Accumulation Strategies and Human Development in India: Jayati Ghosh

Editors Introduction 43
Article
Accumulation
Strategies and
Human Development
in India
Agrarian South: Journal of
Political Economy
1(1) 4364
2012 Centre for Agrarian Research
and Education for South (CARES)
SAGE Publications
Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/227797601200100104
http://ags.sagepub.com
Article
Jayati Ghosh, Centre for Economic Studies and Planning, School of Social
Sciences-II, Jawaharlal Nehru University. E. mail: [email protected].
Jayati Ghosh
Abstract
India is frequently cited as one of the success stories of globalization,
with respect to its economic growth performance, during the past two
and half decades. However, the very pattern of recent growth resulted
in regional imbalances, greater inequalities in the control over assets
and incomes, dispossession and displacement without adequate com-
pensation and rehabilitation. Apart from this, there are clear failures of
this growth process, even from a long-run perspective. An important
failure is the worrying absence of structural change, in terms of the abil-
ity to shift the labour force out of low-productivity activities, especially
in agriculture, to higher productivity and better remunerated activities.
Furthermore, it is evident that the relatively rapid economic growth has
not translated into better human development conditions for a large
proportion of the population.
Keywords
economic boom, agrarian crisis, unemployment, human development
44 Jayati Ghosh
Agrarian South: Journal of Political Economy, 1, 1 (2012): 4364
Introduction
The recent economic boom which has been relatively prolonged has
found, in India, a confident capitalist class increasingly taking on the
world not only in exports but also through investments abroad. There is
euphoria in the financial markets and growing self-confidence among
the elite, professional and middle classes. India is currently regarded
(along with China) as one of the success stories of globalization, likely
to emerge into a giant economy in the twenty-first century. The relative
ability to withstand the worst effects of the global financial crisis has
generated further expectations of a vibrant democracy on the move,
especially in economic terms.
Yet, to paraphrase Charles Dickens, while these are the best of times
for some, they are also the worst of times for others. And the others in
this case may well include the majority of Indians, given the growing
dichotomy in conditions of living. Despite six decades of independence,
the development project is nowhere near completion in India. It is also
clear that over time, some elements of that project seem even less likely
to be achieved than in the past, despite relatively rapid economic growth.
Taking a long view, there are some clear achievements of the Indian
economy since independencemost crucially, the emergence of a rea-
sonably diversified economy with an industrial base. The last 25 years
have also witnessed rates of aggregate gross domestic product [GDP]
growth that are high compared to the past, and also compared to several
other parts of the developing world. Significantly, this higher aggregate
growth has thus far been accompanied by macroeconomic stability, with
the absence of extreme volatility in the form of financial crises, such as
have been evident in several other emerging markets. There has also
been some reduction (although not very rapid) in income poverty.
However, there are also some clear failures of this growth process
even from a long-run perspective. An important failure is the worrying
absence of structural change, in terms of the ability to shift the labour
force out of low productivity activities, especially in agriculture, to
higher productivity and better remunerated activities. Agriculture con-
tinues to account for around 60 per cent of the workforce, even though
its share of GDP is now less than 20 per cent. In the past decade, agrarian
crisis across many parts of the country has impacted adversely on the
livelihood of both cultivators and rural workers, yet, the generation of
Accumulation Strategies and Human Development 45
more productive employment outside this sector remains woefully
inadequate.
Other major failures, which are directly reflective of the still-poor sta-
tus of human development in most parts of the country, are, in many ways,
related to this fundamental failure. These include: the persistence of wide-
spread poverty; the absence of basic food security for a significant propor-
tion of the population; the inability to ensure basic needs of housing,
sanitation and adequate health care to the population as a whole; the con-
tinuing inability to ensure universal education and overcome the poor
quality of much school education; and the sluggish enlargement of access
to education and employment across different social groups, and for
women in particular. In addition, there are problems caused by the very
pattern of economic growth: aggravated regional imbalances; greater ine-
qualities in the control over assets and in access to incomes; and disposses-
sion and displacement without adequate compensation and rehabilitation.
Seen in this light, it becomes apparent that a basic feature of the proc-
ess of economic development thus far has been exclusion: exclusion
from control over assets; from the benefits of economic growth; from the
impact of physical and social infrastructure expansion; from education;
and from income-generating opportunities. This exclusion has been
along class or income lines, by geographical location, by caste and com-
munity and by gender.
However, exclusion from these benefits has not meant exclusion from
the system as such; rather, those who are supposedly marginalized or
excluded have been affected precisely because they have been incorpo-
rated into market systems. We therefore have a process of exclusion
through incorporation, a process that has actually been typical of capital-
ist accumulation across the world, especially in its more dynamic phases.
