27.Delhi 5.01 4.68 4.77
28.Goa, Daman and Diu 8.99 9.72 11.30
29-Lakshadweep 21.36 21.78 22.14
30.Mizoram 0.11 0.11 0.23
31-Pondicherry 6.73 10.70 21.14
All India 3.77 4.80 6.09

* Unemployed as percentage of labour force.; Source: NSSO - 43rd Round Survey.
Note: The survey did not include figures for rural areas of Nagaland and Ladakh and Kargil districts of Jammu and Kashmir.

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