Ideas For GrowthInclusion

Employment Scenario in India

N C Saxena
Distinguished Fellow,
SKOCH Development Foundation

Despite the much-touted population dividend (which increases the number of youth who could contribute to productive employment) and massive investment in rural employment programmes, the 68th round of the NSSO data released in June 2013 show that employment levels in India have been virtually stagnant or declined for the last two decades. Among men, Worker Population Ratio (WPR i.e. ratio of workforce to population) is largely unchanged. It has gone down from 553 per thousand population in 1993-94 to 543 in 2011-12 for urban areas, but increased from 521 to 546 in rural areas. For women, whereas WPR for urban women has slightly declined from 155 to 147, the decline in the WPR for rural women is massive – a drop from 328 to 248 over the past two decades. Regardless of MGNREGA, women’s exclusion from rural labour markets remains a potential concern.

The decline in the number of female workers is a matter of concern as it increases their dependency on men and thus strengthens patriarchal norms. There could be many explanations for the fall in the number of women workers in the last three decades. First, the number of women students in the age group 15-25 has increased and therefore they are not in the labour market. Second, as prosperity increases there is a tendency in Indian households to withdraw women from work outside their homes. In the Indian mindset, a household in which females don’t perform manual work outside their homes has higher status than one in which females do so. Women themselves may be disinclined to participate in work force in the rural areas of India because of family status concerns in a culture that stigmatises market work by married women.

Why are women not in the work force?

The changes in female WPR (urban plus rural) over the years is shown in Figure 1.

Third, rural women are being displaced by growing mechanisation. Punjab farmers are switching to mechanical rice transplanters, and combine harvesters are spreading even in Bihar. Fourth, minor forest products that women used to collect are disappearing, as the preferred forest policy is getting now more timber-oriented. And lastly, non-farm jobs such as in construction, retail trade, and hospitality sector are largely male-oriented. These are generated some distance away from the village where men can go on a cycle, but most rural women do not know how to ride a bike.

As regards both men and women, the argument that more young people are now attending educational institutions cannot explain why there are still 25 million unemployed people in the country (according to the Current Daily Status figures of NSSO 68th round), who should have got the jobs if the economy was creating them. The incidence or instances of those who are willing to work and available for the labour market, but unable to find the work or employment, is higher among the young (below 30 years) when compared to their seniors (30 plus age). Not having jobs in sight may be one of the main reasons for pursuing higher studies.

Macro-policies on employment

One wonders whether macro policies in India are pro-employment and pro-poor in the post-reform period. For instance, financial sector liberalisation led to decline in credit to agriculture sector, to small and marginal farmers and weaker sections in the post-reform period. The micro credit movement is not a substitute for the agricultural credit by the banks, who seem reluctant to operate in rural areas.

Agriculture continues to be a sector ridden with surplus labour and low productivity. The index number of crop production (with triennium ending 1981-82 taken as 100) rose to 148.4 in 1990-91 and 175.7 in 1996-97, showing a healthy growth rate of 3.8 per cent per annum between 1981 and 1996, but since then has increased only by 1.2 per cent per annum, which is much less than the rate of growth of population. Even the absolute number of people employed in the primary sector has fallen from 208 million in 1999-2000 to 190 million in 2011-12.

The non-farm sector in India has immense potential to generate new jobs with relatively low direct investments. However, its expansion depends upon a number of factors which are influenced by government policies – directly or indirectly. Unfortunately, de-regulation introduced after 1991 has not touched the rural or the small informal sector, and has largely been confined to the modern manufacturing sector. For instance, marketing of agricultural products is hampered by various regulations passed under the Essential Commodities Act and the Mandi Acts. The controls and restrictions, imposed under these laws, are dis-incentives to production and distribution of essential commodities. Such controls should be re-examined so as to reduce the influence of various inspectors and their discretionary activities.

For marketing NTFPs, the government should not have a monopoly, nor create such a monopoly for traders and mills. The solution is to denationalise NTFPs gradually, so as to encourage healthy competition

Similarly gathering of forest products, which is regulated under rules framed under the Indian Forest Act, involves a very large number of rural people, especially tribals, but low returns to them are directly attributed to policy distortions arising out of state monopolies. This means only the agencies designated by the State have the right to market, process, and store NTFPs. Monopoly reduces the number of legal buyers, chokes the free flow of goods, delays payment to the gatherers, and reduces gatherers’ collection and incomes. Moreover, government culture does not encourage efficient business. It is suggested that for marketing NTFPs, the government should not have a monopoly, nor create such a monopoly for traders and mills. The solution is to denationalise NTFPs gradually, so as to encourage healthy competition and, at the same time, provide a minimum support price to forest gatherers just as it is done for farmers. Encouraging setting up of processing units within the tribal areas is also recommended.

Wage employment through MGNREGA

According to the NSSO unemployment in the economy as a whole was 9.4 per cent in 2011-12, with 7.3 per cent in urban areas and a staggering 10.1 per cent in rural areas. In addition, a large part of the rural labour force is underemployed. So, if implemented properly, the MGNREGA should help meet a basic need in rural India. However, a large number of studies on MGNREGA point out to the following weaknesses in the programme:

  • Falling financial allocation and job creation over the years;
  • Richer states are doing better than poorer states;
  • High percentage of incomplete works;
  • The objective of drought proofing is not being achieved;
  • Delay in wage payment;
  • Unemployment allowance is not paid;
  • Poor monitoring; and,
  • Corruption.