Thus, peasants facing a crisis of viability of cultivation have been
integrated into a market system that has made them more reliant on pur-
chased inputs in deregulated markets, while also becoming more depend-
ent upon volatile output markets in which state protection is completely
inadequate. The growing army of self-employed workers, who now
account for more than half of our workforce, have been excluded from
paid employment because of the sheer difficulty of finding jobs, but are
nevertheless heavily involved in commercial activity and exposed to
market uncertainties in the search for livelihood. Those who have been
displaced by developmental projects or other processes, and subsequently
46 Jayati Ghosh
have not found adequate livelihood in other activities, are victims of the
process of economic integration, though excluded from the benefits.
These problems are certainly recognized, even in official circles, and
the need for more inclusive growth is now established. Yet, much more
needs to be done, and the urgency of the problems needs to be taken more
seriously, without falling into a trap of complacency about the aggregate
rate of economic growth. This article examines these issues in more detail.
The Nature of the Recent Boom
India sustained a relatively high rate of growth over the past 25 years,
which accelerated since 2002. It is now accepted that after a period of
deceleration in industrial growth during the late 1960s and the 1970s,
widely considered a period of stagnation, India moved from a path
characterized by a slow, 3 per cent, Hindu rate of growth on to a rather
creditable growth trajectory involving GDP growth of around 56 per
cent per annum from the early 1980s. This is important to note: the
recovery from a period when growth decelerated sharply, starting in the
mid-1960s, did not begin with the economic reform of 1991, but a
decade earlier.
1
However, the very recent period suggests a movement
towards an even more rapid growth trajectory, with annual rates of real
GDP growth averaging 79 per cent over the past decade, and dipping
only a little in the period after the global recession of 200809.
The transition to a higher economic growth trajectory was associated,
in the 1980s, with the fiscal stimulus provided by the state in a context of
import liberalization. In the 1990s, this fiscal stimulus was much weaker,
declining in the first part of the decade and only increasing somewhat from
1997 onwards. The growth performance was more uneven, with decelera-
tion in agricultural output growth and fluctuating performance in manufac-
turing. So, the expansion of services proved to be crucial in the later period.
Despite the weakened fiscal stimulus, both in terms of public invest-
ment and aggregate expenditure, the role of the state remained crucial,
since it was the state that determined the contours of tax reductions,
deregulation and other policies that allowed for economic growth based
on the demands of a relatively small and dominantly urban section of the
population. The explosion in the consumption of the upper quintile of the
population, which fed this growth, involved increased inequality, both
across regions of India and within regions, across different economic and
social categories. There was also a widening gap between incomes in
agricultural and non-agricultural activities, such that the ratio of per
worker domestic product in non-agriculture to that in agriculture
increased from about two in the 1950s to well over four in the 2000s.
The phase of higher growth has been associated with some amount of
structural change, although perhaps not as much as might be expected.
Investment rates have increased over time, from about 22 per cent in the
early 1980s to 26 per cent in the early 1990s and to around 30 per cent in
the 2000s, which is to be expected in a developing economy achieving
higher rates of per capita income. Meanwhile, the share of agriculture in
GDP has fallen along predictable lines in the course of development, to
only around 15 per cent in 2010, but there has been little increase in the
share of the secondary sector, which has not changed at all since the early
1990s (Central Statistical Organisation [CSO] National Accounts
Statistics, various issues). Rather, the share of the tertiary sector has
increased dramatically, to the point where it now accounts for more than
half of national income. Such changes in output shares were not accom-
panied by commensurate changes in the distribution of the workforce.
The proportion of all workers engaged in agriculture as the main occupa-
tion has remained stubbornly above half, despite the decline in the
generation of agricultural employment in the most recent decade and
the sharp fall in agricultures share of national income.
For some time now, the rate of growth of services GDP has been
much higher than the rate of growth of overall GDP. More than 60 per
cent of the increment in GDP in the past two decades has been due to an
increase in GDP from services. This sharp increase in the share of serv-
ices in GDP in India has occurred at a much lower level of per capita
income than has characterized the developed countries when they expe-
rienced a similar expansion. It is strongly related to the nature of the
recent boom, which is crucially based on the greater integration of India
with the global economy through a greater reliance on the export of
information technology (IT)-enabled services, including software, as
well as the dependence on capital inflows.
