Article

Employment Intensity Management and Labour Studies

38(4) 483–503
of Growth in India © 2013 XLRI Jamshedpur, School of
Business Management
& Human Resources
An Empirical Review SAGE Publications
of Long-run Evidence Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/0258042X13514889
http://mls.sagepub.com

Falguni Pattanaik

Abstract
In the face of the challenges of globalization, there are new questions about the ability of Indian
economy to adjust to structural change and how to foster a more dynamic and competitive environ-
ment that encourages to enhance productivity and create new employment. However, there is a need
to answer several important questions when examining the issue of employment intensity of growth:
the patterns of economic growth and what are the sectors and subsectors in which output growth
generates more jobs; and are these sectors getting sufficient priority to meet the employment objec-
tive? The findings suggest that favourable macroeconomic environment and improvements in the
functioning of labour markets and institutions are essential to adjust to globalization and transformation
of the Indian economy.

Keywords
Growth, employment, globalization, employment intensity of growth, structural change

Introduction
Study of the relationship between economic growth and employment has gone through various phases in
the literature of economic development. As theories of development have illustrated, the benefits of
economic growth trickle down to generate employment in the economy. An automatic link between
growth and employment generation (Kakwani and Pernia, 2000; Datt and Ravallion, 2002), and the
mechanisms through which the benefits of growth may get transmitted to create jobs, has always been a
matter of discussion (Adelman and Morris, 1973). High growth is not always a sufficient condition for
employment creation (Dagdeviren et al., 2002; Goudie and Ladd, 1999; McKay, 1997). It is the pattern
and sources of growth, as well as the manner in which its benefits are distributed, that is equally impor-
tant from the point of view of achieving the goal of employment creation (Lipton and Ravallion, 1995;
McKay, 1997). Some studies point out that the pattern of growth (Goudie and Ladd, 1999; Lipton and
484 Falguni Pattanaik

Ravallion, 1995; McKay, 1997), and explicitly labour-intensive growth (McKay, 1997), is important
from the point of view of its effectiveness in creating employment.
Of late, India occupies the coveted status of being one of the emerging economies of the world, thanks
to the much talked about reforms processes. The country has moved from the erstwhile ‘Hindu rate of
growth’ to a new growth trajectory and has successfully achieved a decent growth in recent years. In
India, the pattern and soucre of the economic growth has evolved continually over the past 30 years,
modifying the structure of employment and the composition of value added. Currently, service sector
accounts for over 50 per cent of the value added. However, despite its growing weight, the share of the
workforce employed in services remains low (Eichengreen and Gupta, 2010; Joshi, 2004; Mazumdar
and Sarkar, 2007; Unni and Raveendran, 2007). This variation in the growth and employment perform-
ance of the economy can be attributed to growing globalization of services and rapid technological
change and differences in policies and institutions in the country (Joshi, 2004; Unni and Raveendran,
2007). However, the said achievement in growth is stated to have failed to improve employment
situations in the country even though the growth rate of labour force has been quite low (Jha, 2003; Unni
and Raveendran, 2007). The major problem of the economy pertains to ensuring decent livelihood to
all its citizens, an issue as old as India’s independence. Coupled with this, there are paradoxes, which are
indeed relatively new. To be specific, despite the acceleration of economic growth over the last decade, the
positive correlation between growth and employment is reported to have weakened. Many researchers
have described this phenomenon as ‘jobless growth’ (Joshi, 2004; Unni and Raveendran, 2007).
There are thus serious doubts about the capacity of the Indian economy to create new jobs. In the face
of the challenges of globalization, which is now affecting a large and growing part of the economy, there
are new questions about the ability of Indian economy to adjust to structural change and how to foster a
more dynamic and competitive environment that encourages to enhance productivity and create new
employment (Majumder and Mukherjee, 2008). It is, in this context, imperative to understand the growth
and employment potential and pattern of the sectors and subsectors in India from a long-term prospec-
tive. Unleashing this potential, by a combination of structural policies, can help create more employment
in the emerging sectors and subsectors, enhance productivity and increase aggregate incomes.
The present study, thus, attempts to develop a set of stylized facts characterizing the growth of
different sectors and subsectors in India with respect to economic growth and employment, and their
interlinkages over a long period (1960–2008). The objective of this article is to examine the pattern of
growth of India’s output and employment and suggest a perspective for its development. A review of
sectors and subsectors for a long period is indeed an essential prerequisite. It may be pertinent to note
that although some such studies have been carried out in studying the pattern of employment and
output of the country (Papola, 2008), a comprehensive study considering different sectors and
subsectors for a long period of time (1960–2008, with structural trend break), in the context of India, can
be seldom found. The database information built upon these statistics is expected to be immensely help-
ful in formulating plans and policies for the development of pro-employment growth in a more objective
way. Accordingly, the article is divided into different sections. The next section presents a historical
account of employment in development strategy of India. The section following after that outlines
concept, database and methodology of the study. The rates of change in employment, output and
employment elasticity of Indian economy are analyzed in the penultimate section, according to the three
broad sectors and nine subsectors. The last section summarizes the findings and concludes the study.

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Employment Intensity of Growth in India 485

Employment in Development Strategy of India: A Historical Account

In India, in view of the growing numbers of the unemployed, employment has always been an important
policy concern over last six decades of development planning. Consecutive Five-Year Plans, which have
laid down the directions for overall and sectoral development in a medium-term perspective, have been
quite explicit with respect to the goal of employment generation (Papola, 1994).
Interestingly, in the initial years of development planning, employment was not expected to emerge
as a serious problem; yet, there was effort to see that sufficient employment was generated in the devel-
opment process to employ the growing labour force productively (Papola, 1992). A reasonably high rate
of economic growth, backed by the expansion of labour-intensive sectors like small-scale industries, was
expected to achieve this goal. During this period, the rate and structure of growth, rather than technology,
were considered as the key instruments of employment generation. Unemployment was estimated to be
relatively low, as was the growth rate of the labour force, and a targeted economic growth rate of 5 per
cent, with an emphasis on labour-intensive consumer goods sectors, was expected to generate adequate
job opportunities.
Achievements relating to growth and employment during the 1950s and the 1960s, however, fell far
short of expectations. The gross domestic product (GDP) grew at an average annual rate of around
3.5 per cent. Employment growth averaged a meagre 2 per cent, whereas the labour force grew at a rate
of 2.5 per cent. As a result, the number of unemployed, estimated as 5 million in 1956, rose to 10 million
by 1973–1974 (Shetty, 1978).
Recognizing the urgent need to address the problems of growing unemployment and persistent
poverty which was found to afflict over one-half of India’s population, the Fifth Five-Year Plan
(1974–1979) envisaged a reorientation of development strategy towards employment-oriented
growth and the introduction of special anti-poverty and employment programmes. While this approach
continued for about a decade, the magnitude of the problem was found to have become greater in the
meantime. Thus, the Seventh Plan, for the first time, considered creation of productive employment as
an explicit goal and accordingly, attempted to place employment at the core of the development strategy.
Despite this underlying effort, Indian economy experienced a sharp deceleration in the employment
growth in the 1980s with a mild acceleration in the GDP growth (Bhattacharya and Sakhivel, 2004;
Sundaram, 2001a, 2001b).
With the onset of economic reforms in the early 1990s, Planning Commission of India, having
experienced serious failure on the employment front in the preceding decades, considered employment
generation as one of India’s key targets in 1992 and accordingly, set an objective of ‘employment for all’
by 2002 (Planning Commission, 1992). This target was integrated into the plan strategy through overall
and sectoral priorities.
India witnessed a reasonably higher growth rate of GDP (around 6 per cent) during the 1990s.
Interestingly, however, the country failed miserably in transmitting the successes of growth to employ-
ment as employment growth rate remained as low as 1.1 per cent only. A much lower growth during the
earlier decades had been accompanied by about 2 per cent growth in employment (Bhattacharya
and Sakhivel, 2004; Sundaram, 2001a, 2001b). In the wake of economic growth failing to create employ-
ment, a renewed urgency to focus on employment appeared to have set in by the end of the 1990s,
presumably with the realization that faster economic growth by itself is not sufficient to tackle the

