V. Elements of Employment Strategy 6.5.1 A high rate of output growth is necessary, but not always a sufficient condition for high growth of employment. A structure of growth with larger contribution of sectors having high employment content of output and use of production techniques favouring use of labour greatly enhance the employment generation potential of growth. The scope for varying techniques, without lowering efficiency and productivity levels and reducing the competitiveness of the products, is found limited in most lines of production. On a realistic plane, it must also be admitted that in a large part of the economy, in agriculture, unorganised manufacturing and service sectors, technological upgradation involving some increase in the use of capital per worker may be necessary to raise productivity levels. Improvements in the productivity levels in all lines of production, including organised manufacturing sector, will be necessary for expansion of employment opportunities.
6.5.2 Employment growth has, therefore, to result primarily from the growth of the economy and restructuring of output composition of growth. There is no doubt that a larger and more efficient use of labour will accelerate the rate of growth itself, but the latter would largely depend on the availability of other resources like capital and internal and external demand. The employment potential of growth can be raised by readjusting the sectoral composition of output in favour of sectors and sub-sectors having higher employment elasticity. It is with this perspective that an attempt is made to review the past trends in different sectors and also to assess the potential of each of them for faster employment generation in the process of their growth. This may enable us to indicate the broad directions of strategy and policies that can lead to the realisation of the assessed potential in different sectors.
A. Agriculture and Allied Sectors 6.5.3 Even after some shifts in the occupational structure during the last two decades, agriculture still occupies a predominant place in employ-
120
ment structure, employing about two-thirds of the total workers. It is agriculture which has shown the lowest and rapidly declining employment-potential in the recent past. A major reason for this lies in the sharply declining employment potential in the regions with high output growth. Employment growth, accompanying a one per cent growth of output was found to be as low as 0.00, 0.07 and 0. 19 in Punjab, Haryana and UP respectively. In these areas, the sources of growth are now turning to be labour substituting.
6.5.4 Despite an overall declining trend in employment elasticity, there appears to be considerable scope for raising employment in agri- culture in those regions of the country which have so far generally lagged behind in agricultural development. A strategy of agricultural growth aimed at deriving a larger part of the additional output from these regions should help arrest and even reverse the overall decline in labour absorption in agriculture. A faster growth of employment in these areas, where the incidence of poverty is often relatively high, at the same time, will lead to a positive effect on wage rates and incomes of the rural workers. It may be noted that eight States, viz., Andhra Pradesh, Bihar, Madhya Pradesh, Maharashtra, Orissa, Tamil Nadu, U.P and West Bengal account for 80 per cent of the people below poverty line and 70 per cent of the unemployed. A strategy focussed on stimulating agricultural growth in these States will thus be able to meet three important objectives simultaneously, namely, employment, poverty alleviation and reduction in regional disparities, besides acceleration and greater stability in the growth of agricultural output.
6.5.5 An acceleration in the rate of growth of agricultural output in the regions lagging behind others should come primarily from an increase in the yield levels of individual crops and an increase in cropping intensity and, to some extent, from changes in cropping pattern in favour of high value crops. The most important factor contributing to such changes would be the availability of assured irrigation, followed by provision of modern inputs and appropriate price policies. Irrigation, besides leading to increase in yield and cropping intensity, also facilitates changes in cropping pattern in favour of high value crops, most of which also happen to be more labour using. Such shifts in the cropping pattern are important from the view point of employment, particularly in the long run, in so far as yield increases in staple crops beyond a stage involve technologies using less labour.
6.5.6 An activity naturally allied to agriculture and crucial for rural income and employment generation is animal husbandry. The potential of this sector for income and employment generation can hardly be over-emphasised. Based on some recent studies by the National Dairy Development Board (NDDB) and the earlier estimates by the National Commission on Agriculture, it is estimated that the animal husbandry sector, even with the existing stock, can generate employment equivalent to 86 million person years inclusive of employment in processing and marketing of milk and milk products. It is claimed by experts that a much higher growth than in the past can be attained in this sector, raising productivity and income levels of those engaged in it as well as creating new employment opportunities. Fishery, it is maintained, can grow as fast as 7 per cent per annum because about two-thirds of the existing marine and inland potential is unexploited. In fact, a high growth of value-added agribusiness, including animal husbandry, fishery, horticulture and aquaculture, offers scope for employment expansion in the immediate future.
6.5.7 Another area with large scope for employment generation, that has only been marginally recognised so far, relates to regeneration of natural resources such as land and forests. Programmes of afforestation, regeneration and restoration of degraded land are not only likely to generate large volumes of employment in general, but also benefit, in particular, such disadvantaged sections of the society as tribals and women who are most adversely affected by the degradation of eco systems. The extent of culturable wastelands is estimated to be around 130 million hectares. It is estimated that development of one hectare of wasteland will generate 128 mandays of employment with a wage component as high as 70 per cent of the outlay. Importance of wasteland development from the point of view of employment generation arises not only from the employment intensity of the development phase involving earth work, etc., but also from the sustained employment opportunities likely to be generated in the utilisation of the reclaimed land for afforestation and water
121
shed development. A study by the, National Council of Applied Economic Research (NCAER), for instance, shows that one hectare of planted area provides employment of the order of 600-700 mandays per year. However if wasteland development has to achieve these objectives beyond the stage- of asset formation, due attention should he given to (a) securing the active participation of the rural poor in wasteland development and (b) allocation of the developed land to the rural poor with legal titles.