Recent high economic growth in India is also related to financial
deregulation that sparked a retail credit boom and combined with fiscal
concessions to spur consumption among the richest sections of the
48 Jayati Ghosh
population. This led to rapid increases in aggregate GDP growth, even as
deflationary fiscal policies, poor employment generation and persistent
agrarian crisis reduced wage shares in national income and kept mass
consumption demand low. There was a substantial rise in profit shares in
the economy and the proliferation of financial activities. As a result,
finance and real estate accounted for more than 16 per cent of GDP in
200910 (CSO National Account Statistics 2011). This combined with
rising asset values to enable a credit-financed consumption splurge
among the rich and the middle classes, especially in urban areas. And
this, in turn, generated higher rates of investment and output over the
upswing. The earlier emphasis on public spending as the principal stimu-
lus for growth in the Indian economy was thus substituted in the 1990s
with debt-financed housing investment and private consumption of the
elite and burgeoning middle classes. The recent Indian growth story in its
essentials has been, therefore, not unlike the story of speculative bubble-
led expansion that marked the experience of several other developed and
developing countries in the same period.
Thus, the recent boom was fundamentally dependent upon greater
global integration, which also made the growth process more uneven
and more vulnerable to internally and externally generated crises
(Chandrasekhar and Ghosh 2009). It is commonly perceived that this
reflected the impact of trade liberalization, but, in fact, changes in finance
were probably even more significant. Indias apparent success as a
global player is not because of a current account surplus resulting from
its export performance. Rather, it stems from inflows of capital far
exceeding its current account financing requirements. This implies that
our foreign exchange reserves are a reflection not of our export success,
which was what liberalization was expected to deliver, but of our attrac-
tiveness as a destination for investment, which has delivered capital
inflows that are more than what is needed to finance the excess of our
import bill over our export revenues. In sum, Indias external reserves
are not earned (as is true of China with its current account surpluses) but
borrowed.
Recent developments point to a qualitative change in Indias relation-
ship with the world system. Until the late 1990s, India relied on capital
flows to cover a deficit in foreign exchange needed to finance its current
transactions, because foreign exchange earned through exports, or
received as remittances, fell substantially short of payments for imports,
interest and dividends. More recently, however, India has been receiving
excess capital. Hence, capital inflows are forcing India to export capital,
not just because accumulated foreign exchange reserves need to be
invested, but because it is seeking alternative ways of absorbing the
excess capital that flows into the country.
The Agrarian Crisis and its Implications
Agriculture remains the lifeblood of economic activity in India. While
this may appear obvious, given that around 60 per cent of the workforce
still obtains its livelihood from this sector, at another level, it is evidence
of the relative failure of the national development project. After all, the
process of development (and industrialization) entails the progressive
transfer of labour and resources from agriculture to other sectors, and
this is typically associated with a reduction in its share of national
income, as well as an even sharper decrease in agricultures share of
aggregate employment. However, this has not happened because of two
important failures: the failure to generate dynamic sources of additional
employment in non-agricultural activities, which would encourage the
movement of workers out of agriculture; and the lack of success in rais-
ing the aggregate social productivity of labour in the country, which is
crucial to sustained growth and development.
In addition, of course, there is the problem that in large parts of the
country, agriculture itself is currently in an advanced stage of crisis in
India. While the causes of this crisis are complex and manifold, they are
dominantly related to public policy. The economic strategy of the past
decade has systematically reduced the protection afforded to farmers and
exposed them to market volatility and private profiteering without
adequate regulation; it has reduced critical forms of public expenditure;
it has run down or destroyed important public institutions that have
direct relevance for farming, including public extension services and
marketing arrangements; and it did not adequately generate other
non-agricultural economic activities.
At the same time that various forms of public protection for cultiva-
tion were being reduced, trade liberalization meant that Indian farmers
50 Jayati Ghosh
had to operate in a highly uncertain and volatile international environ-
ment. They were effectively competing against highly subsidised large
producers in the developed countries, whose average level of subsidy
amounted to many times the total domestic cost of production for many
crops. Also, the volatility of such pricesfor example, cottoncreated
uncertain, and often misleading, signals for farmers who responded by
shifting cropping patterns. It directly affected soya bean and groundnut
farmers due to palm oil imports. Import of fruits and other commodities
also affected farmers. With increased trade liberalization, reduction in
cereal consumption became very pronounced. Also, export of items like
cotton increased volatility in supplies of cotton raw material, which
adversely affected handloom and powerloom weavers whenever yarn
prices increased significantly due to the export of cotton.
Other government policies had direct and indirect effects on agricul-
ture. The most significant are related to the efforts at reducing subsidies,
which affected both agricultural producers and consumers, and the
reduction of public expenditure which would have benefited cultivation.
Thus, both food and fertilizer subsidies were sought to be reduced over
this period. However, both of these strategies, which involved raising the
prices for consumers of both food and fertilizers, had undesirable and
even counterproductive effects, leading to the paradoxical results of
reducing consumption and simultaneously increasing subsidies!
