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Golden Research Thoughts

Volume 2, Issue. 2, Aug 2012

Available online at www.aygrt.net

ISSN:-2231-5063 ORIGINAL ARTICLE

GRT
Indian Employment: Pre And Post Reform

S.V.Sowani Associate Professor & Head,Deptt. of Economics C.T.Bora College, Shirur (Ghodnadi) Dist Pune Maharshtra 412 210 Email : sadashivsowani@yahoo.com Abstract:: Implications of economic policies initiated and pursued by the Government for the creation of gainful employment opportunities. After independence, when India initiated the programme of economic development through planning mechanism, neither of the two prevalent economic theories i.e. the Keynesian theory of effective demand and the neo-classical theory of flexible wage rates was not found suitable to the Indian conditions. This is the labour surplus but capital scarce economy was far from being found. (1) Economic reforms programme now being pursued in India has almost ignored growth of employment and its quality (2)The design of the policy is to make capital relatively cheap in relation to labour thus destroy the Indian advantage (3)During the post reform period private sector has stolen the pace over that of public sector (4)Economic reforms have bypassed agriculture and rural development prospects. MEASURES Employment generation should be the single most important criteria for investment policy. Rising of the domestic savings and generation of the domestic resources. There is need to reformulate economic policies. The private sector has to be more humane and the public sector more cost efficient. Implications of economic reforms initiated and pursued by the Government of India in the framework of liberalization and globalization for the creation of gainful employment opportunities. The Indian experience with regard to the crucial dimensions of growth and inflation since the early seventies bears out that the economy has had to pass through some exceptionally difficult periods such as during the oil price shocks of the early and late seventies. These shocks were absorbed mainly in the terms of sharp setbacks in the rate of output growth and unacceptable increase in the rate of inflation. Visibly supported with fiscal stimuli, the gradual recovery that materialized during the eighties as reflected in an improvement in economic growth and an abatement of inflationary pressures was somewhat weak until 1988-89 where after the average growth rate edged upwards to 6.0 per cent mark for the remaining part of the nineties. Since 1990s, Indian economy is passing through a period of an economic crisis. In order to place the economy back on the path of high and sustainable growth Government of India introduced certain economic reforms including Liberalization, Privatization, Globalization (LPG) from June 19991 and even now, the reforms being continued. The influence of macro economic environment on the industry speeds ahead economy generates more jobs and higher levels of wages and income through increasing productivity. To achieve
Please cite this Article as : S.V.Sowani , Indian Employment: Pre And Post Reform : Golden Research Thoughts (Aug. ; 2012)

Indian Employment: Pre And Post Reform

these objectives, series of outward oriented policy changes i.e. industrial reforms, fiscal reforms, monetary reforms, trade policy reform etc. were introduced. An economic reform has been evolving historically and being propelled forward with incredible speed by the technological revolution. Employment policy before the Reform period: The concept of unemployment in general is quite vast and also quite well discussed. However unemployment is more of a problem than of a concept, which is faced by almost all the economies of the world. The worst affected are the developing countries like India where the problem has grown and has taken a massive size of population. After independence, when India initiated the programme of economic development through planning mechanism, neither of the two prevalent economic theories i.e. the Keynesian theory of effective demand and the neo-classical theory of flexible wage rates was not found suitable to the Indian conditions. The Keynesian fiscal policy measures to raise effective demand become fruitful only with the assumption of excess capacity. This is the labour surplus but capital scarce economy was far from being found. Again the policy of increasing employment by lowering an already low wage level practically prevented the use of the new-classical approach of flexible wage rates of clearing the labour market in India. So the question arises, what was the specific strategy, which was taken up by the policy makers to reduce unemployment and generate employment possibilities. The Employment Scenario: Indian economic development under different plan periods the rate of growth of output has never been integrated with the rate of growth of employment. Accelerated economic growth has always been found to be favorite with the Indian planners. From the very first plan this concept of economic growth was very much interlinked with the increase in the employment opportunity, reduction of income inequality and poverty through there was an initial debate whether reduction of income inequality was conducive to growth or not. It was posed that reduction in income inequality would retard savings and hence capital formation in the LDCs, which would slacken economic growth.
Plans Annual GDP Growth Rate (at constant price) Growth of Employment

