“Why Indian entrepreneurs have failed to diversified into large

scale labour intensive manufacturing which exibits scale

economies and learning effect, and instead making heavy
investment in capital intensive sectors like automobiles,
engineering equipments ,telecommunication,etc. Despite the fact
that INDIA is relatively labour cheap country.”
 “
“Long years ago we made a tryst with destiny, and now the time
comes when we shall redeem our pledge. The achievement we
celebrate today is but a step, an opening of opportunity, to the
great triumph and achievements that await us.”
-JAWAHARLAL NEHRU
◉ Ever since independence, India has seen substantial growth in agricultural
sector and tertiary sector but the growth rate of secondary sector is not
significant, given the growing population of India.

◉According to the World Bank, the annual growth rate of the manufacturing
industry of India in 1961 was 8.5, in 2010 it was 8.9, in 2014 it was 8.3, in 2015
it was 10.8 and in 2016 it was 7.9. In advanced countries the growth rate is
high. In India, Industrial sector is limited and growth rate is slow.

◉India is the fastest growing large economy, posting a growth rate of over 7
per cent, yet jobs are not growing as fast as GDP. Although India is growing at
7–8% growth rate, a vast majority of the population is jobless.
 TRENDS IN JOB CREATION IN LAST FEW YEAR
◉ During the last decade (2001-11), the growth rate of the labour
force (2.23 per cent) was significantly higher than the growth rate of
employment (1.4 per cent) According to Census 2011, the average
growth rate of the economy was 7.7 per cent per annum, when it was
only 1.8 per cent for employment.

◉ 66th round of the National Sample Survey Office (NSSO) data on

employment in 2011 revealed that between 2004-05 and 2009-10, only
1 million jobs were added per year; in a period when the economy
averaged a record 8.43% growth annually.

◉ An Indian Labour Bureau survey of 2015 showed that 2,000

companies in eight sampled industries generated all of one lakh jobs,
a fall from the four lakh generated in 2014, even though growth in
2014 was lower than in 2015.

◉•A HDFC Bank report on India’s tapering jobs growth says that
“employment elasticity” in the economy is now close to zero – for
every one point rise in GDP, jobs grow only 0.15. Fifteen years ago, it
was 0.39
 FACTORS LEADING TO JOBLESS GROWTH

◉Service Sector led growth

◉India’s atypical pattern of growth
◉Failure in raising labour–intensive manufacturing
◉Informal employment generation
◉Less attention to MSME
◉Slow Infrastructure Development
◉Complex labour laws
◉Technological advancement
◉Ignorance towards non monetary aspects
◉Disguised unemployment
SERVICE SECTOR LED GROWTH
◉In India, growth is attributed to service sector, whereby
both employment and wages have seen a rise. But as
figures say, the biggest employing sector in India is the
Agriculture sector, employing 45% of the population but
contributing 15% to the GDP, whereas Service sector is the
biggest contributor to the GDP but employs less than 30%.
Manufacturing contributes 16% to the GDP and employs
around 13%.

◉While service sector-led growth contributed greatly to

soaring GDP levels, it still employs less than 30% of the
total Indian population. The source of most employment
for Indian people still lies in the agriculture sector, which
employs almost 45% of the Indian population.
INDIA’S ATYPICAL PATTERN OF GROWTH
◉It is important to recognize that India’s pattern of growth has been atypical and has not followed
the standard path (i.e., the phases of development process or the structural transformation did
not go hand in hand from primary sector to manufacturing and then the tertiary, one driving the
other).
◉Relative to other comparable poor countries, India’s emphasis on tertiary education, combined
with a variety of policy distortions, may have channeled the manufacturing sector into more skill-
intensive industries.
FAILURE IN RAISING-LABOUR INTENSIVE MANUFACTURING
◉ Labour–intensive manufacturing sector did not become the engine of growth. In fact, it was the
knowledge-intensive services sector which along with some segments of capital intensive
manufacturing was the engines of growth in India. But these sectors by their nature were not
employment-intensive.
◉The weak absorption of labour by the high growth manufacturing and services sectors has
implications for the employment creating potential of economic growth.
GROWTH OF MANUFACTURING SECTOR IN INDIA
INFORMAL EMPLOYMENT GENERATION
◉Whatever jobs that were created outside of agriculture were
mostly in the low productivity – low wage informal services
sector (comprising mostly trade, hotels and restaurants).Slow
movement of labour from the less productive agriculture to the
more productive manufacturing and service sectors.

LESS ATTENTION TO MSME

◉The labour intensity of MSME is four times higher than that of
large firms. - but they are not treated well in India they have
poor access to credit and they are plagued by many serious
problems which has limited there growth potential.
SLOW INFRASTRUCTURE DEVELOPMENT

◉Infrastructural bottlenecks (especially in access to

electricity), Lack of backward and forward
linkages between agriculture, industry and service sector
has failed to create jobs. Additional factors have held
back the labour-intensive manufacturing in India: costly
power and poor transport infrastructure. Not only do
firms pay a much higher price for power in India than
elsewhere in the world, they also face much greater
uncertainty of supply.
 COMPLEX LABOUR LAWS
◉In the pre-independence period, British colonialists in
India suppressed labour rights, trade unions and the
freedom of association among workers. As a result, labour
activism became a part of the Indian freedom struggle.
◉ Several studies have indicated that India has one of the
most rigid labour regulatory frameworks in the world. A
case in point is the Industrial Disputes Act of 1947, which
stipulates that a firm with 100 employees or more cannot
close down without government permission. Such laws
curtail the growth of a firm by forcing it to hire fewer
workers and remain small
◉This compels industries to invest in technology, leading to
India losing its advantage of cheap labour force.
TECHNOLOGICAL ADVANCEMENTS

◉The growth rate in jobs has distinctly slowed down with significant improvements in
automation and productivity. CII president Naushad Forbes attributes the job squeeze to the
slow pace of labour reforms. "It has dissuaded companies from creating formal employment, and
incentivized investments in automation.

IGNORANCE TOWARDS NON MONETARY ASPECTS

◉The tax incentives, subsidies, depreciation allowance all are solely linked to the amount
invested and not to the number of jobs created.

DISGUISED UNEMPLOYMENT
◉Agriculture is already overburdened in terms of number of people dependent on it. While it
contributes to around 17-18% to GDP, it provides employment to 50% of the labour force. Most of
them suffer from disguised unemployment in agriculture.
CASE STUDY ( MAKE IN INDIA)

Prime Minister Narendra

Modi was therefore absolutely
right when he stated that his
government’s goal was to give
the highest priority to ‘Make in
India’ and called upon the
world’s manufacturing
companies to “Come and
make in India”.
“A STEEP DECLINE”
CONCLUSION
Already, the UNDP's "Asia-Pacific Human Development Report 2016" has warned that
India is likely to face a critical shortage of jobs in the coming 35 years. Hence, while raising
economic growth is definitely a desirable goal, India must adopt a more targeted growth
strategy to benefit a much wider and needier section of its population. Also, setting up a
manufacturing unit takes a long time in India. Policy changes are needed to address that
issue. Government up to this point has behaved like a populist regime. That's not what is
required. They need to be less populist and more reformist. Implementing reforms started
by previous government is not enough. They will have to come up with some genuinely
creative ideas.
 “
Thanking You!