The combination of liberalized trade and reduced protection of other
kinds certainly led to increased levels of exports and imports of agricul-
tural commodities. While exports increased in dollar terms, so did
imports; thus, the trade balance shows no particular trend. There were
very sharp fluctuations in the unit value of exports because of very
volatile international prices, so changes in export volume were necessary
to ensure some degree of stability in total export values. Such variation
typically had very little to do with domestic harvest conditions, and
much more to do with international prices.
In addition to increasing the risks of farming, volatile crop prices gen-
erated misleading price signals. Since Indian farmers are known to have
very elastic responses to relative price signals in terms of shifting acre-
age, this caused large and often undesirable shifts in cropping patterns
which ultimately rebounded on the farmers themselves. Thus, the phase
of high cotton prices in the mid-1990s was associated with a widespread
shift towards cotton cultivation, even in many areas with soil and
climatic conditions not ideally suited to growing cotton. The subsequent
collapse of world cotton prices from the very late 1990s onwards
was a major factor contributing to the material distress of cultivators in
cotton-growing areas. In dry land areas, traditional staple crops, such as
millets and sorghum, were abandoned in favour of oilseeds, such as
groundnuts, which require more irrigation and purchased inputs, and
which have also faced major volatility in crop prices. As a result of the
shift away from traditional staple grains to cash crops, there was much
greater use of a range of monetized inputs, including new varieties of
seed and related inputs marketed by major multinational companies.
Small cultivators, who took on debt (often from informal credit sources
at very high rates of interest) in order to pay for these cash inputs, then
found themselves in real difficulty if crops failed or output prices
remained low.
Thus, the inevitable uncertainties associated with weather fluctua-
tions were compounded by further problems of extremely volatile crop
prices, which were no longer inversely related to harvest levels but fol-
lowed an international pattern. Furthermore, this dramatic volatility of
output pricesand the stagnation/collapse of some harvest prices from
1997 onwardswas associated with continuously rising prices of inputs.
This was especially marked because of government attempts to reduce
fertilizer subsidies, as well as progressive deregulation of supplies of
inputs, such as seeds and pesticides.
Such exposure to global price volatility has been associated with a
growing reliance on private debt, because of the lack of extension of
institutional credit, coupled with growing inability to meet debt service
payments because of the combined volatility of crops and prices. The
relative collapse of institutional credit for agriculture in the 1990s must
be reckoned as one of the more important causes of agrarian distress in
India. Subsequent to financial liberalization in the 1990s, there was a
significant deceleration in the growth of bank credit to rural areas, par-
ticularly from commercial banks, and a relative fall in the proportion of
bank credit flowing to the priority sectors, especially agriculture. The
impact of the slowdown in rural banking fell disproportionately on poor
and small borrowers. As a result, village studies indicate that non-
institutional or informal credit is the main source of credit for the
52 Jayati Ghosh
large majority of rural households today, and interest rates charged in the
informal sector remain high (typically between 24 and 36 per cent per
annum).
All this has had very clear and definite negative effects upon the via-
bility of cultivation. While this has been a generalized rural crisis, the
burden has fallen disproportionately on small and marginal farmers, ten-
ant farmers and rural labourers, particularly those in dryer tracts. The
most extreme manifestation of the crisis is in the suicides by farmers in
some parts of the country, notably in Andhra Pradesh, Karnataka and
Maharashtra, but also other areas. There are also reports of hunger deaths
and of mass migration for work, including by cultivators, in some of the
worst-affected areas. However, the picture is complex, because in some
parts of India, there is also evidence of substantial diversification of
crops, expansion of horticulture and related activities and growth of
commercial farming.
This, in turn, has led to loss of assets, including land, by the small
peasantry. It is now clear that this period witnessed a significant degree
of concentration in terms of operated holdings, which reflected changes
in both ownership and tenancy patterns. Many small and very marginal
peasants have lost their land over this period, and therefore have been
forced to search for work as landless labourers, and there have been
micro-level surveys which have reported increasing leasing-in by large
farmers from small landowners. The National Sample Surveys (NSS)
also suggest that there has been a very large increase in landless house-
holds as a percentage of total rural households, from around 35 per cent
in 198788 to as much as 41 per cent in 19992000.
Overall, the pervasive agrarian crisis has been most harshly illustrated
by the increase in suicides by farmers, which in 19952009 amounted to
more than 200,000 recorded cases across India (Government of India,
various years). Because of the difficulties in establishing cause of death
in many rural situations, and the unwillingness of some state govern-
ments to acknowledge the extent of the problem, it is likely that even this
is an underestimate.