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486 Falguni Pattanaik

problem. Two committees (a task force in 1999 and a special group in 2001) were appointed by the
Planning Commission, in quick succession, to examine the trends in employment generation and to
suggest a strategy for the creation of employment opportunities to attain the goal of employment for all
within a specified time. The remarks of the task force merit mention.
Following the recommendations of the special group and the task force (Planning Commission,
2002), the Tenth Plan introduced a number of special programmes relating to different sectors, including
agriculture and related activities, small and medium enterprises, rural non-farm sector and social sector.
Policy changes were brought in to stimulate the promotion of labour-intensive sectors, including
construction, tourism, communication and information technology (IT) and financial services. It was
argued that this reorientation would not necessarily involve heavy additional investment but mostly a
reallocation of funds and choice of appropriate technologies. In view of the growth failing to benefit the
poor, the Eleventh Plan adopted a strategy of ‘inclusive growth’, wherein employment creation occupied
a pivotal place (Planning Commission, 2006).
Given this national scenario and looking at the developments, it is imperative to see how employment
and output has evolved over the years. These developments are seen as evidence that, though India is
now placed on a high-growth trajectory, this trajectory is not beneficial from an employment develop-
ment point of view. Low GDP growth rates, a characteristic feature from the 1960s to the 1980s—3.5 per
cent on average per annum—were not employment intensive and the basic source of growth was the
sectors with capital-intensive production techniques (such as manufacturing). Furthermore, the 1980s
were characterized by poor and unstable economic performance. Modest GDP growth rates in several
years were associated with an inadequate employment content to absorb the increasing numbers of new
entrants to the labour market. Adoption of the economic reform programme in the early 1990s brought
about the changes that took place in the structure of GDP and employment—which accompanied a
jobless growth. As economic reforms is said to have brought about a clear shift in the focus on growth
strategy, it may be useful to analyze the scenario of employment and output across sectors and subsectors
in the country, comparing the pre-reforms scenario with the post-reforms. Accordingly, growth perform-
ance of the output and employment across the sectors and subsectors of the country is examined for the
period 1960–2008, with trend breaks introduced in 1980 and 1992.

Methodology

Defining Employment
Employment is measured as the number of persons employed in India according to usual activity
status approach. A person is considered employed in the usual status approach if s/he had pursed gainful
economic activity for a relatively longer time period immediately preceding one year prior to the date of
National Sample Survey (NSS). This is known as ‘Usual Principal Activity Status’ (UPS). On the
contrary, if a person had spent relatively shorter time span in gainful employment immediately preceding
one year prior to the date of survey, s/he is accounted under ‘Usual Subsidiary Activity Status’ (USS).
Both the statuses together constitute ‘Usual Principal Subsidiary Activity Status’ (UPSS) (National
Sample Survey Office [NSSO], 2006).

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Employment Intensity of Growth in India 487

Concept of Employment Intensity of Growth

In order to find out the employment content of economic growth, a summary indicator is needed
which should measure the degree of employment growth that is associated with a given output growth.
This indicator is called the employment intensity of growth, which is defined as the elasticity of employ-
ment with respect to output growth. Quantitative estimates of employment elasticity are based on the
assumption that employment is primarily a function of output. Elasticity of employment is expressed by
a log-linear equation that links employment to GDP and takes the following basic form:

ln(E) = a + b ln(Y ) + u (1)

where, ln denotes the natural logarithm of the relevant variable; and the regression coefficient is
employment elasticity with respect to output. Employment elasticity, which measures the ‘employment
intensity’ of economic growth, can provide important information about the labour market and the coun-
try’s overall macroeconomic performances. There is a fundamental linkage between employment
elasticity and labour productivity (Kapsos, 2005): mathematically,

Yi = Ei * Pi (2)

where, Yi and Ei are output and employment respectively, while Pi is labour productivity (output per
worker):

ΔYi = ΔEi + ΔPi (3)

ε = 1 – p Where and  (4)

Equation 3 shows that the elasticity of employment with respect to GDP is equal to 1 minus the elas-
ticity of labour productivity. Examining changes in output together with employment elasticity gives an
idea as to whether growth in a country is occurring hand in hand with gains in employment and labour
productivity, or whether it is balanced between the two.

Database
Data on employment were collected from the 10-sector database of the Groningen Growth and
Development Centre (GGDC), University of Groningen, the Netherlands. As no continuous year-wise
data were available on employment, interpolation was done on the basis of average growth rate of
employment during the gap years to create a continuous time series. Data on employment and output
were collected by three broad sectors and nine subsectors of the Indian economy. The taxonomy of
Indian economy is given in Figure 1.

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488 Falguni Pattanaik

Indian economy

Primary sector Secondary sector Tertiary sector

Agriculture, Manufacturing Wholesale and retail

forestry and Public utilities trade, hotels and
fishing restaurants
Construction
Mining and Transport, storage and
quarrying communication
Finance, insurance and
real estate
Community, social and
personal services

Figure 1. The Taxonomy of Indian Economy

Source: NSSO industry classification.

The data used for the present study are annual and cover the period from 1960 to 2008 at the
aggregate level, and for the sectoral analysis, it is from 1960–2004.

