The economic slowdown, coupled with falling labour intensity of industry, would reverse labour migration from agriculture and redirect 12 million to low-productivity farms in 2013-19, a Crisil Research study has said. The revelation disturbingly points to the grim reality that unless long-pending labour reforms are pushed with determination to boost employment-intensive manufacturing industries, the result could be acute job distress and an imminent social implosion.
The Crisil forecast comes close on the heels of Congress vice-president Rahul Gandhi underscoring the urgent need to tweak multiple labour laws at the central and state levels to increase labour flexibility, a necessary condition for the economy to grow and create decent jobs for about 10 million people entering the country’s labour market every year.
According to Crisil, employment outside agriculture will increase by only 38 million between 2011-12 and 2018-19 compared with 52 million between 2004-05 and 2011-12. In contrast, the additional employment in the farm sector between 2011-12 and 2018-19 will be 12 million, compared with the decline of 37 million between 2004-05 and 2011-12.
The manufacturing sector’s share in India’s GDP has stagnated at 16% for many years as transportation bottlenecks (physical and tax- and administration-related) and poor quality/paucity of electricity stifled the sector, along with inflexible labour norms. There are as many as 40 labour laws in India at the central and state levels that manufacturers will have to comply with and the burden of compliance increases as a unit grows in size.
That, however, doesn’t prevent the government from setting lofty goals like creating 100 million additional jobs in manufacturing by 2025 and taking the share of manufacturing in GDP to 25%, as is said in the national manufacturing policy.
The farm sector with 14% share in GDP employs 49% of the workforce at present.
“The ability of relatively labour-intensive sectors such as manufacturing to absorb labour has diminished considerably in the face of rising automation and complicated labour laws. The employment elasticity of manufacturing deteroriated sharply to an average 0.17 in the seven years to FY 2012 from 0.68 in the seven years to FY 2005. As a result of falling labour intensity, GDP growth now creates far fewer jobs in the industry including manufacturing, construction, mining, utilities and the services sector than it used to a decade ago,” Crisil said.
Some economists, however, do not believe there would be workforce migration from the industry to the farm sector in response to