In addition, there has been a deterioration of conditions of food
security associated with the shift away from cultivation of traditional
staples towards cash crops, as well as a sharp decline in per capita
foodgrain absorption, to the low levels last seen only in the late 1930s,
and again in the early 1950s, which were both periods of extreme rural
distress (Patnaik 2006). Consumption data based on the NSS suggest
that both foodgrain consumption and total calorie consumption have
declined substantially over the period, in the aggregate, and even for the
bottom 40 per cent of population in terms of expenditure classes. This
confirms the evidence on poor and worsening nutrition patterns of the
National Family Health Surveys (NFHS).
Trends in Employment and Wages
In the 1990s, it became fashionable among critics of the plan-led, mixed
economy-based strategy to argue that it was this very strategy that was
responsible for the slow rate of employment growth. It was suggested
that export pessimism and an inward-looking import substitution policy
had discouraged employment-intensive export production and imposed
high-cost, capital-intensive production, which had low linkage effects
with the rest of the economy and did not lead to more use of labour. A
concomitant of this argument, as noted earlier, was that the opening up
of the economy to more liberal external trade and foreign investment
would not only generate a higher rate of output growth, but also auto-
matically create a restructuring of production which would mean a
significant increase in labour-intensive production and therefore, also
substantial increases in employment.
However, evidence yielded by the quinquennial NSS on employ-
ment and unemployment, indicates that this expectation has not been
realized.
2
These surveys revealed a sharp, and even startling, decrease in
the rate of employment generation across both rural and urban areas
during the 1990s. Indeed, so dramatic was the decline of workforce
participation and the slowdown in the rate of employment growth
that they called into serious question the pattern of growth over the
1990s.
The rate of growth of employment, defined in terms of the current
daily status (which is a flow measure of the extent of jobs available),
declined from 2.7 per cent per year in the period 198394 to only
1.07 per cent per year in 19942000 for all of India. This refers to all
forms of employment, casual, part time and self-employment. For
54 Jayati Ghosh
permanent or secure jobs, the rate of increase was close to zero. In rural
areas, the decline in all employment growth was even sharper, from
2.4 per cent in the 198394 period to less than 0.6 per cent over
19942000. This included all forms of employment, whether under-
taken as the principal or subsidiary activity and for part of the day.
This was well below the rate of growth of the population. In both
rural and urban areas, the absolute number of unemployed increased sub-
stantially, and the rate of unemployment went up as well. The daily sta-
tus unemployment rate in rural India as a whole increased from 5.63 per
cent in 199394 to 7.21 per cent in 19992000, and was more than 15
per cent in some states. In addition to this, there was a sharp decline in
the rate of growth of the labour force. More people declared themselves
to be not in the labour force, possibly driven to this by the shortage of
jobs.
Even on the basis of usual status (as opposed to current daily
status) employment, there was a very significant deceleration for both
rural and urban areas, with the annual rate of growth of rural
employment falling to as low as 0.67 per cent over the period 199394
to 19992000. This was not only less than one-third of the rate of the
previous period, 198788 to 199394, but was also less than half the
projected rate of growth of the labour force in the same period. Some of
this was because of the decline in public spending on rural employment
programmes since the mid-1990s. As a percentage of GDP, expenditure
on both rural wage employment programmes and special programmes
for rural development declined from the mid-1990s. The total central
allocation for rural wage employment programmes was already only
0.4 per cent of GDP in 199596, but it declined further to a minuscule
0.13 per cent of GDP in 200001.
The subsequent decade has been, if anything, even more disappoint-
ing in terms of desirable employment generation. The following figures
relate to usual principal status activity, which is the main activity in
which people declare themselves to be engaged on a usual basis over the
course of the previous year. They also refer to those above the age of
15 years. The employment numbers have been derived by applying the
participation rates of the National Sample Survey Organization (NSSO)
survey of 200910 to interpolated population figures from 2001 and
2011 censuses.
Figure 1 shows the dramatic deceleration in total employment growth
in the latest quinquennium, from an annual rate of around 2.7 per cent in
the previous quinquennium period to only 0.8 per cent in the latest quin-
quennium. For women, there was an absolute decline in employment,
although it is certainly true that this may reflect the lack of recognition
of womens work, since the biggest element of the decline relates to
womens self-employment. But even male employment shows quite a
sharp deceleration. This slowdown in employment generation is evident
across both rural and urban areas, though it was especially marked in
rural India.
Nor should it be assumed that the overall slowdown in employment
generation is simply the result of less employment in agriculture, which
is, after all, a typical feature of a broad process of industrialization and
development. Rather, as Figure 2 indicates, rates of increase of non-
agricultural employment also fell sharply, indeed halved, for all workers
taken together. The collapse was sharpest for female workers. But even
for male workers, the slowdown in non-agricultural job creation was
strongly evident.