B. Rural Non-Agricultural Employment 6.5.8 In the long run, however, it must be recognised that agriculture and other land-based activities, even with a reasonably high rate and possible diversification of growth, will not be able to provide employment to all the rural workers at adequate levels of incomes. Further, technological and organisational changes accompanying agricultural growth are likely to lead to, first, a declining employment potential of further growth, and second, conversion of a substantial number of those underemployed in agriculture into openly unemployed seeking work elsewhere. 'Even allowing that some of them will be able to find adequately remmunera- tive jobs on migration to urban areas, it is not only desirable but necessary that the rural economy gets diversified into non- agricultural activities to provide productive employment to the growing rural labour force and also to reduce the wide economic differences between rural and urban areas.
6.5.9 Over one-fifth of the rural workers are engaged in non- agricultural activities. This proportion has shown a remarkably rapid increase in recent years. Available evidence suggests that this shift is attributable to the growth of productive employment opportunities in the nonfarm sector in rural areas, and is not a result merely of the overcrowding in agriculture. Appropriate strategies and policies need to be evolved to strengthen this trend towards diversification of the rural economy. Practically all non- agricultural activities have shown a steady increase in employment. Manufacturing and services respectively accounted for 32 and 24 per cent of rural non- agricultural employment; trade accounted for 18 per cent and construction 15 per cent in 1987-88. Manufacturing has shown a reasonably high (about 3 per cent per annum) growth in employment during 1978-88.But construction, transport and trade have shown an annual growth in employment of 11, 7 and 4 per cent per annum respectively during this period.
6.5.10 It must be recognised that an increasingly larger component of rural industrial activities now consist of non traditional activities with forward and backward linkages with agriculture as well as those with little relation to agriculture. Unlike many traditional village industries which constituted only secondary or supplementary occupations, these activities are pursued as main occupations. Most of them are also producing commodities with reasonably high income elasticity of demand and thus are not likely to face any serious demand constraint. These include textile-based and agro-based industries, and those producing construction materials like bricks, tiles, pipes and cement. Some of these activities are now getting located, for economic reasons, in smaller towns in the rural hinter- land, providing employment to the rural workers. With suitable promotional policies, including those relating to location and infra- structural development in rural towns, considerable expansion of such activities with a high employment potential for rural workers is feasible. Such policies should include measures for orientation of credit and lending practices of banks to suit small business and manufacturing enterprises, strengthening of producers' cooperatives and assistance in marketing and technology.
C. Industrial Sector 6.5.11 A decline in employment elasticity of the industrial sector has primarily been caused by the declining employment potential of output growth in the organised sector. Employment elasticity is estimated to be as low as 0.15 per cent for the organised manufacturing sector, but it is between 0.5 to 0.6 for the unorganised sector. A larger contribution of the small and unorganised sector is, therefore, likely to raise the employment elasticity and employment growth in the manufacturing sector significantly. The small industry sector currently contributes about one- half of value added and four- fifths of the total employment in manufacturing. If this segment of manufacturing can be made to grow at 10 per cent per annum, with the organised sector growing at about 5 per cent,
122
the overall employment growth in the manufacturing sector will be about 4 per cent as against 2 per cent in the recent past. It needs to be recognised that the small and unorganised manufacturing sector consists of different highly variegated segments. Employment in the cottage and household industry has experienced a relative decline, due to shrinking markets on account of competition from modern products and often due to lack of technological upgradation to meet the new demands. Non-household, tiny sector has shown potential for growth, but suffers from the lack of financial and marketing facilities. The modern small scale sector has shown significant growth in output, employment and also exports. It is this sector which has also received the major part of the benefits of the promotional policy towards the small sector.
6.5.12 It has, however, been observed that the policy for the promotion of small scale industry has not been very effective in serving the employment objective. It is not directly related to employment in so far as the eligibility for preferential treatment in terms of incentives and other assistance is related to fixed capital investment. The assumption that small capital necessarily implies high employment per unit of capital has not always been found valid. Thus, while the criterion of capital size may be necessary for other socioeconomic objectives, it is felt that employment criterion should be superimposed on it. In fact, some studies point out that in the absence of such a criterion, many small industries have tended to become unnecessarily capital intensive. To the extent such a tendency is observed, it suggests the need to examine the relative factor prices and changes in them over time, so as to check the tendency towards avoidable capital intensification.