First Plan (1951-56) Second Plan (1956-61) Third Plan (1961-66) Fourth Plan (1969-74) Fifth Plan (1974-78) Sixth Plan (1980-85) Seventh Plan (1985-90) Eight Plan (1991-96) Ninth Plan (1997-2002) Tenth Plan (2002-2007)

3.7 4.2 -3.8 3.4 5.0 5.5 3.6 6.7 7.7 7.2

0.39 0.87 2.03 1.99 1.84 1.89 1.26 1.86 1.14 1.23 1.82*

Eleven Plan (2007 -2012) 7.5*


Source: Plan Documents (* Approximate)

Growth of employment by Sector: The employment generation in sartorial base i.e. primary, secondary and tertiary sectors it is fined that in pre reform and reform period the attitude of employment opportunity is in increasing trend. Following table indicate the growth of employment in sartorial base
Economic Sector 1983 Prim ary Sector Secondary sector Tertiary sect or Total E mplo ym ent 208.99 (69.0) 41.66 (13.8) 52.11 (17.2) 302.76 (100) Employment Generated in M illion 1993 245.16 (65.5) 55.53 (14.8) 73.76 (19.7) 374.45 (100) 2000 239.83 (60.4) 66.91 (16.8) 90.26 (22.7) 397.0 (100) 2010 228.43 (55.07) 78.12 (18.82) 108.35 (26.11) 414.90 (100)

Sour ce : C om pile d and c omp uted f or m the da ta pr ovided by th e P lanning C om m ission Re por t to Ta sk F or ce on Em ploym e nt Oppor tunitie s.

Golden Research Thoughts Volume 2 Issue 2 Aug 2012

Indian Employment: Pre And Post Reform

The growth rates of unemployment and labour force derived from NSS data are given in the above table, the following points emerge. 1. The growth rate of employment declined from 69% to 55.07% in agriculture, mining and other production unit in primary sector. 2. Indian economy known as rural and agro-based economy. Majority population stayed rural India, but the employment opportunities is declined by 14.03%. It affects to decline purchasing power parity, compulsory mobility toward urban sector etc. 3. Secondary sector witnessed an employment growth from 13.8% to 18.82%. It is an indication of development theory regarding transfer population from primary sector to secondary sector. 4. In the tertiary sector the growth rate of employment was high. It increase 17.2% to 26.11%, the growth rate is near about ten per cent. 5. Employment opportunities were increase in the reform period i.e. 112 million new jobs increase last twenty years. Unemployment Rate- Urban and Rural Differences: In the pre- reform period the data reveal that unemployment rates are, traditionally higher in urban areas than in rural areas. As against an unemployment rate of 10.3 per cent in 1977 in urban areas, the rural unemployment rate was 7.7 per cent. There was a significant fall in the rural unemployment rate in 1990 to 5.3 per cent, but the urban unemployment rate was of the order of 9.4 per cent, significantly higher because Indian economy was in savior economic crisis. After the period of reform, rural unemployment rate again increased to 7.2 per cent in the year 2000 and again 8.1 per cent in 2010 while urban unemployment also marginally increased to 7.7 per cent in the year 2000 and again decrease to 7.9 per cent in 2010. Following table indicate the unemployment among Urban and Rural sector. Unemployment among Urban and Rural sector (As per cent of labour force)

Period 1977 1990 2000 2010

Rural Areas 7.7 5.3 7.2 7.7

Urban Areas 10.3 9.4 8.1 7.9

Issues of Employment Generation: The appropriate strategy of economic reform with an eye to employment friendly development. Man is the object of development, any strategy of development depends on employment. The rate of growth of capital, technology and technical progress, skilled manpower development etc has to be circumscribed by the requirement of the target rate of growth of employment. Considering the issues of employment generation in reform period it is observed that the employment generation policies adopted are not positively acted. 1.In reform period the role of multinational corporations are accepted for generate the employment in manufacturing sector. The multinational as part of their marketing strategy try to ensure that capital-labour ratio is substantially increased to give them advantage in competition since they are familiar and equipped with highly capital intensive technology they have little concern for the growth of employment in India since the market they target bypass the people who live by the sweat of their brows, and ignored the objective of employment. 2.Economic reforms programme now being pursued in India has almost ignored growth of employment and its quality. Further the objective regarding the rate of growth of output has been paid only lip service. A tree is generally known by its fruits and as the role of reform it works as per the market and not the objectives. 3.The design of the policy is to make capital relatively cheap in relation to labour and thus destroy the Indian advantage of cheap labour in the international arena. 4.During the post reform period private sector has stolen the pace over that of public sector in respect of growth rate of employment. Though the signals of employment opportunities are good but it witnessed
Golden Research Thoughts Volume 2 Issue 2 Aug 2012

