Abstract 

Income and Employment Intensive Growth Agenda for India: The paper examines income and employment status in the Indian labour force to identify policy attention and follow up. The macroeconomic policies taken during last one decade are yielding positive results leading to expansion of manufacturing and services and structural transformation in the economy. GDP growth (8.2 per cent in 2024) particularly in manufacturing and construction (9.9 per cent) and financial /professional services and real estate (8.6 per cent) along with slow growth of agriculture (1.4 per cent) leads to increasing emphasis on non-farm sector. At the same time, low productivity of self-employed, casual labour, non-contract salaried workers, women participation and rural areas assume special attention for economic growth.

In continuation of recent policies specific initiatives are emerging covering social security, insurance and forward and reverse supply chain, productivity linked incentives, internships with industry/MSME. Finally, fifteen-point state specific agenda along with the potential role of centre and local bodies in the federal structure of India is suggested. 

Introduction 

Recent trends in the economic growth reaffirm that micro-economic policies are yielding positive results for income and employment generation in India. Economic growth is registering a consistently high growth (around 7 per cent) on year-to-year basis and endorse specific focus on both labour and income intensive activities1. The latest data on growth in economy @8.2 per cent in 2024 also suggests appreciable progress in manufacturing and construction @ 9.9 per cent each whereas real estate, financial and professional services have also maintained a reasonably high rate of growth being 8.4 per cent respectively during the same year. On the other hand, Agriculture has shown a fairly low rate of 1.4 per cent during 2023-24.

It is also noted that India has added 4.7 crores jobs in the year 2023-24 on the basis of assessment based on KLEMS data covering 27 sectors2. Data also indicate a V shape recovery in creation of jobs as compared to 2022-23 (1.9 Crores) and 2021-22 (1.2 Crores) in Indian economy after the recession caused by COVID-19. Accordingly unemployment rate declined from 4.2 per cent in 2021 to 3.6 per cent in 2022, and further to 3.1 per cent in 20233. Against this background RBI also concludes that last five years have witnessed more employment opportunities than the people joining the labour force.

The job creation and reduction in unemployment confirm the overall positive trends on various initiatives at intergovernmental level. Government of India in recent past has initiated several schemes to facilitate better access to land, labour, and finance and marketing facilities for generation of income and employment. These include 34 schemes under ministry of MSME (Ministry of Micro, Small and Medium Enterprises) GoI4. Some important milestones achieved in Indian economy in 2022-235 are given in Box-1.

Box-1: Policy Achievements in Income and Employment Sector in India

The trends of rapid growth (covering manufacturing and services combined with slow growth of agriculture sector) in Indian economy confirm structural transformation in the country which is a positive sign for the India’s journey towards developed nation @ 2047. At the same time, we have to ensure that the pace of growth is sustainable, pro-poor, environment friendly and inclusive. Further, Workforce distribution in urban and rural areas is fairly different than Brazil, Mexico and China wherein the rural share has sharply reduced. This indicate that our process of structural transformation will further continue to consolidate like other developing nations6. 

Recent budget presented on July 23, 2024 gives special focus as indicated in Box-2 on creation of jobs and income for labour force during 2024-25 along with partnership and convergence of resources from private corporate sector, MSMEs and EPFO (Employee Provident Fund Organisation)

Box-2: Job and Employment Orientation in GOI Budget: 2024-25

Accordingly, India is all set to undergo a concentration of labour force in the non-farm sector in the coming decades. It is, in this context, imperative to examine workforce distribution and income levels across the working population including the informal sector to identify potential areas of policy intervention to promote economic growth with social justice.

Labour Force – Status and Distribution

Labour force in the age group of 15-64 in India constitutes 56 per cent of population which is overwhelmingly formed by informal sector (92 per cent). Periodic Labour Force Survey (PDLF) 2022-23 reveals that share of self-employed in the Indian labour force is 50 per cent whereas 45 per cent depend on wages and 5 per cent falls in the category of unemployed. However, recent data as reported in 2023 by NSSO indicate that unemployed workforce is only 3.1 per cent 7. It is equally important to note that the 29 per cent share of population in the age group of 15-24 is in the category of NEET (Not in Employment, Education or Training). In contrary the share of NEET in China is reported fairly low being only 11.20 per cent in 20178. This needs further investigation and prioritisation of actions accordingly to unlock the potential labour force for economic development. (Table 1)

Table 1: Labour force Distribution in India

Distribution of Labour Force 

Recent data shows that share of labour force in rural areas is 61 per cent whereas urban areas have 53 per cent of population. It is, however, striking to note that the labour force participation is substantially lower among women (34 per cent) as compared to men (79 per cent). It is largely contributed to the fact that women as home maker are not considered paid labour and fall outside the workforce. Further, women are also significant proportion of NEET and these force do not contribute as part of labour force. (Table 2)

Table 2: Share of Labour force (15-64 age group)

Income and Employment Concerns

Despite of several schemes and programs as indicated earlier, a large chunk of labour force suffer from access to adequate income to meet their basic minimum requirement and social security as part of livelihood opportunities. Nature of employment, monthly earnings and access to social security among labour force show major variations and imbalances in their earnings and jobs. 