Growth Rates
Growth rates of all the three broad sectors and nine subsectors for 49 years from 1960 to 2008 are con-
sidered for analysis. The study considered 1980 and 1992 as the year of trend breaks, if any, and divided
the whole study period into four time periods: (i) from 1960 to 2008; (ii) first sub-period, 1960–1980;
(iii) second sub-period, from 1981 to 1991; and (iii) third sub-period, from 1992–2008.
Simple Exponential Growth rate
Consider the following linear form:

ln(Qt ) = a + bt + ut(5)

where, Qt = output; t = time; b = coefficient on time; and a = con­stant. The coefficient on time, b, is the
continuous rate of growth. It closely approximates to the annual compound growth rates. Therefore, the
estimates of b are presented as growth rates.
Kinked exponential growth rate
In order to check the anomaly in the growth rates: the estimated growth rate over the entire period and
the estimated growth rates over the three sub-periods were calculated. The study also computed kinked

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Employment Intensity of Growth in India 489

exponential growth rates, in which the trend lines of the three sub-periods are forced to meet at the mid-
point that divides the sub-periods. This practice has been implemented earlier in the literature (Boyce,
1986).
Considering a time series for the period, t = 1,....,n, is broken at two points, k1 and k2. Discontinuous
growth rate estimates for the three resulting sub-periods could be derived by estimating them separately
or, equivalently, by fitting the unrestricted (discontinuous) single equation:

ln Yt = α1D1 + α2D2 + α3D3 + (b1D1 + b2D2 +b3D3)t + ut(6)

The estimated growth rates from (1), are the same as if exponential trends were fitted
separately to the data for each sub-period. The two-kink exponential model is derived by imposing linear
restrictions such that the sub-period trend lines meet at k1 and k2:

α1 + b1k1 = α2 + b2k1  (7a)

α2 + b2k2 = α3 + b3k2(7b)

Substituting for α2 and α3, we obtain the two-kink exponential model:

ln Yt = α
 1 + b1 (D1t + D2k1 + D3k1) + b2 (D2t – D2k1 – D3k1 – D3k2)
+ b3 (D3t – D3k2) + ut(8)

The growth rates in the three sub-periods are now given by the ordinary least squares (OLS) estimates
of the coefficients of the resulting composite variables. The kinked exponential growth model reduces
discontinuity bias, provides better basis for growth rate comparison, reduces instability or cyclical fluc-
tuations and uses a full set of available information to estimate the growth rates for each sub-period in a
single step (Boyce, 1986).

Results and Discussion

As envisaged earlier, the prime objective of this article is to carry out an analysis of the growth of
employment and output in India over a long period. An attempt is made to analyze the changes in the
growth rates of the three broad sectors and nine subsectors of the economy since 1960.

Trends in Employment Intensity of Growth in India

The present study analyzes the employment elasticity with respect to output over a period of 49 years
since 1960 to find out India’s process of development over this period. There appears to have been a
general decline in the employment intensity of growth of the country from 1960 to 2008. The calculation

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490 Falguni Pattanaik

Table 1. Employment Elasticity

Period R2 Adj. R2 Std Error Constant t-value RC t-value F-test Value

1960–2008 0.970 0.969 0.057 4.809 (0.371) 12.938* 0.490 (0.012) 39.226* 1538.701*
PD I 0.912 0.907 0.038 2.647 (1.165) 2.271** 0.563 (0.040) 14.080* 198.268*
PD II 0.983 0.981 0.011 5.353 (0.618) 8.659* 0.474 (0.020) 22.814* 520.477*
PD III 0.989 0.989 0.010 9.828 (0.258) 38.073* 0.325 (0.008) 38.451* 1478.539*
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2008.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.

using the log-linear regression method (equation 1) resulted in a value of employment elasticity of (0.49)
at a 1 per cent level of significance. This elasticity value, which explains the nature of the relationship
between employment elasticity and productivity elasticity with respect to GDP, shows that the estimated
elasticity indicates that almost half of the economic growth achieved between 1960 and 2008 is attrib-
uted to productivity gains, while the other half is attributed to the increase in employment. It is useful at
this point of the analysis to identify the change that might have occurred in employment elasticity to
GDP in the Indian economy throughout the study period, which covers a half century. Table 1 shows
values of employment elasticities taking into consideration different periods and scope of coverage. As
shown in the table, employment elasticity to GDP has been declining from one period to another; decreas-
ing from merely 0.56 during 1960–1980 to a low value of 0.30 during 1992–2008, characterized as
jobless growth (Table 1).
A look at country-level data on growth of output and employment for different sub-periods brings out
further interesting aspects of the phenomenon of jobless growth observed in the recent past. Considering
simple exponential growth rates (Annexure, Table A1), country experiences an average of 4.5 per cent
output growth and 2.2 per cent of employment growth over the study period (1960–2008). A break-up of
the study period into various phases unfolds differences in the trends over time. To elaborate, considering
the kinked exponential growth rate during 1960–1980, the economy having registered GDP growth
rate of 3.3 per cent during that period, the rate of growth of employment was estimated to be 2.1 per cent
(Annexure, Table A2). In the following period, 1981–1991, employment growth registered a rise at
2.8 per cent, with a higher growth rate in GDP of 4.6 per cent. Since 1992, however, the country has
been experiencing declining employment growth (1.9 per cent) and higher GDP growth (6.1 per cent) as
compared to the previous period (Annexure, Table A2).
In what follows, the study will shed more light on the various sectors and subsectors, by analyzing the
nature of employment growth with output growth.

Sectoral Trends in Employment Intensity of Growth in India

Primary sector
As India has got an agrarian economy predominantly, since the beginning of the planning process, its
growth has occupied the centre stage. Primary sector (agriculture and forestry, mining and quarrying) is

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Employment Intensity of Growth in India 491

the largest sector of the Indian economy in terms of employment opportunities. It provides a source of
employment to little less than 60 per cent of India’s workforce. However, the contribution of this sector
to the country’s GDP is a meagre 23 per cent (NSSO, 2006). What is more alarming is the widening of
this gap between employment and GDP contributions over the years. The resultant effect of this gap has
been the persistent decline in the productivity of this sector.
Employment elasticity in Indian’s primary sector had already started to decline since the 1980s (0.79
during 1960–1980, as compared to 0.46 during 1981–1991 and 0.43 in 1992–1904) (Table 2). As shown
in the table, employment elasticity to GDP has been declining from one period to another; the overall
employment elasticity during 1960–2004 (0.67) characterizes the sector as one providing high employ-
ment with low growth. Among the subsectors, elasticity of agriculture and forestry has been declining
over the periods; however, the elasticity value of mining and quarrying has shown a significant figure of
0.84 during 1980s (Table 2).
At the aggregate level, the simple exponential growth rate of primary sector was 2.7 per cent and the
employment growth was 1.9 per cent for the whole study period (1960–2004) (Annexure, Table A3). For
the subsectors, agriculture and forestry and mining and quarrying, the output growth was 2.6 per cent and
5.4 per cent respectively, whereas the employment growth was 1.9 per cent and 2.5 per cent respectively
for the period 1960–2004. Considering the kinked exponential growth model across the sub-periods, the
output growth has shown fluctuations and the employment growth has shown continuous decline among
the subsectors (Annexure, Table A4). The output of primary sector increased from 2.2 per cent for the
period 1960–1980 to 3.5 percent in 1981–1991 and declined to 2.7 per cent in 1992–2004; the same for
employment went up from 2 per cent to 2.2 per cent and came down to 1.1 per cent in the respective

