Growth fails to cure India's unemployment problem: UN

While the country’s growth rate has been registering impressive numbers, problems related to employment still persist in India, according to the UN Trade and Development Report 2010. 

The massive growth in modern services such as information technology (IT), communication and financial services was not reflected in the growth of employment. 

“This reflects an increase in labour productivity, which makes India’s growth trajectory in services more positive in terms of productivity, though less positive in terms of unemployment and underemployment in a labour-surplus economy,” the report stated. 

The growth in India’s IT and ITeS services was also accentuated due to export of services having positive effects in the country’s balance of payments. The report also said while services sector dominated the growth trajectory of the country, only half of it consisted of the modern services. 

“It is, therefore, necessary that productivity and incomes grow not only in the modern but also in the traditional sectors. This can be achieved by establishing linkages between the two sectors, including the latter in supply chains, increasing the prices of agricultural products and using tax revenue perceived in the modern sector for redistribution policies,” the UN said. 

Despite the expansion in services, employment remained stagnant, the report said. While the sector accounted for 50 per cent of the gross domestic product in 2004-05, it employed 25 per cent of the work force. 

Also, employment in this sector has only increased by 22 per cent between 1999-2000 and 2004-05. “Real wages in India have not followed productivity gains,” it said. 

Similarly, the manufacturing sector also failed to expand in terms of generating employment, even though the sector grew significantly. Formal employment in this vertical, on the contrary, declined from 9.3 per cent to 7.5 per cent of the total employment. 

One of the primary reasons for lack of real growth in employment was because consumption in rural areas failed to pick up compared to the urban areas, the report added.