Low-Productivity Jobs Are Hurting India's Growth

Summary

As with any emerging countries, employment in India has been moving from agriculture to other industries in the past few decades. Between 1981 to 2016, agriculture sector's share in employment has fallen from 70% to 42%. In the case of India though, the role of manufacturing industry was limited. Its employment share barely rose from 10% in 1981 to 12% in 2016. In India, it was the service sector, and more recently the construction sector that absorbed the expanding labour force in India. The employment share of the service sector rose from 17% to 31% between 1981 and 2016, and that of construction rose from 2% to 14% in the same period. For the latter industry, the rural construction boom in 2000-12 added quite a few jobs. While more jobs are certainly better, the productivity growth in the construction sector has unfortunately been falling in the 10 years to 2015 and the per person value added is falling close to that of the agriculture sector. While the productivity growth in the service sector is decent, its employment growth has been slowing in recent years. We believe that the prevalence of low value adding jobs and a slower growth in high-productivity jobs has started to hurt the overall growth the economy. India needs to produce high productivity employment along with high-skilled labour to reap the chances of a favourable demographic dividend.

To read a full report, please become a Premium subscriber.

Start a Premium subscription

If you are already an IMA subscriber please