Table 2. Employment Elasticity of Primary Sector

Period R2 Adj. R2 Std Error Constant t-value RC t-value F-test Value

Agriculture, Forestry
1960–2004 0.956 0.955 0.053 –1.218 (0.659) –1.847*** 0.715 (0.023) 30.596* 936.166*
PD I 0.801 0.791 0.058 –3.676 (2.557) –1.437 0.803 (0.091) 8.762* 76.772*
PD II 0.845 0.828 0.023 5.381 (1.949) 2.760** 0.484 (0.068) 7.027* 49.380*
PD III 0.895 0.886 0.015 5.710 (1.394) 4.095* 0.473 (0.048) 9.717* 94.437*
Mining and Quarrying
1960–2004 0.917 0.915 0.106 1.578 (0.572) 2.758* 0.492 (0.022) 21.848* 477.369*
PD I 0.002 –0.050 0.053 13.476 (1.269) 10.614* 0.010 (0.051) 0.205 0.042
PD II 0.999 0.998 0.006 –7.464 (0.219) –34.056* 0.843 (0.008) 98.568* 9715.713*
PD III 0.340 0.280 0.045 10.058 (1.889) 5.324* 0.171 (0.071) 2.380** 5.668**
Primary
1960–2004 0.957 0.956 0.052 –0.140 (0.611) –0.229 0.676 (0.021) 31.271* 977.902*
PD I 0.819 0.809 0.055 –3.378 (2.381) –1.418 0.791 (0.085) 9.287* 86.248*
PD II 0.877 0.864 0.020 5.846 (1.646) 3.551* 0.466 (0.058) 8.042* 64.673*
PD III 0.884 0.874 0.016 6.734 (1.365) 4.933* 0.436 (0.047) 9.182* 84.314*
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2004.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.

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492 Falguni Pattanaik

periods. Among the subsectors, output growth of agriculture and forestry was 2.1 per cent, 3.2 per cent
and 2.5 per cent, whereas the employment growth was 2 per cent, 2.1 per cent and 1.1 percent in the
respective sub-periods (1960–1980, 1981–1991 and 1992–2004). For mining and quarrying, the output
growth was 3.9 per cent, 7.8 per cent and 4.4 per cent, and employment growth was -0.1 per cent, 6.7 per
cent and 0.1 per cent respectively in the above-said sub-periods. Inside the primary sector, mining and
quarrying has shown a significant growth both in output and employment during the period 1981–1991.
Though agriculture and forestry has shown an increment in output growth during the above-mentioned
period, employment growth has declined. After 1992, both the subsectors have shown significant decline
in output and employment.
Secondary sector
Secondary sector (manufacturing, public utilities and construction) has been a key sector in raising pro-
ductivity and generating employment in the country. The pace of expansion of secondary sector in India
has been marked by an inability to achieve prolonged spells of rapid growth. Apart from the year-to-year
fluctuations in growth, there have also been different trends in different phases.
Employment elasticity in secondary sector has increased over the period of study (0.33 during 1960–
1980, as compared to 0.53 during 1981–1991 and 0.63 in 1992–2004) (Table 3). As shown in the table,

Table 3. Employment Elasticity of Secondary Sector

Period R2 Adj. R2 Std Error Constant t-value RC t-value F-test Value

Manufacturing
1960–2004 0.971 0.970 0.066 2.541 (0.380) 6.684* 0.531 (0.013) 38.195* 1458.872*
PD I 0.778 0.766 0.055 6.865 (1.206) 5.688* 0.369 (0.045) 8.160* 66.587*
PD II 0.979 0.977 0.014 5.254 (0.568) 9.249* 0.431 (0.020) 20.882* 436.071*
PD III 0.779 0.759 0.075 2.037 (2.495) 0.816 0.550 (0.088) 6.228* 38.794*
Public Utilities
1960–2004 0.983 0.983 0.066 0.752 (0.252) 2.985* 0.508 (0.010) 50.575* 2557.887*
PD I 0.988 0.988 0.035 –1.966 (0.365) –5.376* 0.621 (0.015) 41.072* 1686.924*
PD II 0.994 0.993 0.007 4.929 (0.220) 22.373* 0.341 (0.008) 39.412* 1553.359*
PD III 0.949 0.944 0.036 –4.679 (1.306) –3.583* 0.715 (0.049) 14.387* 207.007*
Construction
1960–2004 0.898 0.896 0.203 –12.402 (1.415) –8.759* 1.051 (0.053) 19.545* 382.024*
PD I 0.208 0.166 0.064 11.348 (1.516) 7.483* 0.131 (0.058) 2.235** 4.999**
PD II 0.996 0.995 0.015 4.929 (0.220) 22.373* 0.341 (0.008) 39.412* 2300.862*
PD III 0.788 0.768 0.120 –8.580 (3.867) –2.218** 0.914 (0.143) 6.394* 40.894*
Secondary
1960–2004 0.963 0.963 0.082 0.698 (0.488) 1.428 0.597 (0.017) 33.874* 1147.471*
PD I 0.755 0.742 0.054 7.698 (1.196) 6.431* 0.338 (0.044) 7.660* 58.686*
PD II 0.989 0.988 0.012 2.348 (0.501) 4.683* 0.536 (0.018) 29.777* 886.709*
PD III 0.801 0.783 0.079 –0.398 (2.730) –0.145 0.637 (0.095) 6.672* 44.523*
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2004.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.