Whereas the national wage for MGNREGA has increased from 82 a day in 2009-10 to 155 in 2012-13, the overall central government expenditure on the programme has fallen during the same period from Rs 379.10 billion to Rs 293.87 billion. Thus, with stagnant or falling outlay and rising wage rate, the total employment generated has been falling rapidly every year.

Richer states are doing better than poorer states: It is interesting to note that whereas in richer states, such as Tamil Nadu, HP, J&K, Kerala and Andhra Pradesh, the number of households (HHs) doing wage employment under MGNREGA is far in excess to the number of poor HHs, the reverse is true of poorer states, such as Bihar, UP, Assam, MP and Jharkhand. For instance, the number of poor HHs is more than 10 million in Bihar, but work has been provided to only 2 million HHs, and that too only for less than ten days in a year. Thus participation rate in public works is un-correlated with the poverty rate across states.

In its recent report, the government auditor (CAG) has highlighted gross irregularities in the scheme in many states apart from an overall decline in the rural employment (per household) from 54 days in 2009-10 to 43 days in 2011-12. The report also questioned the crucial linkage between NREGA implementation and poverty alleviation. “It was also seen that Bihar, Maharashtra and Uttar Pradesh, which together account for 46 per cent of the rural poor, utilised only about 20 per cent of the Central funds,” it stated.

There could be many possible explanations of the trend in the richer states. First, a large number of women from non-poor HHs are supplementing their incomes through NREGA, whereas their husbands find more remunerative jobs elsewhere. Second, a large number of HHs though above the poverty line are still not able to meet their desired financial aspirations and therefore are willing to do wage employment. Third, in some states such as HP and the north-east work is being done by migrants who are below the poverty line, but have been left out of the poverty census because they are not able to exert pressure on the local administration for inclusion in the BPL list. This could also indicate bogus and inflated reporting in the muster roll.

The reasons for poor performance by Bihar, Orissa, UP, and Assam are well known. Their weak capacity is often due to the widespread shortage of staff at all levels that adversely affects implementation of the scheme.Second, poorer states tend to have a weaker capacity for administering schemes, draw funds from GOI and ensure that these reach the villages in time. Third, poorer states will be less able to afford the share of the costs that are borne by the state and local governments. And lastly, the number of banks being limitedin poorer states, delayed payment discourages workers away from government works.

The objective of drought proofing is not being achieved: MNREGS works are not leading to drought proofing, effective forestation, or watershed development because there is no monitoring to see if these works are indeed being done and then maintained properly. For instance, spending on planting – a labour intensive activity – should focus on survival of the trees. What’s the point in planting saplings if these are not cared for and transformed into trees? Women can be employed to do all these activities. Thus, employment can be the by-product of such labour-intensive economic development programmes. Similarly for drought proofing and watershed programmes, one needs to involve Gram Sabha, social workers, unskilled labour and focus on building and maintaining the assets created. However many studies show that there was hardly any effort to involve people in protection and maintenance of assets.

Unemployment allowance is not paid in most cases: In a Rajya Sabha Unstarred Question No. 1011, due for 3rd August 2010 asked by Mani Shankar Aiyar, it was revealed that the total number of cases where unemployment allowance was paid by the States under NREGA over the years was much less than 5,000, although millions of job card holders have either not been provided any employment or it is much less than 100 days. In another question number 763 answered on 20th March 2012 government informed the House that unemployment allowance during 2010-11 was paid only in 514 cases in the entire country. Thus law is being flouted openly by the state governments.

For drought proofing and watershed programmes, one needs to involve Gram Sabha, social workers, unskilled labour and focus on building and maintaining the assets created

Corruption is still quite high: In spite of a host of transparency and accountability measures (eg, public disbursal of wages, regular maintenance of “job cards” and mandatory social audits), NREGA remained vulnerable to fraud and embezzlement. In Indore (MP) the MGNREGA scheme saw wide-scale corruption in the state so much so that dead persons were named as beneficiaries of the project. Pilot experiments with Aadhaar-enabled payment systems show that the problem of fake names in the muster roll can be overcome, but inflating the number of days in the muster rolls or problem of huge commissions in material component still remained.

To sum-up, it is difficult to escape the conclusion that the NREGA has not performed well. The solution lies in a drastic overhaul of this scheme with greater transparency and accountability through social audits. Its limited success may be one of the reasons why overall employment has not grown in India in the last ten years.

N C Saxena

Dr.Naresh Chandra Saxena was the topper of his batch in the Indian Administrative Service, which he joined in 1964. He retired as Secretary, Planning Commission, Govt of India (GOI). He also worked as Secretary, Ministry of Rural Development, and Secretary Minorities Commission (GOI). He was a Member of the National Advisory Council from 2004 to 2008 and 2010 to 2014. During 1993-96 he was Director, Lal Bahadur Shastri National Academy of Administration, Mussoorie, which trains senior civil servants. On behalf of the Supreme Court of India, Dr Saxena monitors hunger based programmes in India.
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