It is evident from Table 3 that excluding the 50 per cent of share of self-employed; only 30 per cent earners are employed on the basis of monthly salary whereas 20 per cent are casual workers. In view of their ad-hoc conditionality the casual workers are always at a unfavorable situation for their access to reasonable income and associated perks. (Table 3) 

Table 3: Distribution of Workforce by Nature of Employment

It is further discovered from the data that service conditions and earnings, among self-employed, salaried workers and casual workers vary significantly according to male, female and urban rural distribution. 

Table 4: Average Monthly Earnings by Nature of Employment (Rs.)

It is evident from Table 4 that:

(i) Gross Monthly Earning (GME) of self-employed who are overwhelmingly working as informal sector is Rs. 10,331 with a wide variation among male and female being Rs. 13,838 and Rs. 3,533 respectively.

(ii) The GME also show high variation between rural and urban areas in a ratio of 1:2 being Rs. 7,585 (rural) and Rs. 14,175 (urban). This magnitude of urban rural variation confirm the access to connectivity and value chain in urban setting.

(iii) Further, the average monthly earning of salaried class labour force are nearly double than self-employed being Rs. 20,071 as compared to Rs. 10,331 respectively. The average monthly earning of salaried class also shows fairly high (26 per cent) share of male (Rs. 21,593) than female (Rs. 16,031).

(iv) Similarly, salaried class in urban areas earn Rs. 21,129 which is 26% more as compared to rural earner with Rs. 16,817.

(v) It is also noted that earnings of salaries class vary substantially as per nature of employment. Workers with contract (Rs. 28,800) earn 45 per cent more than without contract (Rs. 15,946). 

(vi) The variation in the monthly earnings of workers with written contract also indicate high variation as per male and female and urban and rural distribution whereas male being Rs. 30,769 earn 23 per cent more than women with Rs. 23,657. Similarly, contract employees in urban areas have gross monthly earning of Rs. 31,242 which is 23 per cent more than earning of contract labour in rural areas (Rs. 23,879).

(vii) The gross earnings among no-contract employees are again high among Male workers and urban areas as compared to female and rural areas The GME of male are Rs. 17,285 which is 28 per cent more than female (Rs. 12,361). GME of salaried class with no contracts Rs. 17113 (urban) as compared to Rs. 11,047 (rural) which is 35 per cent more.

(viii) Finally, the gross earnings of the casual workers are worse with marginal difference in urban (Rs. 9,990) and rural (Rs. 8,628). Yet, the variation in the earnings of male and female casual workers show substantial difference almost in a ratio of 2:1 being Rs. 10,076 (male) and Rs. 5736 (female).

Therefore, there is a clear distinction between earnings of salaried class and self-employed, male and female and urban and rural areas. Yet the overall levels of earnings or labour productivity are low indicating vast potential for corrective actions at the time of our journey towards India @2047.

Social Security

The access to social security to wage earners is fairly low, yet, it is relatively better almost in a ratio of 1.2 between female-male and rural and urban. As is evident from Table-5 only 10 per cent wage earnings have one or other type of social security which varies substantially among male (11 per cent) and female (5 per cent) with similar variation in urban (14 per cent) and rural (7 per cent) areas. On the whole urban earners and male workers have better access to social security. (Table 5)

Table 5: Social Security Access to Wage Employed

Unincorporated Sector in the Workforce

Unincorporated sector enterprises which are largely composed by informal sector dominates the labour force in India. There are 6.5 Crore enterprises covering 2.9 Crores (45 per cent) in Urban areas and 3.6 crores (55 per cent) in rural areas in 2022-23 which has increased from 2.7 Crore and 3.3 Crore in 2021 respectively. The workers in these establishments are almost evenly divided into urban and rural areas with 52 per cent and 48 per cent respectively.9 Average income per worker in these establishments is fairly low being Rs.9,249 per month in 2022-2310. The increasing share of these workers in urban areas confirm structural transformation and migration of rural workforce to urban areas.

Table 6: Unincorporated Sector in Indian Economy

Income or Employment: What is the Real Issue?

