GDP Growth and Narrative on Unemployment: Know the Ground Reality
By Manohar Manoj
The recently reported GDP growth rate of 7.8 percent has been criticised by the opposition and several economists as being government-sponsored. On the other hand, the government has strongly defended these figures, saying that they have been accepted by the IMF and the World Bank. However, the government has not been able to convincingly answer the criticism that, despite high economic growth, unemployment continues to persist in the country.
In India, governments generally cite higher or lower recorded unemployment rates to promote a particular narrative. Yet such figures often fail to fully reflect the depth of employment and unemployment in Indian society and the economy. It is true that changes in the growth rate affect employment and unemployment to some extent, indicating their broad impact on the availability of jobs for skilled and unskilled workers in a dynamic economy. The government is currently presenting the figure that the proportion of the working population has increased from 50 percent during the COVID period to around 58–60 percent now.
However, unemployment in India cannot be understood only through changes in the growth rate. It is also shaped by the broader structure and coverage of labour laws across the country and its many states—covering recruitment, wages, working conditions, labour welfare and retrenchment. It is further shaped by the many worlds of labour in India, their sociology, and their claims, demands, bargaining power, regulation and pressure groups within political democracy. From the perspective of employment economics, the skill level and productivity of the labour force, along with the forces of demand and supply in the job market, are certainly important factors.
For a proper study of unemployment in India, it is necessary first to examine all categories of employed and unemployed persons and then assess their actual condition. Broadly, those seeking employment in India may be divided into the following categories:
Educated unemployed persons, and illiterate unemployed persons; the semi-educated unemployed may also be included in this category.
Workers employed in the government sector and those employed in the private sector.
Employment in the organised sector versus the unorganised sector
Employment in the formal economy versus employment in the informal economy.
The demand and supply position of skilled, semi-skilled and unskilled labour.
Daily-wage labourers and monthly salaried workers.
Contractual employment and appointments to permanent posts.
Jobs versus self-employment.
Class I, II, III and IV categories of employment, including the role of reservation policy within them.
The actual situation in each of these categories of employment, together with the legal and administrative framework of the government, society and the system, substantially influences unemployment in India.
The environment for employing India’s labour force presents a highly unequal and distorted picture. The legal framework and the prevailing structure of labour have evolved in such a way that the workforce employed in the government sector enjoys extensive labour-welfare provisions and rights. There is security of employment, stability of service and a broad guarantee of welfare. Yet productivity, work performance, and accountability towards consumers and the public are often found lacking. The government does not impose adequate obligations on this workforce in these matters.
The situation in the private sector is the reverse. There, profits are often increased by paying workers less than what their productivity warrants. These conditions have created an extraordinary attraction towards government jobs in Indian society. Yet governments show little interest in filling vacancies in their departments because they seek to avoid the financial burden and labour-law obligations associated with permanent employment.
As a result, despite the heavy workload of government schemes and programmes, only a limited number of gazetted and non-gazetted vacancies are filled through commission examinations. Otherwise, a retiring employee’s responsibilities are assigned to another employee, or recruitment is carried out through contracts and temporary appointments. These conditions have prevailed in the Union government and across state governments since the 1990s. Some governments initiate recruitment in police forces and teaching positions during elections, but for most of the time they avoid filling vacancies. Consequently, India’s vast unemployed population—deeply attached to the aspiration of government jobs—continues to remain unemployed.
At present, there are three categories of workers in the Union government: permanent employees; employees appointed after 2004 without pension benefits; and contractual employees. Overall, the broad outcome of these circumstances is that, despite the country’s enormous unemployed labour force, the workforce of the Union government has been steadily declining.
The Union government’s workforce, once around 70 lakh, has reportedly fallen to about 55 lakh, while the number of pensioners is higher, at around 70 lakh. It is estimated that 15–20 lakh sanctioned posts are vacant in the Railways, paramilitary forces, armed forces, and departments of education, health and technology under the Union government. Filling military vacancies through the Agniveer scheme reflects the casual and contractual approach of the government’s recruitment policy.
The question, therefore, is: why does the Government of India not bring in a nationwide and universal law on contractual employment that provides a comprehensive solution to all working conditions? Or why does it not clearly determine which departments and posts will be permanent and which will be contractual? If the Union government takes such an initiative and obtains the consent of all state governments, it could bring broad and revolutionary change in the condition of educated employment in the country.
On the one hand, this could enable immediate recruitment to 15 lakh vacant posts in the Union government and to a large number of posts in state departments—particularly in police and education. In total, appointments to nearly one crore posts could become possible. This would have a significant impact on reducing educated unemployment, without having to wait for a higher growth rate or a faster economy.
The second effect would be on private-sector employment, where a new contractual employment law could create fairer conditions and greater uniformity in the labour market. It would also reduce the distinction between government and private-sector employment, as labour laws and working conditions would become similar in both sectors. The demand of the new economic policy and economic order is that public and private participation should be determined within a common framework, under a single law and regulatory authority, providing a level playing field.
Educated unemployment has remained a politically sensitive issue in the country. Such legal and environmental changes could quickly generate nearly two crore jobs for educated unemployed persons in both the private and public sectors. India has only about 16 government employees per thousand population, compared with 77 in a capitalist country like the United States and 57 in China. Therefore, the government must take the initiative to generate educated employment; this will inevitably influence employment generation across non-government sectors as well.
For this, the government should begin a national exercise to audit vacant posts and employment opportunities across all public and private establishments. On the one hand, it would reduce the government’s reluctance to fill jobs due to the perceived burden of permanent employment. On the other hand, it would curb the private sector’s tendency to make fewer workers perform more work in order to earn higher profits.
The role of demand and supply forces in India’s labour market also cannot be denied. India’s free-market economy is influenced by changes in multiple areas of development and by the resulting demand for labour. Demand for skilled workers is increasing rapidly in real estate, information technology, transport, automobiles, health and education.
Therefore, the supply of semi-skilled, skilled and fully trained workers depends on the establishment of more worker-training institutions and on the political will of the government to operate them effectively and rapidly. New and emerging sectors of the economy, such as the gig economy, have opened up employment opportunities for semi-educated workers, while self-employment opportunities in public transport are also expanding rapidly.
The growth rate of India’s economy increases the potential for employment generation in government business enterprises as well as private manufacturing companies. However, comprehensive coverage of labour laws over the workforce is necessary not only for productivity but also for equality of opportunity, an egalitarian society and a just economy.
Therefore, one cannot explain changes in the country’s employment and unemployment situation merely by referring to a higher or lower growth rate. Unless the legal and compliance-based barriers between different categories of employment are removed—between organised and unorganised work, permanent and contractual work, public and private employment, and formal and informal employment—there can be no comprehensive solution to unemployment.
At the same time, qualifications, skills, productivity, experience, and the forces of demand and supply will undoubtedly continue to influence our labour market and, accordingly, shape our economy.
Employment should neither be a matter of anyone’s favour or charity, nor should it become a white elephant. It should not mean different wages for the same work, unequal opportunities for the same qualifications, or differing working conditions for the same job. For a lasting and decisive attack on unemployment, government economic policies must be employment-oriented while also encouraging productivity, welfare, investment and profits. Only then can sustainable employment flourish.
At the same time, there must be a continuous search for new avenues of employment in both the private and public sectors.
The author is the Convenor of Bharat Parivartan Abhiyan.