There is little doubt that the Indian economy has sustained a high rate of growth of the Gross Domestic Product (GDP) during the reform period. It is also quite clear that there has been some acceleration in this rate over time. During the decade of the 1980s, it was about 5.5 per cent per annum, and it increased to about 6 per cent between 1991-92 and 2003-04. For the last couple of years, there has been a further acceleration in this rate. As regards the structure of growth, the most important feature of the reform years has been a dramatic increase in the share of the tertiary sector. Since the mid-1990s, the rate of growth of the services GDP has been significantly higher than the rate of growth of the overall GDP, and the share of the tertiary sector in the economy has gone up from about 41 per cent in 1991 to about 54 per cent in 2005-06. In fact, well over 60 per cent of the incremental growth in GDP since the mid-1990s is accounted for by the rate of growth of the services sector.

Going by the conventional division of the economy into primary, secondary and tertiary, a comparison of the annual real growth rates of the country in the two phases — 1981-82 to 1990-91 and 1991-92 to 2005-06 — is quite instructive. During the first phase, the growth rates of the primary, secondary and tertiary sectors were 3.84, 6.98 and 6.72, respectively, and the comparable rates for the latter phase were 3.02, 6.51 and 12.33, respectively. In other words, there is almost a doubling of the tertiary sector’s growth rate, a very significant deceleration in that of the primary sector and a slowing down of the secondary sector. The performance of the commodity producing sectors during the reform period has been relatively poor, compared to the services sector. Also, the sharp ballooning in the proportion of services in the GDP, and the economy’s growing dependence on this sector to generate growth appear to be quite unusual in the light of the historical experiences of economic transformation, whether in the case of advanced or developing countries. This obviously warrants a call for caution with regard to the prospects of sustaining current growth rates in the foreseeable future.

Within the services sector, the most talked-about segment and impressive performer during the reform period has been the booming Information Technology (IT) sub-sector; the ratio of the IT segment output to the country’s GDP went up from 0.38 per cent in 1991-92 to 4.5 per cent in 2004-05, and this is a remarkable increase. Moreover, this growth was significantly facilitated by liberalisation because the growth of the export of software and IT-enabled business services grew at a phenomenal 47.5 per cent per annum over the same period.

However, the ‘good’ news more or less ends here. In terms of employment implications, there is not much to write home either about the IT segment in particular or the tertiary sector in general. As it happens, total employment in the IT sector amounts to just about 1.2 million (of the country’s workforce of approximately 460 million). As per the most recent official data, the tertiary sector accounts for about a quarter of the country’s workforce and the primary sector continues to house more than 57 per cent of the workers. Agriculture, as well as large segments of small-scale manufacturing, received quite a policy-driven battering in the reform period. Quite obviously, the dismal-to-unimpressive performance of the bulk of commodity producing sectors is likely to impact labour market adversely.

That most of the important labour market outcomes have been major casualties during the reform period is, therefore, hardly a surprise. For instance, going by a flow measure of employment (that is, the commonly used Current Daily Status) and taking all forms of employment together, its rate of growth during the 1990s was almost halved compared to the 1980s. The rural areas, housing the overwhelming majority of the country’s population, witnessed a startling deceleration in employment opportunities as the rate of growth (of all forms of employment) came down from 2.4 per cent during 1983-94 to less than 0.6 per cent during 1994-2000. Deceleration in the rate of growth of employment was quite marked in urban areas as well and also across most states in the country. In sum, the country as a whole experienced dramatically adverse setbacks on the employment front during the 1990s, and the rate of growth of employment was way below the rate of growth of population. Even though for a large segment of the country’s population in the working age group, any kind of employment is absolutely necessary for survival, it is possible that the dramatic collapse of opportunities shocked sections of them into at least temporary withdrawal from the workforce. A sharp decline in the rate of growth of the labour force, between 1993-94 and 1999-2000, possibly reflected this phenomenon. Furthermore, deterioration with respect to employment was also reflected in different dimensions of quality such as growing informalisation, casualisation, etc., and the rate of growth of secure jobs was close to zero during much of the 1990s.

