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Job creation heading for a sharp drop

Posted by fairval on January 18, 2014

Employment generation from non-farm sectors – the growth engines of any modern economy – is set to go down sharply over the next few years, says a report by rating firm Crisil. CRISIL estimates that 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.

The biggest reason for this is the likely slower growth rate of Indian economy in the coming years. Crisil assumes an average growth rate of 6.5% in the 7 year period FY12-19. This compares to an average of 8.5% registered over FY05-12, which led to creation of 52 million non-farm jobs. This helping in pulling out 37 million people from agriculture. Overall employment intensity has been reducing over time as well. Some of newer service sectors like IT it seems are far less employment intensive compared to manufacturing or agri.

In the seven years to 2018-19, India’s working age population would have swelled by over 85 million. Of these, 51 million would be seeking employment. However, job creation in non-farm sector will be only 38 million, or less than the number of people who may seek jobs. So what happens – CRISIL says 12 million may need to be absorbed by Agri. In India, employment is a loose term, there is lots of disguised unemployment.

Employment Generation in India

Employment Generation in India

A rider: economic data is quite complex it seems. As you would notice, net employment generation in FY05-12 period was only 15 million, much less than what one may assume were the number of job seekers, which should have been upward of 50 million.Crisil says – the difference is explained by people voluntarily opting out of employment (old, women etc). Hmm..thats a tricky one. That trend can well continue? If so, net job seekers may not be 51 million as the report assumes. Crisil report assumes the ratio of people seeking jobs as constant between the two periods.

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