6.5.13 The other problem of the small scale industry policy is that it has not benefitted the really small units. Due to the cumbersome procedures and non-existence of the promotional and service net-work in smaller towns and villages, the concessions and assistance have only reached the not-so-small sector. It is realised that the existing administrative and service agencies are not well suited to meet the requirements of the decentralised sector, which has substantial growth and employment potential. Therefore, it is desirable that the tiny or the micro-enterprise sector is recognised as a separate segment for evolving and implementing promotional poli- cies.
D. Other Sectors 6.5.14 Among the major sectors of economic activity, construction recorded the highest growth in employment of over 10 per cent per annum during the period 1977-78 to 1987-88, Both road construction and housing are a part of the basic needs of the people and, therefore, deserve to be given priority, as they will create the necessary assets and generate large-scale employment in the short run. It is estimated that connecting the 31 percent of the villagers in the population group 1000-1500 anti 10 per cent of those with larger size still unconnected by road will mean construction of 8 lakh kms. of road with an employment potential of 22.8 million person years. It is also observed that there is a concentration of these unconnected villages in the States with a high incidence of rural poverty and unemployment and hence it will be appropriate to give priority to construction of roads in these areas. Similarly, a high priority to housing and development of appropriate legal, institutional and financial mechanisms to encourage larger investment in this sector would meet the objectives of employment and provision of shelter simultaneously.
6.5.15 The growth of the services sector in recent years has been relatively fast but employment growth in this sector has been rather sluggish. It experienced a GDP growth of about 6 per cent during 1980-81 to 1986-87 (as against around 4 per cent during the 1970s) but employment growth during this period has been of the order of around 2.5 per cent only. This trend suggests that productivity has shown an increase and the service sector has not grown merely as a residual low productivity sector. Still, this sector has significant potential for employment generation both in rural and urban areas. Tourism, rural transport and repair services are subsectors identified as having relatively high growth as well as employment potential. In the rural areas, employment in the services sector can be expected to grow with the faster development of agri-business resulting in increasingly larger volume of goods to process, trade and transport.
6.5.16 In general, one may not expect any significant increase in public sector employment
123
as there is already a high degree of overmanning both in the public enterprises and the Government Departments. But, in line with the aim of meeting certain basic objectives in areas like education and health, it would only be logical that more manpower is utilised for strengthening educational and health institutions, particularly in rural areas. Strengthening of teaching staff in rural areas, particularly single-teacher schools, and adequate manning of the health system, particularly in technical and paramedical occupations are likely to generate considerable job opportunities for the educated.
6.5.17 The urban informal sector has exhibited a high rate of growth of employment of around 6 per cent per annum. Manufacturing and services sector activities, including trade and transport constitute important segments of the urban informal sector with large employment potential. Recent studies indicate that there is a large unsatisfied demand for a number of services; that the quality of existing services needs to be improved; and that the major constraints on fuller development of this sector are the lack of inputs like credit and raw materials, facilities for skill development and space for carrying on such activities. Steps and policies including stream- lining of existing municipal and other laws and regulations would be necessary to overcome these constraints. In general, a policy environment favourable for the growth of entrepreneurship and self- employment in medium and large towns and cities requires to be created. Besides streamlining existing schemes like Self- Employment Programme for Urban Poor (SEPUP), Self-Employment for Educated Unemployed Youth (SEEUY) and Nehru Rozgar Yojana (NRY) (Micro- entreprises scheme), it would also be useful to adopt the approach of the Society for Employment Promotion and Training in the Twin Cities of Hyderabad-Secundrabad (SETWIN) on the basis of the experience gained.
6.5.18 As observed earlier, employment generation needs to be seen not merely in terms of creation of new opportunities for wage employ- ment; an equally important thrust will need to be laid on creation of necessary conditions for an increasingly larger number of people to undertake activities on a self-employment basis, as well as raise the productivity and income levels of those already self-employed so as to see that they are not compelled to leave them and join the ranks of the openly unemployed. Infrastructure, access to credit and market linkages are found to be the most crucial factors in the development of a vibrant self-employment sector. Institutional arrangements for supply of these services along with suitable programmes for the development of technical skills and entrepreneurship would need to be evolved.
6.5.19 Given the variegated nature of work requirements of different workers, particularly the underemployed, and also the varied nature and structure of work in different activities, the goal of providing work to all can only be achieved on the basis of detailed local level planning. Since a major part of unemployment and underemployment is to be found in rural areas where variations of these kinds are particularly marked across regions and areas and among activities, employment planning on a decentralised basis assumes special significance. While a certain degree of mobility, particularly among the openly unemployed and the educated, should be expected and even be encouraged, for a large mass of underemployed and unemployed, particularly, women, marginal farmers and those engaged in seasonal activities, work needs to be generated locally, in the villages or nearby small towns. An exercise to assess and plan for work opportunities within an area to match the labour supply characteristics of the unemployed and the underemployed workers can only be effectively undertaken on an area-specific basis.