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employment elasticity to GDP has been increasing from one period to another; the overall employment
elasticity during 1960–2004 is 0.59. For the subsectors, manufacturing, public utilities and construction,
the elasticity value for the entire period of 1960–2004, construction registered the highest of 1.05, fol-
lowed by manufacturing (0.53) and public utilities (0.50). These values are a bit surprising in light of the
developments in the national economy since 1960. A significant improvement in the elasticity values has
been observed in public utilities and construction during 1992–2004 (Table 3).
The output growth of secondary sector was 5.3 per cent and the employment growth was 3.1 per cent
for the whole study period (1960–2004) (Annexure, Table A5). For the subsectors, manufacturing, public
utilities and construction, the output growth was 5.4 per cent, 7.6 per cent and 4.2 per cent respectively,
whereas the employment growth was 2.8 per cent, 3.8 per cent and 4.4 per cent respectively for the
period 1960–2004. Considering the simple exponential growth rate across the sub-periods, the output
and employment growth showed fluctuations among the subsectors. The output of secondary sector
increased from 4.3 per cent for the period 1960–1980 to 6.0 per cent in 1981–1991 and increased margin-
ally to 6.1 per cent in 1992–2004; the same was seen for employment, which increased from 1.5 per cent
to a high of 4.3 per cent and remained stagnant for rest periods. Among the subsectors, output growth of
manufacturing was 4.3, 6.4 and 6.1 per cent, whereas the employment growth was 1.6, 3.8 and 3.7 per
cent in the respective sub-periods (1960–1980, 1981–1991 and 1992–2004). For public utilities,
which comprise electricity, gas and water supply, the output growth was 7.9, 8.0 and 6.0 per cent and
employment growth was 4.7, 2.3 and 4.5 per cent respectively in the above-said sub-periods. In case of
construction, the output growth was 3.5, 4.1 and 5.9 per cent and employment growth was 0.2, 8.1 and
6.8 per cent respectively in the above-said sub-periods. Trends observed across the sub-periods by the
simple exponential growth were confirmed by the results estimated by kinked exponential model
(Annexure, Table A6).

Tertiary sector
In India, the service sector has evolved continually over the past 30 years, modifying the structure of
employment and the composition of value added. Keeping in view the diversified nature of the service
sector, the present study proposes to analyze the service sector employment at a disaggregate level. The
major industry divisions comprising the total service sector are: (i) wholesale, retail trade, hotels and
restaurants; (ii) transport, storage and communication; (iii) financing, insurance, real estate and business
services; and (iv) community, social and personal services.
As shown in Table 4, employment elasticity to GDP of tertiary sector has increased marginally from
0.43 in 1960–1980 to 0.46 in 1981–1991 and decreased to 0.30 in 1992–2004; the overall employment
elasticity during 1960–2004 is 0.55. For the subsectors, the elasticity value for wholesale, retail trade,
hotels and restaurants, and community, social and personal services, has declined during the 1980s.
During the period 1992–2004, the elasticity value in all three subsectors of tertiary sector, except financ-
ing, insurance, real estate and business services (which has shown a significant improvement), has
declined significantly as compared to the previous period, characterized as a period of jobless growth.
The output growth of tertiary sector was 5.5 per cent and the employment growth was 3.1 per cent for
the whole study period (1960–2004) (Annexure, Table A7). For the subsectors, (i) wholesale, retail trade,
hotels and restaurants; (ii) transport, storage and communication; (iii) financing, insurance, real estate
and business services; and (iv) community, social and personal services, the output growth was 5.2 per
cent, 6.2 per cent, 5.7 per cent and 5.4 per cent, whereas the employment growth was 3.8 per cent,

Management and Labour Studies, 38, 4 (2013): 483–503

494 Falguni Pattanaik

3.5 per cent, 5.9 per cent and 2.3 per cent respectively for the period 1960–2004. Considering the simple
exponential growth rate across the sub-periods, the output and employment growth show fluctuations
among the subsectors. The output of tertiary sector increased from 4.3 per cent for the period 1960–1980
to 6.0 per cent in 1981–1991 and declined marginally to 7.3 per cent in 1992–2004; the same was true
for employment, which increased from 1.9 per cent to a high of 5.0 per cent and 2.2 per cent in the
respective periods. Among the subsectors, output growth of wholesale, retail trade, hotels and restaurants
was 4.3, 5.3 and 6.9 per cent, whereas the employment growth was 2.3, 6.3 and 2.7 per cent in the respec-
tive sub-periods (1960–1980, 1981–1991 and 1992–2004). For transport, storage and communication,
the output growth was 5.5, 6.0 and 8.0 per cent and employment growth was 3.3, 3.9 and 3.3 per cent
respectively in the above-said sub-periods. In case of financing, insurance, real estate and business services,
the output growth was 3.6, 7.2 and 7.7 per cent and employment growth was 3.3, 3.8 and 1.4 per cent

Table 4. Employment Elasticity of Tertiary Sector

Year R2 Adj. R2 Std Error Constant t-value RC t-value F-test Value

Trade, hotels and restaurants
1960–2004 0.974 0.974 0.082 –3.262 (0.486) –6.711* 0.728 (0.017) 40.730* 1658.944*
PD I 0.923 0.919 0.041 1.932 (0.931) 2.074*** 0.531 (0.035) 15.155* 229.683*
PD II 0.999 0.999 0.001 –12.088 (0.038) –317.426* 1.052 (0.001) 755.732* 571131.6*
PD III 0.975 0.973 0.019 6.117 (0.528) 11.576* 0.394 (0.018) 20.929* 438.045*
Transport, storage and communication
1960–2004 0.981 0.980 0.313 0.832 (0.313) 2.653** 0.561 (0.011) 47.376* 2244.532*
PD I 0.992 0.991 0.019 –1.170 (0.330) –3.539* 0.639 (0.012) 49.693* 2469.485*
PD II 0.997 0.997 0.006 0.479 (0.234) 2.043*** 0.575 (0.008) 65.292* 4263.104*
PD III 0.765 0.744 0.063 8.095 (1.362) 5.942* 0.297 (0.049) 5.998* 35.981*
Finance, insurance and real estate
1960–2004 0.941 0.940 0.201 –13.698 (1.054) –12.993* 1.033 (0.039) 26.358* 694.751*
PD I 0.837 0.829 0.122 –17.066 (3.078) –5.543* 1.165 (0.117) 9.913* 98.282*
PD II 0.997 0.997 0.007 –1.750 (0.251) –6.957* 0.582 (0.009) 62.386* 3892.048*
PD III 0.979 0.977 0.073 –32.104 (2.047) 15.681* 1.696 (0.073) 23.107* 533.955*
Social and personal services
1960–2004 0.917 0.915 0.091 5.597 (0.517) 10.809* 0.419 (0.019) 21.902* 479.717*
PD I 0.551 0.528 0.065 10.037 (1.363) 7.363* 0.250 (0.051) 4.837* 23.401*
PD II 0.998 0.997 0.006 –0.070 (0.250) –0.279 0.630 (0.009) 68.435* 4683.427*
PD III 0.546 0.505 0.018 15.443 (0.512) 30.152* 0.066 (0.018) 3.643* 13.275*
Tertiary
1960–2004 0.977 0.976 0.063 1.850 (0.369) 5.010* 0.558 (0.013) 42.769* 1829.184*
PD I 0.892 0.887 0.041 5.324 (0.947) 5.618* 0.431 (0.034) 12.586* 158.430*
PD II 0.990 0.989 0.008 5.834 (0.441) 13.225* 0.463 (0.015) 30.861* 952.435*
PD III 0.874 0.862 0.027 10.704 (1.031) 10.378* 0.300 (0.034) 8.742* 76.421*
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2004.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.

