Two Approaches to the Dynamics of Employment and Economic Growth in India

One of the most salient features of India’s labour market in the last two decades has been its relatively weak performance in terms of employment generation. The labour market experience of low and declining employment rates despite rapid GDP growth performance has been termed as the phenomenon of jobless growth. It is widely believed that jobless growth has been responsible for the disappointing results in achieving inclusive growth. However, there is an emerging economic thinking that the emphasis should be placed not on increasing employment levels per se but on increasing high- quality, productive employment that lies at the core of sustainable economic and social development. Keeping this in view, Wadhwani Foundation Policy Research Centre has conducted two studies: one, on the quantitative aspect of job creation; and another on qualitative aspects of employment. The objective is to draw some important policy implications. Quantitatively, it examines the dynamic relationship between employment and growth for India using a time series analysis for the period from 1983 to 2011- 12, and projected the level of employment under alternative scenarios of economic growth. We have also attempted to map these projections on the government targets of job creation. For the qualitative analysis, it uses the Shapley’s Decomposition Analysis to examine the contribution of growth in employment and change in its quality to GDP per capita across different phases of growth over 1972- 73 to 2011-12. Two indicators of the change in employment quality are: one, structural change in employment, and two, TFP growth. We highlight the need of a comprehensive “Employment Policy” in the country.