The above analysis reiterates the rapid pace of growth in the Indian economy along with reduction in unemployment which is still @3.1% in 2023-24.It is striking to note that unemployment is important concern but is not the real issue. The low levels of labour productivity is a more important concern covering overwhelming (70 per cent) share of labour force i. e. self-employed:50 per cent and Casual Labour 20 per cent with gross monthly earnings being Rs.10,331 and Rs. 9169 only. (Table 4) Further, the workers among unincorporated enterprises who fall in these two categories also have monthly earnings @ Rs 92,49 per month only. In addition labour force under salaried category without contract shows relatively lower monthly earnings being Rs 15,946 per month as compared to those working on written contract with Rs.28,880 per month. These workers in most cases do not have access to social security and other perks.

Therefore, a two pronged strategy is needed to create new jobs to meet estimated requirements of nearly eight million jobs per year up to 203011 and enhance the labour productivity in the larger context of self-employed, casual workers and salaried workers employed without written contract.

Focus Areas for Enhancement of Labour Productivity

Specific areas as appears from the preceding analysis that need particular attention are:

i. Special attention is needed on Structural transformation which is occurring at a rapid pace and rural population will start declining in absolute numbers from the year 2027 onwards12. 

ii. The surplus labour from agriculture should not move towards select urban centers only covering Delhi and cities from Gujarat upto Tamil Nadu which are relatively more urbanized states.

iii. Most cities that attract migration suffer from underutilization of land which is locked up in the low rise density of illegal land sub division and slums.

iv. Cities, therefore, are not ready in a balanced manner across the country to gainfully absorb the rural surplus labour coming from structural transformation in the economy.

v. Around one third (29.3 per cent) population in the age group of 15 to 24 is outside the labour force and confined to the category of NEET (Not in Employment, Education and Training).

vi. A large chunk of female in the age group of 15+ is not part of workforce. They are either home maker or part of NEET.

vii. A large section of labour force (53 per cent female and 38 per cent male) suffer from sedentary life style caused by use of mobile devices, prolonged screen time, lack of green space and use of labour saving devices like transport absence of outdoor recreation. (Table 7) Study also shows that women are more physically inactive than men. 

Table 7: Incidence of Sedentary Life Style in India

i. MSME; and Unincorporated sector which predominantly include informal sector suffer from skills, training, finance, serviced land, access to infrastructure and marketing facilities. (Draft MSME Policy, IIPA, 2022)

ii. It is also noted that manufacturing and services are facing tardy land supply. It is difficult to consolidate land from small and marginal land holders for non-farm sector. It is important to recall that 2/3rd of civil litigations are confined to land disputes13. It is inhibiting level playing field for manufacturing and services and adding to the cost and quality of product or services.

State Driven Income and Employment Promotion 

As indicated earlier, the schemes and programs of government of India cover various initiatives which need wider adaptation and scaling up . In this regard access to land, infrastructure, community organization and local governments in urban and rural areas fall within the state/UTs (Union Territories) jurisdiction in three tier federal structure of India. Accordingly, the states need proper orientation and commitment to act as intermediary link institution to sensitise stakeholders and initiate actions. 

Role of Centre 

Yet, the role of centre is decisive to reorient macro-economic policies, technology transfer, share public finance and formulate suitable schemes for implementation by urban and rural local bodies and para-statals. Accordingly, as a prerequisite to state agenda the government of India has to continue its role as a facilitator, enabler and guide to engage, encourage and support states in a few critical areas such as:

a. Reallocate/redirect flow of capital towards labour intensive manufacturing and service sector activities. Engage and incentivise stakeholder for a larger flow of funds from domestic and external market. These should include facilitation of stakeholders for External Commercial Borrowings (ECBs), Exchange Traded Funds (ETFs), Real Estate Investment Trust (REITs), Bonds, Commercial Papers, customer advance and trade credits.

b. Facilitate intercountry and multilateral cooperation for technology transfer, joint projects, pilot projects and demonstration projects and investment promotion.

c. Develop interstate institutional mechanism to create institutional memory and dissemination of innovation being taken by states and UTs.In this regard, at central level, a nodal institution needs to be identified to document, develop case studies and relevant material for sharing among states/UTs.

d. Promote initiatives for labour intensive investment in the manufacturing sector for example Bangladesh type model to boost Garment Sector needs to be adapted in the Indian context to enhance labour deployment in the sector. (Box-3)

e. Large industries should be linked with MSME and household units to promote a labour intensive supply chain as already used in India for certain industries like leather etc.

Box-3: Policy Intervention for labour intensive Garment Sector

Action Agenda for States/UTs

Economic survey of Govt. of India (2024) reinforces the role of states to take step to ease the compliance burden and reform the land related laws to meet the priorities of development.14 At the same time, the environment for private sector hiring is fairly positive with profitability at a 15 years high in 2024 and profits have quadrupled between 2022-23.