Management and Labour Studies, 38, 4 (2013): 483–503

Employment Intensity of Growth in India 495

respectively in the above-said sub-periods. Output growth of community, social and personal services
was 4.4, 5.7 and 6.8 per cent, whereas employment growth was 1.3, 4.6 and 0.3 per cent respectively in
the above-said sub-periods. Trends observed across the sub-periods by the simple exponential growth
were confirmed by the results estimated by kinked exponential model (Annexure, Table A8).

Summary and Conclusions

To sum up, India’s economic performance during the last half-a-century was characterized by ‘the ele-
phant that became tiger’. It has moved from ‘Hindu growth rate’ to one of the fastest-growing economies
of the world. Since labour market performance is necessarily affected by GDP growth, employment
growth in the Indian economy was modest and lagged behind labour force growth. Increased employ-
ment intensity of growth from one sub-period to another indicates that the basic source of economic
growth is the substantial increase in employment at the expense of productivity growth, which is also
consistent with the nature of informal employment.
It is evident that, despite India’s resurging growth over the past years, the country seems to have
failed miserably especially on employment front. While analyzing the output and employment growth
over a long period of time, it was observed that, in the early phase (1960–80) employment was treated as
a corollary of economic development and the basic source of growth was the sectors with capital inten-
sive production techniques. Furthermore, creation of productive employment was considered as an
explicit goal during the 80s and then followed a phase of employment targeting. This period was attrib-
uted by moderate and unstable output growth with inadequate labour absorbing capacity. Having expe-
rienced resurging growth in 1990s, India reintroduced its growth-led employment strategy which had
also failed to generate employment and lead to a situation of ‘jobless growth’. The primary factor that
may constrain employment creation is weak economic growth in the short run. Strong economic growth
leads to continuous upward shifts in the long-run demand for labour curve, thereby leading to employ-
ment growth over the long term (Datt and Ravallion, 2002). In fact, there is a need to answer several
important questions when examining the issue of employment intensity of growth, most importantly: the
patterns of economic growth and what are the sectors and subsectors in which output growth generates
more jobs; and are these sectors getting sufficient priority to meet the employment objective?
Agriculture seems to be a sector that has highest employment elasticity for the whole period of
analysis. Performing the role of ‘employer of last resort’, the sector receives workers that cannot be
absorbed by the formal sector. This could be related to the fact that this sector is the home of the bulk
of the informal sector. All this is clear from the following. Output growth of primary sector showed an
improvement during the period 1980–1991, due to the late effect of Green Revolution that started in the
mid-1960s. Economic policy reforms were introduced in India in early 1990s. There is enough ground
to believe that the observed trend break (1991) in the negative direction was a result of the economic
reforms. India entered the market economic regime in the 1990s. Consequently, agri­culture received
perhaps the greatest ever shock since independ­ence. On the one hand, erstwhile incentives were
withdrawn to a great extent, and on the other hand, farmers had to face the hit of competition as a con-
sequence of trade liberalization in agricultural produce. While costs of production continued to rise due
to withdrawal or curtailment of subsidies, concessional credit and the like, falling foodgrain prices acted
as an obvious disincentive for the farmers (Bhalla and Singh, 2009).

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496 Falguni Pattanaik

The fall in employment in the primary sector may have several ramifications. One possible explana-
tion in support of this phenomenon could be that structural shift may have been underway in connivance
with the growth of an economy. It is likely that as the economy grows, the share of non-agricultural
sector to the country’s GDP and its employment should rise (Hazra, 1991). However, in the context of
the Indian economy, such a shift has not been evident, particularly in the post-reform period—especially
in the 1990s. As studies indicate, the process of diversification of employment, which was in force from
mid-1970s to the late 1980s, away from primary activities towards a variety of non-agricultural avenues,
has tended to come under pressure and the growth rate of the latter also slowed down considerably in the
1990s. This diversification, prior to 1990s, was primarily attributed to significant acceleration in public
expenditure in rural areas (Chandrasekhar and Ghosh, 2002; Sen, 1996). However, the 1990s witnessed
a policy shift for the worse in this regard (Jha, 2003).
The industry sector showed relatively stable employment elasticity for the whole period. In this sense,
it is understandable that the growing number of workers in this sector (combined with a fixed capital
stock) is the cause of declining employment elasticity for some subsectors. As this study analyzes, three
phases are distinguishable: the post-independence period (1960–1980); pre-liberalization period (1981–
1991); and post-liberalization period (1992–2004). The first phase corresponding to, roughly, the first
three Five-Year Plans saw an acceleration in industrial growth which was rudely halted in the mid-1960s
in the background of two successive droughts and military conflicts. Industrial growth slackened
and then began a period that has been referred to as the decade of industrial stagnation. Industrial
growth started reviving from the late 1970s and the next decade, again, saw reasonably rapid growth.
This positive growth trend appeared, initially, to receive a further impetus from liberalization in the
early 1990s.
From the findings, it is evident that India’s service sector is dominated by wholesale, retail trade,
hotels and restaurants and community, social and personal services, both in terms of output and employ-
ment. As more than three-fourth of service sector employment in India constitutes wholesale, retail
trade, hotels and restaurants and community, social and personal services, the types of labour employed
are mostly unskilled and these activities tend to be productively low in nature. The high-productive
sectors, namely, transport, storage and communication and financing, insurance, real estate and business
service, are unable to create employment in the service sector as they contribute only about 40 per cent
of the service output.
From the preceding analysis, it is evident that Indian economy is becoming a service-driven economy
more in terms of output than employment. The pre-reforms period was a period of high employment
growth and rapid economic progress. The tertiarization process was dynamic and growth driven.
However, in recent years, much of the rise in the service sector is because of lack of employment oppor-
tunities in other sectors of the economy. As a result, jobs created in the service sector during this period
are mostly in the sub-sectors like trade, hotels and restaurants. The workers which are moving out from
agriculture are not finding jobs in the secondary sector, particularly in manufacturing and getting
absorbed in this sub-sector (trade, hotels and restaurants). Jobs in this sector are mostly low productive
and distress in nature. There has also been creation of a handful of high-income jobs in the sectors
like financing, insurance, real estate and business services that has been growth driven, leading to
accentuation of inequalities. A clear hierarchy exists within the service sector not only in terms
of employment growth or output growth but also in terms of the dynamism of the growth process.
Moreover, high-productive and high-income segments like financing, insurance, real estate and business

Management and Labour Studies, 38, 4 (2013): 483–503

Employment Intensity of Growth in India 497

services within the services are experiencing faster growth in terms of output. On the other hand,
low-productive and low-income segments, namely, trade, hotels and restaurants, are experiencing
rise in terms of employment. These factors should be kept in mind while drawing policy for the develop-
ment of the service sector.
There are thus serious doubts about the capacity of the Indian economy to create new jobs. In the face
of the challenges of globalization, which is now affecting a large and growing part of the economy, there
are new questions about the ability of Indian service sector to adjust to structural change and how to
foster a more dynamic and competitive environment that encourages service sector to enhance produc-
tivity, offer new services and create new employment. It is, in this context, imperative to understand the
growth potential of the service sector in India and identify the structural factors that have become increas-
ingly apparent in the service sector. Unleashing this potential, by a combination of structural policies,
can help create more employment, enhance productivity and increase aggregate incomes.

