India’s Elusive Quest for Inclusive Development: An Employment Perspective

This paper is an attempt to assess India’s performance in generating the required quantity and quality of employment for its growing population since independence in 1947. But the exercise is set in a longer period that covers India’s population growth since the turn of the twentieth century (1901) in relation to its ability to generate employment. The half-a-century preceding independence, despite a slow population growth, was a disaster in generating employment and any signs of structural change. Detailed analysis of the issue since independence shows that there was indeed a demographic burden more than the world average as well as its comparator Asian countries such as China and Indonesia. While employment generation with reference to growth—employment elasticity—was quite impressive during the first four decades of independence, it almost collapsed ever since the adoption of neoliberal economic reforms in 1991, thus entering a phase of ‘jobless growth’, a phenomenon that is shared by China in a more vigorous form. This has led to what may be called an exclusion of working age people from not just employment but from labour force indicating the emergence of ‘discouraged workers’ in a larger set that we called underutilized labour. But what about those who are included in the workforce? Does it ensure an escape from poverty for those at the bottom? Our estimates show that the pace of reduction in the incidence of poverty is so slow that a significant share of households is still below the international definition of extreme poverty. We attribute this to the quality of employment characterized by a high incidence of informal sector employment as well as low wages measured by the share of workers not receiving a recommended subsistence wage. The absence of any kind of social security to an overwhelming share of workers adds to this situation of absolute poverty. Finally we examine the question of poverty from the point of manifold inequalities by dividing the households in the economy in terms of their employment, educational, rural–urban, and social group statuses for estimating predicted probability of being poor. The results bring into sharp focus the huge variation in predicted probability that shows households with low education, disadvantaged social group status, casual nature of employment, and living in rural areas at the bottom end of the scale. These results bring out the imperative for creating more employment with better quality.