Locked in a Low-Skill Equilibrium? Trends in Labour Supply and Demand in India

This paper analyzes aspects of supply and demand for labour in India using National Sample Survey data for the years 1983, 1993-94, 1999-2000 and 2004-05. With the possibility of a ‘demographic dividend’ and the emergence of a few high technology sectors in the country, there is great deal of optimism concerning labour supply and labour demand in India today. However, this paper shows that both these optimisms are highly misplaced. Discouraged by the absence of employment opportunities, large numbers of women in India – 162 million in 2004-05 – withdraw from labour force and attend only to household work. While 57 million new jobs were generated in India between 1999-00 and 2004-05, the quality of employment suffered a sharp decline. Agriculture continues to be a major source of employment in the country despite the stagnant growth of output in this sector. The other major generators of new employment have been construction, a number of low value-adding services including that of women employed as domestic help, and a limited number of manufacturing jobs notably in garment making. In general, many more employment opportunities have been created in India during 1999-2005 for the primary school or middle school educated persons than for better educated persons. Women, especially educated urban women, fared badly during the period under study as their share of new jobs created in emerging economic activities such as the information technology has been rather tiny.