The most recent reports relating to employment trends were released by the NSSO in the closing weeks of 2006. These are based on the 61st Round of the NSSO, covering 2004-05. On the face of it, these reports show that there has been a revival of the employment growth, after the sharp deceleration in the late 1990s, both in rural and urban India, over the first half of the current decade. Labour force participation rates, for both males and females, have recovered the lost ground and the aggregate employment growth rates, for both males and females in rural as well as urban areas, were close to the rates achieved in the period between 1987-88 and 1993-94. Nonetheless, despite the recovery, unemployment rates, both in rural and urban India (taking the current daily status measure), have continued to rise. Moreover, the most striking results from the latest survey relate to the shift in the type of employment. Essentially, self-employment among major segments of the workforce has witnessed very significant increases. For instance, the annual compound growth rate of agricultural self-employment, which stood at –0.53 between 1993-94 and 1999-2000, jumped to 2.89 between 1999-2000 and 2004-05. The comparable rates for agricultural wage employment, however, were 1.06 and –3.18, respectively. Likewise, over the same time period, the comparable rates for rural non-agricultural self-employment almost doubled from 2.34 to 5.72 per cent whereas for rural non-agricultural wage employment, the increase was of a smaller magnitude, that is, from 2.68 to 3.79 per cent. The story is no different in urban areas, as there too self-employment accounts for the dominant share of the increase in aggregate employment since 2000. In other words, the significance of wage employment (taking both regular and casual contracts together) in overall employment generation has weakened considerably, and this may simply be hiding the fact that a large section of the workforce is finding it increasingly more difficult to get paid jobs. As per the most recent count, almost half of India’s workforce does not work for a direct employer. Given that the overwhelming proportion of self-employment in India consists of fragile working conditions and very low returns, it does not seem reasonable to make a song and dance about growth of ‘opportunities’ in this sector. In fact, it is common knowledge that substantial segments of self-employment, such as agriculture, are only parking sites for disguised unemployment. Thus, the sharp increase in self-employment among rural women between 1999-2000 and 2004-05, which accounts for close to two-thirds of all their jobs at the latter date, can hardly be a cause for celebration. One other particularly disturbing aspect of the unemployment scenario is worth taking note of even in this brief account. This is regarding unemployment levels among the younger group of workers. There has been much talk of the ‘demographic dividend’ that India has because close to 42 per cent of the country`s population, as per the latest population census (2001), was below 18 years. However, unemployment rates in the age group 15-19, or 20-24 years present quite an alarming picture because these rates are close to 15 to 20 per cent. Clearly, the growth process is unable to accommodate aspirations of a substantial segment of the country’s large young population, and it may not be unreasonable to suggest that the so-called ‘demographic dividend’ can easily be a ‘demographic bomb’.

Apart from employment, the other significant, and obvious, variable impacting the well-being of workers is returns to their labour power. In this respect too, particularly for the most recent period, the story is truly dismal. The NSSO data show that during the 1990s itself, the rate of growth of real wages for most categories (whether in terms of occupations or nature of contracts) of workers was lower than in the 1980s. However, the trends for 1999-2000 to 2004-05 appear to be extremely disturbing. For instance, of regular workers, rural males have managed to escape a decline in real wages between 1999-2000 and 2004-05, but the other three categories, namely, rural females, urban males and urban females have not been so fortunate. The story is not very different for casual workers as well and the wage trends are roughly similar to what is reported above. During the most recent period, that is, between 1999-2000 and 2004-05, the real wages of casual labour in rural areas seem to have increased marginally (although the rates of growth have decelerated compared to the 1990s, which in any case was significantly lower than in the 1980s) but both men and women casual workers in urban areas were subjected to decline in real wages.

In fact, if we look at supposedly one of the most ‘attractive’ employment options for India’s workers, namely, the organised manufacturing sector, the significance of the adverse changes surface almost dramatically. As per the Annual Survey of Industries (ASI) data, employment in this ‘privileged’ segment has been on the decline, in absolute numbers, since the late 1990s. The share of organised sector in the country’s total workforce, currently at around 7 per cent, in any case is small and has been declining since the early 1990s. However, the decline in its absolute size since the late 1990s is obviously a matter of added concern. Furthermore, the wage trends in this sector are alarming, as a recent analysis by Ghosh and Chandrasekhar (‘Economic Growth and Employment Generation in India: Old Problems and New Paradoxes’, Mimeo, 2007, Centre for Economic Studies and Planning, Jawaharlal Nehru University) show. Between 1981-82 and 2003-04, labour productivity in India’s organised manufacturing sector, as measured by the net value added generated per worker, at constant prices, increased by almost three fold, but the benefits of it did not accrue to workers. Rather, beginning late 1980s, the share of wages in the value added has fallen sharply. For much of the 1980s, it hovered around a little over 30 per cent but, by 2003-04, this figure shrank to about 15 per cent. This is not only way below the comparable figures for the developed countries but also, in all likelihood, substantially less than the average for the developing countries. Thus, essentially, the net value added per worker and the share of wages in value added have diverged over this period almost in a mirror-image manner, as the gains of labour productivity have accrued largely to non-wage incomes. Even more startling is the trend regarding the average real wage. In the organised manufacturing sector as a whole, the real wages in the triennium ending 2003-04 were around 11 per cent less than in the triennium ending 1995-96 (for details, see Ghosh and Chandrasekhar, ibid, 2007). It seems almost bizarre that a buoyant economy, in which the organised manufacturing sector has clocked respectable growth rates on the trot for almost 25 years, should show such wage (as well as employment) trends.

In sum, the above brief overview of the some of the key trends relating to some labour market outcomes seem almost incongruous with the images of a booming India’. The metaphor holds little meaning for the overwhelming majority of the country’s workforce.