Indian Council for Research on International Economic Relations

Ongoing Details

The Challenge of Productive Employment Creation in India

Project Leader: Radhicka Kapoor
Research Team: P.P. Krishnapriya, Surbhi Ghai and Serene Vaid
Commencement: November 2016
Funded by: Ford Foundation

As India stands at the cusp of a demographic dividend, the maximisation of employment and not just maximisation of GDP needs to take centre stage. There is an urgent need to create an environment that is conducive to the attainment of full and productive employment and decent work for all as a foundation for sustainable development. It is widely acknowledged that India has been far from successful in creating such employment opportunities. In the given context, it is imperative to understand where jobs will come from in the future, where existing jobs are located in the economy and whether these jobs are indeed productive/good jobs. The key objective of the study is to understand the drivers of output growth and employment growth in a way that informs policy. More specifically, it examines whether certain sectors and types of firms hold the key to job creation. What has been the record of these sectors and firms in contributing to output growth and job creation so far? To the extent that their track record has been lacking, what holds these firms back from creating good jobs? Additionally, using data from the Annual Survey of Industries, the study examines variations in the performance of the manufacturing sector across Indian states to identify the role of state level regulatory factors in explaining this heterogeneity. Understanding these questions is essential for the policy debate to rest on strong conceptual foundations.

While such an analysis is imperative to understand where and what kind of jobs have been created in a country, any study on employment in India would be incomplete without a discussion on the nature of available employment statistics. Employment statistics are a key input in designing macroeconomic policies and need to be reliably sourced, accurate and timely for policy responses to be meaningful and for validation of outcomes of policy decisions taken. However, the reliability and timeliness of employment statistics in India leave much to be desired. Real time data is missing and, unlike in the US economy where employment statistics can be tracked minutely through official data, there are very few data points to rely on in the case of India. In the absence of frequently updated data, policy planners have to extrapolate old data such as the five-year cycle for employment data from the NSSO. The government needs to focus on improving the measurement of employment and wages even as it works towards improving the ease of doing business and enhancing India’s manufacturing and employment capability. An important part of this study, therefore, will be to discuss the shortfalls in employment statistics and examine alternative data sources that can perhaps give a better sense of real time changes in labour markets. This is a challenging exercise, further exacerbated by the complex employment dynamics in developing countries.

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