It has been admitted in a NITI Aayog research paper as the topmost challenge India has been facing. The paper states the uneven growth of industry and services sector across the different regions and states as the second most challenging factor, since it has resulted in a mismatch in employment opportunities and the supply of labour at local levels.

The third, the paper says, is a large divergence between structural changes in the output and employment of Indian economy. The industry and services sectors, which constitute more than 80 per cent of the gross value added in the country, provide employment to 54.5 per cent of the workforce, and, agriculture, which constituted one fifth of the total economy (GVA) of the country in 2020-21, retains 46.5 per cent workforce.

The paper titled “Changes in Labour force and Employment in Rural and Urban India: 2017-18 to 2020-21” finds that this divergence in sectoral share in income and employment is manifested in the large and rising gap in per worker income in the agriculture and non-agriculture sectors.

Lastly, preference towards government jobs has increased tremendously due to job security, assured salary and other pay and prestige associated with such jobs, the paper says.

India has experienced more or less consistent and steady changes in the structure of the output of the economy, especially after the economic reforms of 1990–91. The growth rate of the economy, measured by the gross value added, at constant prices, accelerated from 4.27 per cent twenty years before the economic reforms to 6.34 per cent twenty years after the reforms. The growth rate in GVA showed further acceleration and reached 6.58 per cent during 2010–11 to 2019–20 (ie pre Covid decade) at 2011–12 prices. This growth trajectory was accompanied by a steady decline in the share of agriculture and a steady increase in the share of non-agriculture sectors in total economy.

However, the trend in employment did not reveal a consistent and clear pattern over time. This is partly due to demographic changes and increased enrolment for post-matric education. Many other factors like technological changes; sectoral composition of output; shift of female workforce from household activities to outside activities and also vice versa; skill creation; mechanisation; labour laws; and regulations have also produced changes in the workforce and employment.

These complexities have led to a wide variation in the conclusions drawn by experts and various studies on employment. The problem is further accentuated by a long gap in data on various aspects of employment, the paper admits.

Moreover, it is well known fact that current and timely official data are also not available which makes the real time assessment of employment and unemployment with all their aspects almost impossible.

The papers says that two major official sources of data on the workforce and employment have been the (i) decennial population census and (ii) nationwide quinquennial surveys on employment and unemployment by the erstwhile NSSO under the Ministry of Statistics and Programme Implementation (MoSPI), Government of India. The Census data is available after an interval of ten years and the last available data refer to the year 2011. Similarly, the quinquennium NSSO data on employment and unemployment is available up to the year 2011–12 only. The nationwide Employment and Unemployment (E&U) surveys have been replaced by the Periodic Labour Force Survey (PLFS) conducted by the National Statistical Office (NSO) of MoSPI, which started in the year 2017–18. The PLFS data is available for both rural and urban and the total population on an annual basis. The quarterly data, on the other hand, is available only for urban households.

There are other problems with the data sources. The paper says that the PLFS surveys are based on a different sampling framework and uses a different analytical approach vis à vis the NSSO surveys on employment. Because of this, the time series data on E&U, available from the NSSO surveys, is not comparable with the PLFS data.

The extent and incidence of unemployment based on current weekly status of employment is more severe and shows an increase in the number of unemployed persons in two years by 3.4 million. The unemployment rate based on current weekly status remained around 8.8 percent during 2017-18 to 2019-20 and declined in year 2020-21 to 7.4 per cent. Unemployment was much lower in rural areas than in urban areas. Also, it showed a decline in rural households and a rise in urban households.

PLFS data also shows a decline in the absolute number and share of workers employed in agriculture between 2018–19 and 2017–18. However, this process was reversed the next year, which witnessed not only a big increase in employment in the agriculture sector but also an increase in the share of agriculture in the total workforce. Consequently, the share of industry and services in total employment followed a decline.

It is interesting to note that 63 per cent employment in the industry sector and 43 per cent in the service sector originated in the rural areas. Overall, 74 per cent of the workforce belongs to rural households and 26 per cent to urban households. Due to the effect of COVID on urban economic activities, employment share of urban areas witnessed decline.

The agriculture and allied sectors provided employment to 40 per cent male workers, 62 per cent female workers and 46.5 per cent of all workers during 2020–21. The industry sector absorbed 26 per cent of male workers and 16.6 per cent of female workers. The service sector provided employment to 33.6 per cent male and 23.5 per cent female workers.

Regular wage/salaried employment fell during 2020-21 when 3 million persons lost their jobs. Self-employment continued to rise. This shifted the scale of employment somewhat towards self-employment both in the case of male as well as female. At overall level, 23.3 per cent of the total workers were employed as casual labour, 55.6 per cent were self-employed and
21.1 percent were in regular wage/salary employment.

Age-wise estimates of the workforce reveal a big increase in the number of youth (aged 15–29 years) working in agriculture during 2019-20 and 2020-21 which happened to be the Covid years. Youth constituted 26 of total workforce and 23 per cent of agriculture workforce in the country.

The paper concludes that India has experienced a serious mismatch between structural changes in output and employment as growth rate in the output of the non-agriculture sector did not generate commensurate employment. This along with other factors have a significant bearing on the labour market, labour force, workforce, unemployment, nature of employment and distribution of workers over various activities, and necessitate appropriate policy response for employment generation. However, uninterrupted data flow on various aspects of employment has been a big gap for evidence-based policymaking on employment in the country.