5.00
4.00
3.00
2.00
2.66
2.49
0.83
1.70
3.14
1.72
2.21
0.42
1.92
4.00
(15+ group, annual compouno rates )
1.00
0.00
1.00
2.00
3.00
Total Male Female Pural Urban
19992000 to 200405
200405 to 200910
Figure 1. Rates of Growth of Total Employment
Source: Authors calculation from the base data given in various rounds of NSSO,
Government of India.
56 Jayati Ghosh
Figures 37 include data from the smaller 64th Round of the NSSO,
conducted in 200708, which was specifically devoted to employment.
This is useful, because it allows us to check whether the latest round is
indeed a significant outlier, or part of a trend that was already emerging
a few years earlier.
(15+ group, annual compouno rates )
4.65
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Total Male Female
2.53
4.42
2.89
5.76
0.76
19992000 to 200405
200405 to 200910
Figure 2. Rates of Growth of Non-agricultural Employment
Government of India
120.0
100.0
80.0
60.0
40.0
20.0
0.0
199900 200405 200708 200910
20.8
1.9
40.3
4.4
35.6
Casual Employee
Regular Employee
Self-Employed
Unemployed
In education
16.1
1.6
42.2
4.5
36.6
9.4
1.1
39.0
3.1
36.3
34.9
(15+ group, millions)
4.2
50.3
3.0
13.0
Figure 3. Distribution of Rural Females
Figures 3 and 4 show the distribution of rural females and males
respectively, over the recent rounds, in terms of absolute numbers. For
rural females, it is certainly true that self-employment has collapsed,
showing a decline of more than 20 per cent compared to five years ear-
lier. This is obviously a matter that needs to be explored, not in terms of
the adequacy of the investigative methods, but also in terms of question-
ing whether the forms of self-employment that were said to have emerged
were really viable at all.
This question becomes significant because it is clear that self-
employment has also fallen for rural male workers. In both categories,
the increase has been in casual work. This increase is marginal for rural
women (some of whom are likely to have withdrawn from the work-
force), but quite substantial for men in rural India. Regular employment
has been largely stagnant.
The good news is that there has been a substantial increase in those
engaged in education, for both rural males and females. The increase is
really quite significant, around 50 per cent over the five year period for
both males and females, and amounting to nearly 20 million more young
people (above the age of 15) being engaged in education as the principal
activity.
300.0
250.0
200.0
150.0
100.0
50.0
0.0
199900 200405 200708 200910
19.4
4.4
104.0
17.3
69.8
22.9
4.6
121.7
19.3
70.2
26.6
5.1
121.4
20.5
79.1
34.6
4.2
120.2
19.8
86.8
Casual Employee
Regular Employee
Self-Employed
Unemployed
In education
Figure 4. Distribution of Rural Males
58 Jayati Ghosh
Could this be related to the evident decline in unemployment? Not
really, because it turns out that, while unemployment seems to have
fallen both in terms of rates and absolute numbers, as is evident from the
figures, it has not fallen much for rural males, though it has declined
slightly for rural females.
In urban India, similar trends seem to be at work, as indicated in
Figures 5 and 6. Self-employment has decreased for both men and
women, and in fact, the decline is significantly more for urban men.
Regular employment has increased marginally for both categories.
However, a note of caution is necessary before such a finding gives rise
to even minor celebration. In the 61st round of NSSO, 200405, the larg-
est increase in regular employment for urban women was in domestic
service, as maidservants and the like, which is not exactly the most
desirable form of work. So obviously, further investigation is necessary
before we can adequately intepret this trend.
Casual employment for both male and female workers has increased
to a greater extent. Specifically for the age cohort between 25 and
59 years, for all India, there were around 18.2 million more casual work-
ers, compared to 6.4 million additional regular workers and four million
more self-employed. At the same time, unemployment rates appear to
200405
10.9
199900
9.1
1.2
5.7
5.8
3.4
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2.0
7.8
8.4
3.4
200708
13.4
1.3
6.5
8.0
3.8
200910
15.3
6.9
8.8
4.0
1.5
Casual Employee
Regular Employee
Self-Employed
Unemployed
In education
Figure 5. Distribution of Urban Females
Government of India)
have fallen, especially for this age group. The decline in unemployment
even during a period of very low aggregate job creation is a paradox that
deserves further examination.