Annexure

Table A1. Simple Exponential Growth Rates of Employment and GDP

Adj. Std F-test

Period Variable R2 R2 Error Constant t-value RC t-value Value
1960–2008 Employment 0.991 0.990 0.031 18.814 (0.009) 2063.483* 0.022 (0.001) 72.358* 5235.755*
GDP 0.981 0.981 0.090 28.593 (0.026) 1090.285* 0.045 (0.001) 50.317* 2531.846*
PD I Employment 0.927 0.923 0.034 18.840 (0.015) 1199.133* 0.019 (0.001) 15.610* 243.692*
GDP 0.983 0.982 0.028 28.744 (0.012) 2250.952* 0.034 (0.001) 33.524* 1123.922*
PD II Employment 0.997 0.997 0.003 19.310 (0.002) 7630.401* 0.024 (0.001) 66.352* 4402.609*
GDP 0.989 0.988 0.018 29.430 (0.011) 2508.311* 0.051 (0.001) 29.797* 887.861*
PD III Employment 0.988 0.987 0.011 19.570 (0.005) 3358.981* 0.020 (0.001) 36.002* 1296.193*
GDP 0.993 0.993 0.026 29.947 (0.013) 2251.627* 0.062 (0.001) 48.360* 2338.726*
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2008.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.

Table A2. Kinked Exponential Growth Rates of Employment and GDP

Adj. Std. RC RC RC F-test

Variable R2 R2 Error Const. t-value PD I t-value PD II t-value PD III t-value Value
Employment 0.993 0.993 0.026 18.829 1608.918* 0.021 24.858* 0.028 21.118* 0.019 18.237* 2370.786*
(0.011) (0.001) (0.001) (0.001)
GDP 0.998 0.998 0.027 28.746 2448.105* 0.033 39.688* 0.046 34.384* 0.061 57.912 9556.074*
(0.011) (0.001) (0.001) (0.001)
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2008.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.

Management and Labour Studies, 38, 4 (2013): 483–503

Table A3. Simple Exponential Growth Rates of Employment and GDP of Primary Sector (1960–2004)

Std F-test
Sectors R2 Adj. R2 Error Constant t-value RC t-value Value
Employment Agriculture and Forestry 0.978 0.977 0.038 18.527 (0.011) 1603.648* 0.019 (0.001) 43.828* 1920.965*
Mining and Quarrying 0.841 0.838 0.148 13.481 (0.044) 300.354* 0.025 (0.001) 15.124* 228.761*
Primary 0.978 0.978 0.037 18.534 (0.011) 1619.884* 0.019 (0.001) 44.376* 1969.233*
GDP Agriculture and Forestry 0.978 0.977 0.052 27.603 (0.015) 1747.034* 0.026 (0.001) 43.783* 1916.966*
Mining and Quarrying 0.983 0.983 0.091 24.143 (0.027) 867.021* 0.054 (0.001) 51.295* 2631.178*
Primary 0.980 0.979 0.052 27.627 (0.015) 1730.826* 0.027 (0.001) 46.069* 2122.426*
Notes: (i) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(ii) Figures in the parentheses show standard errors; RC: regression coefficient.

Table A4. Kinked Exponential Growth Rates of Employment and GDP of Primary Sector

Std. RC RC RC F-test
Sectors R2 Adj. R2 Error Con t-value PD I t-value PD II t-value PD III t-value Value
Employment Agriculture 0.987 0.986 0.029 18.502 1465.251* 0.020 22.862* 0.021 14.448* 0.011 6.846* 1108.110*
and Forestry (0.012) (0.001) (0.001) (0.001)
Mining and 0.982 0.981 0.049 13.744 637.401* –0.001 –0.256 0.067 25.926* 0.010 3.773* 789.652*
Quarrying (0.021) (0.001) (0.002) (0.002)
Primary 0.988 0.987 0.028 18.510 1477.925* 0.020 22.890* 0.022 14.781* 0.011 6.907* 1132.073*
(0.012) (0.001) (0.001) (0.001)
GDP Agriculture 0.983 0.982 0.046 27.654 1369.434* 0.021 14.540* 0.032 13.422* 0.025 9.889* 804.960*
and Forestry (0.020) (0.001) (0.002) (0.002)
Mining and 0.996 0.996 0.044 24.293 1253.206* 0.039 27.832* 0.078 33.630* 0.044 17.897* 3751.294*
Quarrying (0.019) (0.001) (0.002) (0.002)
Primary 0.986 0.985 0.044 27.688 1449.516* 0.022 15.884* 0.035 15.383* 0.027 11.173* 1017.971*
(0.019) (0.001) (0.002) (0.002)
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2008.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.
Table A5. Simple Exponential Growth Rates of Employment and GDP of Secondary Sector (1960–2004)

Std F-test
Sectors R2 Adj. R2 Error Constant t-value RC t-value Value
Employment Manufacturing 0.944 0.943 0.093 16.397 (0.028) 579.619* 0.028 (0.001) 27.007* 729.428*
Public utilities 0.973 0.973 0.084 12.607 (0.025) 492.210* 0.038 (0.005) 39.855* 1588.418*
Construction 0.849 0.846 0.247 14.246 (0.075) 189.945* 0.044 (0.002) 15.602* 243.443*
Secondary 0.935 0.934 0.109 16.519 (0.033) 496.804* 0.031 (0.001) 25.026* 626.335*
GDP Manufacturing 0.989 0.989 0.074 26.047 (0.022) 1149.945* 0.054 (0.001) 64.007* 4096.914*
Public utilities 0.994 0.994 0.075 23.320 (0.023) 1013.392* 0.076 (0.001) 87.475* 7651.901*
Construction 0.977 0.976 0.087 25.329 (0.026) 958.945* 0.042 (0.001) 42.834* 1834.791*
Secondary 0.990 0.990 0.078 26.479 (0.020) 1290.228* 0.053 (0.001) 68.596* 4705.405*
Notes: (i) * Significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(ii) Figures in the parentheses show standard errors; RC: regression coefficient.

