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India needs to create close to 11 million jobs annually for the next five years to meet the growing new workforce in the country. The country can achieve this by creating a labour policy that will cater to the manufacturing and services sectors with digital services as the engine of employment growth.
"Labour force is expected to expand to 580 million by 2024-25 from 480 million in 2015-16…This implies 100 million new workers will join the workforce till 2024-25. Hence, we need to create close to 11 million new jobs each year," said a report by the Treasury Economic Research team of HDFC Bank.
Although it points out that the unemployment rose between 2012 and 2016, a part of the service sector where job opportunities are rising exponentially, were overlooked by current employment analysis.
Unemployment climbs, but informal jobs rise too
Unemployment rate rose from 3.3 percent in 2011-12 to 3.7 percent in 2015-16. The labour force has expanded by around 11 million each year since 2010-11, although employment additions have been close to 8 million with about 80 percent of the additions in the informal sector.
“These are the new digital ecosystems and start-ups. Not only are these systems (ecommerce and online aggregators) creating direct job opportunities but they are also boosting opportunities in allied ecosystems such as logistics, warehousing, IT, ITeS etc. To put out some numbers, employment in cab-hailing services such as UBER/OLA alone increased from 0.3 million in 2015 to over 1 million in 2018 (Mckinsey report, India’s Labour Market: A New Emphasis on gainful employment, June 2017)," it report noted.
Quoting a KPMG study, the report estimated that employment in allied systems with relatively low skill workers (like delivery services) will rise from 23,000 in 2012 to 1.5 million by 2021 and employment by start-ups is estimated to increase from 80,000 in 2015 to 250,000 by 2020.
Based on the labour bureau survey database, the labour force (employed + unemployed people) could rise close to 580 million by 2025 from 480 million currently – an addition of 100 million new people entering the workforce, it said.
Labour policy
The report flagged two important issues facing the labour market – one is the growth required to employ the expanding labour force and the second is the need to create more jobs in the formal sector.
“We need to start by accepting the labour challenge at hand, steer policy towards not just labour intensive manufacturing sectors but also the service sector, raise productivity and address skill mismatch issues, and capitalise on the expanding digital services as an engine of employment growth,” it said.
Apart from jobs moving out of the agriculture sector to industrial and now services sector, the employment absorbing power of certain service categories like the “other services” component (includes coaching, recreational and sports activities, hair dressing, tailoring, persons employed in households etc) has been much higher than conventional labour intensive sectors such as manufacturing.
For every 10 percent increase in output produced, the other services sector employment grew by 4.7 percent, while the manufacturing sector employment grew by 3.3 percent, trade, hotels and restaurants employment grew by 2.5 percent and finance, real estate employment by 0.6 percent.
Apart from services, utilities and construction, both saw employment growth of more than 10 percent for every 10 percent increase in output, data showed.
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