Job generation failing to keep pace with growth

Job generation failing to keep pace with growth

New Delhi: The total number of people employed in India’s organized manufacturing sector increased by only 4.1% although output grew in double digits, data from preliminary results of the Annual Survey of Industries (ASI) for the year 2009-10 shows.

“A return to a longer-run trend of softness in the growth rate of employement is a concern. Organized sector employment has not seen rapid growth. The growth is relatively low compared to growth rate in value added and output," said T.C.A. Anant, chief statistician of India.

The ASI estimates the contribution of the organized manufacturing sector to national and state gross domestic product, and analyses the structure of industries and the various factors impacting it.

“The coverage of ASI is dictated by the Factories Act and the chief inspector of factories. There is a number of secondary evidence to suggest that employment growth in much-regulated areas of manufacturing has been slower as compared to unorganized and unregulated areas of production, which is partly being shown up in the data", Anant said.

Anant, however, attributed the low levels of employment to the dominance of large factory units in the sample survey. “Even though ASI’s coverage includes both large and small factory units, it does have a dominance of large factory units and a part of this slow growth in the organized sector employment is because of this."

Of the 61,080 sample size, around 25,000 were large units, said an official in the ministry of statisitics and implementation. A unit is classified as “large" when it employs more than 100 workers.

The decline in the growth rate of employment was visible mainly in four sectors—machinery and equipment (21.3%), tobacco (7%), paper and paper products (1%) and textiles (1%).

“ASI captures only existing units and is not very good at capturing new units. Companies become more efficient over the years and do not employ new people. It is only the new units which hire more people", said Pronab Sen, a former chief statisician.

The capital output ratio (capital required for one unit of output), a measure of productivity, increased to 2.32 in 2009-10 from 1.98 in 2008-09—suggesting a decline in productivity. Both Sen and Anant felt otherwise.

“If the economy is at an accelerating phase, the capital invested does not get reflected in the current output as measured by the capital output ratio. The effect of the capital investment will only be reflected with a lag," said Sen.

Investment into the manufacturing sector showed good growth with fixed capital investment growing nearly 28%.

“The latter half of 2008-09 saw many corporates delaying investments. This growth could be explained by this pent-up invetsment", said Anant.

But only around 3,000 new factories were set up in the fiscal. “Most of this investment was mainly into existing factory units," said Anant.