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No longer a bottomless pit

No longer a bottomless pit
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First Published: Tue, Aug 19 2008. 10 57 PM IST
Updated: Tue, Aug 19 2008. 10 57 PM IST
India’s farm economy will create no new jobs in the coming years — and that is good news.
The Planning Commission estimates in the 11th Plan that the number of workers in agriculture will stagnate between 2006-07 and 2011-12 — and then drop by around four million in the subsequent five years. This is perhaps the first time since data has been collected that Indian agriculture will no longer be the bottomless pit in which the unemployed and unemployable are hidden.
The actual economy rarely jumps through the hoops that planners hold in front of it and so the eventual pattern of employment may be quite different from these estimates. Yet, what the Planning Commission expects is truly extraordinary. If fewer people in absolute terms will be busy on the farm from now on, not just the economy but India as a country would have changed — becoming less agricultural and perhaps more urban.
Jobless growth is usually not welcome. It is only when new jobs are created that the benefits of economic growth filter down to more people. That is the true meaning of inclusive growth — the ability to provide quality jobs to as many people as possible. In fact, the phrase “inclusive growth” gained wide currency only at the beginning of this decade, when there were widespread fears that the rapid economic growth of the 1990s was not creating enough jobs or bringing down poverty fast enough. Subsidies and rural employment generation schemes are politically attractive ways to help the poor, but they are usually wasteful and short-term fixes. They do not eventually lead to truly inclusive growth.
Gainful employment is the only way out. An earlier instalment of this column had quoted Nobel Prize-winning economist Edmund Phelps as saying this: “High wages enable workers to solve various problems, participate in the economy and live with dignity.”
Agriculture has kept absorbing people. The problem is that new jobs created in agriculture amount to disguised unemployment. In other words, it is possible to produce the same amount of farm output by employing fewer workers. But there were few jobs outside agriculture and millions were trapped in low-productivity work in farms. Indian farms are family-owned, so family members who have no job opportunities outside end up toiling on the same patch of land that already employs too many people.
That is why jobless growth in agriculture should be welcome. The farm income pie will not keep getting cut into ever-smaller pieces; incomes would improve.
But, where are the alternative jobs — both for new entrants into the labour force and the four million or so who will leave their farms?
And this is where the Plan documents point to really interesting possibilities. The traditional answer is that people moving off the farm will eventually be absorbed in labour-intensive manufacturing. That is what happened across Asia, in countries such as Taiwan, South Korea, Thailand and Malaysia. Farm labour moved into the cities and export zones to work in factories that made toys, textiles, computer chips and the like for the export market. There are too many obstacles to the growth of such labour-intensive manufacturing in India, including labour laws that protect those with industrial jobs but harm prospective workers.
The Planning Commission says it expects an extra 11 million manufacturing jobs in the five years to March 2012. But that’s not where the story ends. Almost an equal number of new jobs will be created in the construction industry. Trade, hotels and restaurants will absorb an extra 17 million workers. And another nine million will find jobs in transport, storage and communication.
What this means is that we will be seeing radical change in the Indian workforce. Fewer people will be toiling away on farms in rural India. New workers will find employment in factories, but far more will be busy at construction sites, restaurants, retail outlets and warehouses.
Such work will not necessarily allow them to live better. A lot will depend on the details. A job in retail? Does that not mean standing at the check-out counter of a large department store or toiling away in a corner shop? Construction work? With an engineering company that invests in worker safety or some site that has never seen a hard hat? And what of proper labour contracts, decent wages and social security?
The Planning Commission has raised a very valid issue in the 11th Plan: what it calls the informalization of employment. Too many Indians will continue to have jobs in tiny and unorganized workplaces. The growth of the formal sector will hopefully lead to better working conditions and wages. That is something those opposed to modern retailing and the reform of land laws should understand.
Your comments are welcome at cafeeconomics@livemint.com
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First Published: Tue, Aug 19 2008. 10 57 PM IST