States have to consolidate schemes and programs launched by GoI and their own initiatives and pursue inter-alia a range of inter related actions:

i. This is the era of competition wherein states are competing with each other for investment promotion. As some states are adopting, the investment promotion events (Gujarat, Uttar Pradesh and West Bengal etc.), other states also should follow the same for due promotion of state potential. In this regard interstate or intercountry visits by state delegation may also be undertaken.

ii. States/UTs (hereinafter used as states) should identify investment quality and destination within state. Some states like Uttar Pradesh have initiated ODOP (One District One Product) policy for MSMEs which should be duly considered for investment promotion based on local traditions and expertise on specific products. Due care should be taken to select investment for labour and income intensive activity as may be feasible for respective district of state. At the same time, skill promotion, technology adaption, raw material and finance should also be arranged.

iii. Special drive to assess structural transformation and due strategy to respond at district level should be undertaken. In this regard, infrastructure development at town/city level needs to be taken up to gainfully absorb the surplus labour from nearby areas. As noted by NITI study one percentage point increase in urbanisation leads to 2.7 per cent increase in GDP of district, efforts should be made to link spatial dispersal of economic activities at district level.

iv. Human settlements including urban centres located around the infrastructure corridor (PMGATISHAKTI and other GoI or state schemes) should be identified to develop them as centre/hub of economic growth in respective region.

v. In this regard, efforts should be made to duly promote manufacturing and services in line with incentives for MSMEs in the state under various schemes of Ministry of MSME Government of India. 

vi. Education, health and insurance facilities and social security schemes should be extended to labour force across the state. It should specifically include promotion of skills as per local requirements.

vii. Suitable schemeon migration of surplus labour should be launched to minimise the population (15-24 years of age) in the category of NEET. It will considerably add to labour force in the state.

viii. Special focus is needed to promote life style education in the school and college syllabus and other forums as sedimentary life style among Indian adults is one of the main obstacles in the productivity. It should particularly focus on women who are a bigger victim of disadvantages in the existing life style.

ix. At the same time states should also give special emphases on important social reforms like child marriage to unlock the potential of women workforce in the Indian economy.

x. States should promote a forward and reverse supply chain to consolidate and accelerate production with due incentives and facilitation for marketing, raw-material and technology adaption. 

xi. At the same time, household industry and MSMEs should also be linked with larger units for processing the items produced in a decentralized manner.

xii. Rural and Urban local bodies should be involved in the promotion of jobs and income through a well-designed LEDP (Local Economic Development Plan). In this regard, the incentives available in the existing scheme namely DAY-NULM and DAY-NRLM (Deendayal Antyodaya Yojana - National Urban/Rural Livelihoods Mission) of Govt. of India should be integrated in the LEDP.

xiii. Local bodies should plan a central role to cooperate with Banks and other financial institutions and cooperatives in their jurisdiction to seek potential support for LEDP.

xiv. Local bodies should be encouraged to facilitate access collateral free loan available under PMSVANidhi (PM Street Vendor’s Atma Nirbhar Nidhi) and various schemes of ministry of MSME, Govt. of India to large number of self-employed.

xv. Finally, states should document and award innovations/best practices in the field of job creation and access to reasonable salaries and perks (including social security insurance) to the labour force in the state.

Endnotes

1. Indian Express, June 01, 2024

2. ToI, 9th July, 2024 – As per provisional data of RBI based on 27 industries aggregated under six broad sectors including agriculture, hunting, forestry and fishing, mining and quarrying, manufacturing, electricity, gas and water supply, construction and services. K=Capital, L=Labour, E=Energy, M=Material and S=service(purchased)

3. https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=20240306123028&msec=176#:~:text=Unemployment%20rate%20in%20India%2C%20among,individuals%20in%20the%20labour%20force.

4. https://my.msme.gov.in/mymsme/Scheme.aspxhttps://pib.gov.in/PressReleaseIframePage.aspx?PRID=1991727

5. Muralidharan, Karthik,, Accelerating Indias Development, Penguin Rendom House, India, 2024.

6. National Sample Survey Organisation (NSSO) data for 2023-24 and PLFS data 2023

7. OECD Survey,2022 and Mint. 7 march, 2017.

8. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2025340

9. Ibid.

10. Indian Express, July 24, 2024.

11. World Urbanisation Prospects, UNDESA, 2018.

12. Muralidharan, Karthik, Accelerating Indias Development, Penguin Rendom House, India, 2024.

13. Times of India, 23 July, 2024

14. https://www.niti.gov.in/sites/default/files/2022_05/Mod_CEOG_Executive_Summary_18052022.pdf