Indian Employment: Pre And Post Reform

growth in the volume of employment, there is much to worry about the slow-down in real wage earnings and deceleration in the quality of employment. 5.Contract labour system introduced in reform period by private sector with the help of labour reform. The employment generation in the form of contract labour affect on the security aspect as well as socioeconomic welfare of employees. 6.The Government has been vigorously follow the disinvestment policy in Public sector enterprises. The restructuring of public sector undertakings adversely affected on employment generation in public sector. At the same time the voluntary retirement scheme introduced to restructuring the business and rationalizing industry. 7.Economic reforms have bypassed agriculture and rural development prospects. Thus rural economy and agricultural sector has shown a very low rate of growth. In the reform period, in comparison with workforce in rural sector and the availability of employment opportunity is widen. The unemployment problem in rural and agriculture sector is savior in present days. Employment Generation Programmes adopted by Government in Reform Period Growth rate of GDP, Foreign Direct Investment, wide scope to Multi-National Enterprise's, Reforms in varies sectors like labour reform, wage reform, financial sector reform, tax reform etc are not work as per the objectives to generate employment. For the purpose of employment generation several special programmes are being implemented by the Government both in rural and urban areas during the reform period. 1.Employment Assurance Scheme (EAS) The EAS was launched form 2nd Oct 1993 in 1778 development blocks in the rural areas of 261 districts. The main objective of this scheme is to provide employment of not less than 100 days to every desirous person aged between 18 to 60 years during the lean agricultural season. 2.Prime Minister's Rozgar Yojana (PMRY)- PMRY was also introduced on 2nd Oct 1993. Under this scheme every selected educated unemployed youth in the group of 18 to 40 years and having family income below Rs. 40000/- is provided a loan up to Rs. one lakh for opening his own enterprise. 3.Rural Employment Generation Programme (REGP)- REGP launched in 1995 with the objective of creating self-employment opportunities in the rural area and small towns. Under REGP, entrepreneurs can establish village industries by availing of margin money assistance for maximum Rs.25 lakh. 4.Swarnajayanti Shahri Rozgar Yojana (SJSRY)- SJSRY is operational since Dec 1997. This scheme provides gainful employment to urban unemployed and underemployed. 5.Swarnajayanti Gram Swarozagar Yojana (SGSY):- SGSY was launched in April 1999 after restructuring of IRDP and allied scheme. It is the only self-employment programme currently being implemented. Up to April 2009 the total allocation of Rs 8930 crore was made available by the Government to 74.92 lakh Swarozgaris. 6.Sampoorna Grameen Rozagar Yojana (SGRY)- SGRY was launched in Sep 2001, merging the ongoing scheme of Jawahar Gram Samridhi Yojana (JGSY) and Employment Assurance Scheme (EAS). The objective of this programme is to provide additional wage employment in the rural areas as also food security, along with the creating of durable community, social and economic infrastructure in rural areas. This programme is open to all rural poor who are in the need of wage employment and desire to do manual and unskilled work in and around the village. To generate employment in Indian economy there is need overall sectoral increase in labour resources as per the share of GDP. The employment generation also widely spread in private-public sector, urban-rural sector etc. So to generate employment, the private sector has to be made more humane and the public sector most cost efficient. The operation of the market mechanism in a labour surplus economy shall hardly be able to humanize the private sector. The state should be assigned a positive role. For enlarging employment, the emphasis shall have to be shifted from corporate sector or organized medium and large scale sector to small scale sector and modern service sector. It is imperative to place greater emphasis on rural and agricultural development for designing machinery and equipment so as to employ more labour and less capital particularly in agriculture and agro based industries. The draft of twelth plan envisaged inclusive
Golden Research Thoughts Volume 2 Issue 2 Aug 2012