Home / Opinion / Industrial employment shrinks

The industrial slowdown has hurt employment on the factory floor.

The new Annual Survey of Industries (provisional) shows a nearly 4% decline in the number of industrial workers in the organised sector. This comes after a decade of nearly 5% annual growth. In 2012-13, Indian industry shed nearly 400,000 workers, leaving the total number of organised sector workers at just over 10 million.

The economic slowdown would have had a large part to play in this decline of organised sector employment given its broad-based nature. The fall is evident across industries and states. It just adds to the woes of the stagnant manufacturing sector. Even during days of employment growth, a large majority of it had come from contract workers, and growth in directly employed workers remained subdued. Given the financial stress and overcapacity in the manufacturing sector, there is hardly any driver for growth in the near term.

A look at state-wise numbers gives a clearer picture of the sorry state of affairs. Almost all the biggest employers of industrial workers such as Tamil Nadu and Maharashtra shed workers in 2012-13. The worst performer among these was erstwhile Andhra Pradesh, showing a fall of nearly 11%. Some of the southern states, especially Tamil Nadu, suffered from crippling power shortages during this period which reflects in the drop in workers.

Even states which had recorded the fastest growth of workers in the five years to 2011-12 showed a trend reversal barring Himachal Pradesh. Along with Uttarakhand, this state has seen the fastest growth in the past decade owing to industry-friendly policies, and tax concessions and grants from central government owing to their special category status.

At the sectoral level, most of the labour-intensive industries such as textiles and mining have shown a contraction in employment. The mining sector, which had posted an overall annual growth of 20% in number of workers between 2008-09 and 2011-12 saw a decline of 7% in the following year. This period coincides with the wide-ranging bans on this activity imposed by different state governments as the Supreme Court.

All the top 5 industries – food products, textiles, apparel, metals and mineral products - employing the highest number of workers show an employment decline. There were a few outliers such as furniture and waste collection industries. The automobile sector should be of special concern to policymakers there was a marked contraction of 5% in 2012-13 after double-digit growth in the three years to 2011-12. Note that labour troubles such as the incident involving Maruti Suzuki India Ltd’s workers and its officials that led to the death of a manager happened that year. Besides, the global slowdown in automobile demand has also impacted Indian automobile industry’s exports.

According to Jayan Jose Thomas, assistant professor at IIT Delhi, one major reason behind the drop in employment was a marked increase in the share of imports in some industries such as machinery and transport equipment. He added that this had depressed growth prospects of small-scale industries as well, by denying them the opportunities for manufacture of components and ancillaries.

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