The increase in numbers of those engaged in education is so substan-
tial that it clearly requires another look. Figure 7 provides the absolute
numbers of increase for those engaged in education as the principal
activity, for the age cohorts of 1519 years and 2024 years. While the
200910
36.1
3.4
47.2
13.2
39.5
200608
29.5
2.9
48.7
12.5
40.5
200405
23.8
5.0
58.1
199900
18.6
2.3
44.8
9.0
39.7
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
12.6
38.2
Casual Employee
Regular Employee
Self-Employed
Unemployed
In education
Figure 6. Distribution of Urban Males
9.00
6.34
1.35
8.79
(by age, gender and residence, millions)
2.61 2.55
1.62
3.17
Age 1520 years
Age 2024 years
1.72
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Rural females Rural males Urban females Urban males
Figure 7. Increase in Education between 200405 and 200910
Government of India
60 Jayati Ghosh
biggest increases are for those presumably going in for secondary and
higher secondary schooling (in the age group of 1519 years), there are
also substantial increases in the older age group, suggesting involvement
in different forms of tertiary education.
This is good news, of course: the citizens of India deserve to be better
educated, and the economy desperately needs a more skilled workforce.
However, it also points to a concern that should surely exercise our pol-
icy makers, if they can bring themselves to look at a dataset that they
appear to reject at present. According to these data, there are nearly
30 million more young people putting themselves through more educa-
tion in the hope of being able to access better jobs. The total numbers of
such youth in secondary and tertiary education is at least 55 million.
Soon, perhaps even within the next five years, these young people will
enter the job market and expect to access employment that is at least
minimally commensurate with the efforts they have put in to receive
more education. But in the previous five year period, all forms of
employment (regular and casual paid work as well as self-employment),
only increased by around 28 million (authors calculation from the base
data given in various rounds of NSSO, Government of India). If this
sluggish pace of job creation continues, there will be even larger gaps
between aspiration and reality in Indias labour markets.
Thus, overall, the transition to a high growth trajectory does not seem
to have delivered much on the employment front. Employment increases
seem to occur when workers, especially female workers, are pushed into
the workforce by economic circumstances like a bad agricultural year. The
elasticity of employment with respect to output increases seems to have
deteriorated with accelerated growth. Casual wage labour and self-
employment dominate the employment scenario. And the non-agricultural
sectors appear to contribute inadequately to additions to employment,
though these were the sectors that were expected to take up the employ-
ment slack once neoliberal policies succeeded in delivering growth.
If this is a true description of labour markets in India at present, it has
significant implications. One concern relates to the possibility of missing
the window of opportunity provided by a large young population,
because the economic growth process simply does not generate
enough jobs to employ them productively. Another important concern
follows from this, in terms of the negative social impact of growing
numbers of young unemployed. If the economy does not generate
adequate employment of a sufficiently attractive nature, the demograph-
ics could deliver not a dividend but anarchy.
It is often held that the rapid growth of modern IT-driven services in
India offers an opportunity to exploit the demographic dividend. Of
course, there is no doubt that, both in absolute and relative terms, the size
of the IT sector in India is now impressive, with the revenues of this
sector now amounting to around 5 per cent of the GDP. This makes it an
important segment of the non-agricultural sector. However, the contribu-
tion of the sector to employment does not compare with its role in the
generation of income and foreign exchange. The total IT industry,
including both hardware and software elements, as well as IT-enabled
services, still employs only slightly more than 1 million workers, out of
an estimated total workforce in India of more than 415 million, and
urban workforce of around 110 million. Total employment in this sector
is far short of even the annual increment in the youth workforce. This
mismatch between the contribution of the sector to GDP and its contribu-
tion to employment suggests that, despite its high growth, this sector can
make only a marginal difference to employment, even among the more
educated groups in urban areas.
It is evident that the relatively rapid economic growth has not trans-
lated into better material or human development conditions for a very
large proportion of the population. The persistence of illiteracy, espe-
cially among women; the inability to ensure even primary education to
all children and reduce the high dropout rates over successive years of
schooling; the poor indicators of health and the recent stagnation of
infant and maternal mortality rates; the absence of proper sanitation for
a large proportion of the population, all these provide an indication of the
current state of the development project in India. In all, these indicators
suggest that the worsening coverage and quality of public services have
meant that human development has not improved pari passu with
economic growth, and have had particularly negative impacts upon the
condition of women and children.
Conclusion
It is apparent from this discussion that the past 15 years have brought
India an interesting and possibly unique mix of policy measures and
62 Jayati Ghosh
socio-economic outcomes. In policy terms, both globalization and the
neoliberal economic package, on the one hand, and a growing recogni-
tion of the significance of human development on the other hand,
have influenced discussions of economic strategy and patterns of public
allocation. In outcome terms, there has been a startling combination of
rapid growth of aggregate incomes and some (especially urban-based)
economic activities, with sharp increases in economic inequalities, the
persistence of widespread poverty, greater material insecurity for a
significant part of the population and uneven evolution of human
development indicators. Faster economic growth has certainly been
accompanied by an expansion of economic opportunities overall, as
well as dramatically improved consumption standards for around
200 million people in the upper-income groups. However, employment
growth has not kept pace with GDP growth and, in particular, there has
been inadequate generation of decent work, that is, good-quality
employment. Much more of the employment is in fragile and petty self-
employment, with higher tendencies for self-exploitation. Gender gaps
in wages and other incomes have increased quite sharply in the recent
period.