Table A6. Kinked Exponential Growth Rates of Employment and GDP of Secondary Sector

Adj. Std. RC RC RC F-test

Sectors R2 R2 Error Const. t-value PD I t-value PD II t-value PD III t-value Value
Employment Manufacturing 0.975 0.973 0.063 16.532 598.012* 0.016 8.400* 0.038 11.535* 0.037 10.694* 538.184*
(0.027) (0.002) (0.003) (0.003)
Public Utilities 0.982 0.980 0.070 12.521 406.878* 0.047 21.212* 0.023 6.326* 0.045 11.674* 757.445*
(0.030) (0.002) (0.003) (0.003)
Construction 0.985 0.984 0.079 14.712 427.487* 0.002 0.907 0.081 19.581* 0.068 15.649* 914.565*
(0.034) (0.002) (0.004) (0.004)
Secondary 0.980 0.979 0.061 16.697 624.381* 0.015 8.083* 0.043 13.544* 0.043 12.759* 692.404*
(0.026) (0.001) (0.003) (0.003)
GDP Manufacturing 0.997 0.996 0.039 26.173 1515.437* 0.043 34.708* 0.064 31.173* 0.061 27.921* 4844.550*
(0.017) (0.001) (0.002) (0.002)
Public Utilities 0.996 0.996 0.059 23.267 898.115* 0.079 42.565* 0.080 25.911* 0.060 18.447* 4128.662*
(0.025) (0.001) (0.003) (0.003)
Construction 0.988 0.987 0.062 25.417 932.885* 0.035 18.145* 0.041 12.527* 0.059 17.141* 1190.468*
(0.027) (0.001) (0.003) (0.003)
Secondary 0.997 0.997 0.035 26.592 1743.307* 0.043 39.101* 0.060 33.129* 0.061 31.378* 5850.932*
(0.015) (0.001) (0.001) (0.001)
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2008.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors. RC: regression coefficient.
Table A7. Simple Exponential Growth Rates of Employment and GDP of Tertiary Sector (1960–2004)

Sectors R2 Adj. R2 Std Error Constant t-value RC t-value F-test Value

Employment Trade, hotels and 0.969 0.969 0.089 15.649 (0.027) 574.049* 0.038 (0.001) 37.187* 1382.933*
restaurants
Transport, storage 0.994 0.994 0.034 14.867 (0.010) 1415.700* 0.035 (0.001) 89.523* 8014.495*
and communication
Finance, insurance 0.887 0.884 0.279 12.719 (0.084) 150.171* 0.059 (0.003) 18.410* 338.944*
and real estate
Social and personal 0.930 0.928 0.083 16.405 (0.025) 645.529* 0.023 (0.001) 23.948* 573.514*
services
Tertiary 0.971 0.971 0.070 16.923 (0.021) 789.976* 0.031 (0.001) 38.605* 1490.348*
GDP Trade, hotels and 0.987 0.987 0.078 25.979 (0.023) 1085.973* 0.052 (0.001) 57.980* 3361.751*
restaurants
Transport, storage 0.990 0.989 0.082 24.993 (0.025) 993.970* 0.062 (0.001) 65.759* 4324.357*
and communication
Finance, insurance 0.971 0.970 0.132 25.529 (0.040) 637.309* 0.057 (0.001) 38.225* 1461.158*
and real estate
Social and personal 0.989 0.989 0.073 25.769 (0.022) 1164.075* 0.054 (0.001) 64.740* 4191.262*
services
Tertiary 0.986 0.986 0.085 27.014 (0.025) 1045.302* 0.055 (0.001) 57.118* 3262.492*
Notes: (i) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(ii) Figures in the parentheses show standard errors; RC: regression coefficient.
Table A8. Kinked Exponential Growth Rates of Employment and GDP of Tertiary Sector

Adj. Std RC RC RC F-test

Sectors R2 R2 Error Const. t-value PD I t-value PD II t-value PD III t-value Value
Employment Trade, hotels and 0.994 0.993 0.040 15.796 902.706* 0.023 18.647* 0.063 30.078* 0.027 12.186* 2347.718*
restaurants (0.017) (0.001) (0.002) (0.002)
Transport, storage 0.995 0.994 0.033 14.886 1022.713* 0.033 31.875* 0.039 22.357* 0.033 18.084* 2848.076*
and communication (0.014) (0.001) (0.001) (0.001)
Finance, insurance 0.985 0.983 0.104 13.001 287.506* 0.038 11.853* 0.033 6.199* 0.014 24.353* 900.587*
and real estate (0.045) (0.003) (0.005) (0.005)
Social and personal 0.980 0.978 0.045 16.486 827.419* 0.013 9.604* 0.046 19.383* 0.003 1.274 670.685*
services (0.019) (0.001) (0.002) (0.002)
Tertiary 0.993 0.993 0.034 17.063 1146.980* 0.019 18.542* 0.050 28.264* 0.022 11.989* 2162.631*
(0.014) (0.001) (0.001) (0.001)
GDP Trade, hotels and 0.997 0.997 0.032 26.093 1832.764* 0.043 41.755* 0.053 31.108* 0.069 38.507* 6545.100*
restaurants (0.014) (0.001) (0.001) (0.001)
Transport, storage 0.995 0.995 0.054 25.080 1057.909* 0.055 32.455* 0.060 21.030* 0.080 26.548* 3338.508*
and communication (0.023) (0.001) (0.002) (0.003)
Finance, insurance 0.998 0.998 0.026 25.775 2262.936* 0.036 43.849* 0.072 53.133* 0.077 53.180* 12679.20*
and real estate (0.011) (0.001) (0.001) (0.001)
Social and personal 0.998 0.998 0.031 25.882 1922.547* 0.044 45.769* 0.057 35.324* 0.068 39.866* 7797.757*
services (0.013) (0.001) (0.001) (0.001)
Tertiary 0.999 0.999 0.020 27.157 2993.365* 0.043 66.529* 0.060 55.050* 0.073 63.216* 18286.86*
(0.009) (0.001) (0.001) (0.001)
Notes: (i) PD I: 1960–1980; PD II: 1981–1991; and PD III: 1992–2008.
(ii) * significant at 1 per cent level; ** significant at 5 per cent level; and *** significant at 10 per cent level.
(iii) Figures in the parentheses show standard errors; RC: regression coefficient.
502 Falguni Pattanaik

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Falguni Pattanaik is Assistant Professor at School of Humanities, KIIT University, Bhubaneswar,

Odisha, India. E-mail: [email protected]

Management and Labour Studies, 38, 4 (2013): 483–503