Food securityboth at the aggregate macroeconomic level and at the
household levelhas emerged as an important problem once again, and
overall nutrition indicators appear to have actually worsened, despite
higher real per capita consumption overall. Partly as a consequence of
this and partly because of reduced levels of per capita public spending on
health, other health indicators have improved much more slowly than in
the recent past, and even deteriorated in some states (for example, with
respect to child immunization). Access to education, however, has
improved significantly over the past 15 years: the literacy campaigns
made a substantial dent in illiteracy (although they did not succeed in
eliminating it) and the Sarva Shiksha Abhiyan (Education for All pro-
gramme) has meant that there has been some progress towards ensuring
at least primary education for all children. However, there are serious
problems still with the quality of school education and the high dropout
rates, such that universal elementary education (up to Class VIII) still
remains a distant goal. In addition, there is the problem that a significant
share of the age cohort of 1525 years did not benefit from the Sarva
Shiksha Abhiyan and is not benefiting from new literacy programmes.
This is the group that has already entered the labour force, which raises
serious questions about the countrys ability to benefit from the brief
window of opportunity provided by the demographic dividend.
Clearly, therefore, the current phase of rapid economic growth, while
it has brought undoubted successes in some areas, has also been associ-
ated with very disappointing (some would even say alarming) lack of
achievements in crucial areas of human development. However, the
heady growth of recent years has had the unfortunate effect of making
policy makers less focused on the need to ensure more rapid progress in
human development. Yet, this is absolutely crucial if the country is even
to fulfil its economic growth potential, and is obviously desirable from
the perspective of the living conditions of the people.
Forward-looking strategies must incorporate central concerns with
three major areas: employment, education and health. In each of these,
the current government policies and debates already contain the seeds of
what is to be done, and these need to be developed and expanded in the
immediate future. In addition, some new issues that have recently been
raised in national debates need to be addressed, namely: increasing
access to land, water and other increasingly scarce resources, and mak-
ing their distribution more democratic; easing the pain and dislocation of
displacement through effective compensation and rehabilitation policies;
and addressing the potentially disastrous and divisive question of grow-
ing economic inequalities.
Notes
1. Chandrasekhar and Ghosh (2004) elaborate on this argument, showing that
the shift to a higher growth phase began in the 1980s, led significantly by an
expansion of public expenditure.
2. The NSS data on employment are based on the distinction between principal
and subsidiary status of activity, as well whether the person is usually
engaged in the activity. Thus, a person is classified as usual principal status,
according to the status of the activity (or non-activity) on which the person
spent a relatively longer time during the preceding year. The activities
pursued by a person are grouped into three broad categories: (a) working
or employed; (b) seeking or available for work (that is, unemployed); and
(c) not in the labour force. A non-worker (on the basis of the usual principal
status) is someone whose major part of time in the preceding year was
64 Jayati Ghosh
spent as either unemployed or not in the labour force. However, he or she
could still be involved in some economic activity in a subsidiary capacity;
when this is usually the case, the person is referred to as a subsidiary status
worker. The two categories togetherusual workers by both principal and
subsidiary statusconstitute all usual workers.
References
Chandrasekhar, C.P. and Jayati Ghosh (2004). The market that failed: neoliberal
economic reforms in India (2nd ed.). New Delhi: Leftword Books.
(2009). The Asian face of the global recession. Available at http://
www.networkideas.org/news/feb2009/Global_Recession.pdf, accessed on
15 November 2011.
Central Statistical Organisation (CSO) (various years). National accounts
statistics. Available at www.mospi.nic.in, accessed on 20 November 2011.
Government of India (Various years). Accidental deaths and suicides in India
Annual Publication, National Crime Records Bureau. Available at http://
ncrb.nic.in/, accessed on 20 November 2011.
National Family Health Surveys (NFHS). Available at http://www.nfhsindia.org/,
accessed on 20 November 2011.
National Sample Surveys (NSS). Available at http://mospi.nic.in/, accessed on
20 November 2011.
Patnaik, Utsa (2006). Poverty and neo-liberalism. Rao Bahadur Kale Memorial
Lecture delivered at Gokhale Institute of Economics and Politics, Pune,
3 February 2006, mimeo.

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