Employment Issues in India

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Employment Issues in India


  • India, despite achieving an impressive and steadily rising economic growth in recent years, still faces the twin challenge of –
    • creating adequate decent employment opportunities for scores of young men and women joining the labour market every year and
    • facilitating the transition from informal to formal employment for those already in the labour market.
  • The advances in technology are also affecting manufacturing and services sectors.
  • The challenges imposed and opportunities brought forth by these transitions necessitate a comprehensive and convergent policy initiative synchronising various sectoral policies and programmes and giving a coherent vision to the country’s employment objectives and ways to achieve them.

Current scenario

  • Demographic dividend: The youth presently make up close to 35% of the population and the Indian workforce is expected to increase to approximately 600 million by the year 2022 from the current estimated 473 million. To capitalize on its demographic dividend, India must create well-paying, high productivity jobs.
    • India: Of India’s total workforce of about 52 crore, agriculture employed nearly 49% while contributing only 15% of the GVA. Comprehensive modernization of agriculture and allied sectors are needed urgently.
    • China: In contrast, only about 29% of China’s workforce was employed in agriculture.
      • Industry and services accounted for 13.7 and 37.5% of employment while making up for 23% and 62% of GVA, respectively.
    • Shift of labour force: The structural transition from farm to the non-farm sector is suggestive of new emerging avenues for employment. A signifcant number of workers, currently employed in agriculture, will move out in search of jobs in other areas. This will be in addition to the new entrants to the labour force as a result of population growth.
      • By some estimates, the Indian economy will need to generate nearly 70 lakh jobs annually to absorb the net addition to the workforce.
      • Taking into account the shift of labour force from low productivity employment, 80-90 lakhs new jobs will be needed in the coming years.
    • Micro and small-sized firms as well as informal sector firms dominate the employment landscape in India.
      • As per the National Sample Survey (NSS) 73rd round, for the period 2015-16, there were 6.34 crore unincorporated non-agricultural micro, small and medium enterprises (MSMEs) in the country engaged in different economic activities providing employment to 11.10 crore workers.
      • A large majority of these firms are in the unorganized sector. By some estimates, India’s informal sector employs approximately 85% of all workers.
    • Low and declining female LFPR: India also exhibits a low and declining female labour force participation rate.
      • The female labour force participation rate in India was 23.7% in 2011-124 compared to 61% in China, 56% in the United States.
    • Labour laws: Recognizing the high cost of compliance with existing labour regulations and the complexity generated by various labour laws at the central and state levels, the central government has recently introduced policies to make compliance easier and more effective.
      • They are also simplifying and rationalizing the large and often overlapping number of labour laws. These measures include moving licensing and compliance processes online, simplifying procedures and permitting self-certifcation in larger number of areas.
      • One of the government’s key initiatives is to rationalize 38 central labour laws into four codes, namely wages, safety and working conditions, industrial relations, and social security and welfare.
        • Of the four codes, the one on wages has been introduced in the Lok Sabha and is under examination.
        • The other three codes are at the pre-legislative consultation stage and should be completed urgently.
      • Employment generation schemes: The government has put in place several schemes to help generate employment.
        • These include the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), MUDRA Yojana, Prime Minister’s Employment Generation Programme and Pradhan Mantri Rojgar Protsahan Yojana.
        • Additional initiatives aid job creation through providing skill development, easing access to credit and addressing sector specifc constraints.
        • The government also made the EPFO premium portable so that workers can change jobs without fear of losing their provident fund benefts.
      • Data: With MOSPI collecting employment data through its enterprises and household surveys – particularly the Periodic Labour Force Survey – and the focus on improving payroll data, the effort is to vastly improve availability of reliable employment data and release it on a regular basis.


  • Productivity: A large share of India’s workforce is employed in low productivity activities with low levels of remuneration. This is especially true of the informal sector where wages can be one twentieth of those in firms producing the same goods or services but in the formal sector.
  • Social security: A large number of workers that are engaged in the unorganized sector are not covered by labour regulations and social security. This dualistic nature of the labour market in India may be a result of the complex and large number of labour laws that make compliance very costly. In 2016, there were 44 labour laws under the statute of the central government. More than 100 laws fall under the jurisdiction of state governments. The multiplicity and complexity of laws makes compliance and enforcement diffcult.
  • Skills: According to the India Skill Report 2018, only 47% of those coming out of higher educational institutions are employable.
  • Employment data: We currently lack timely and periodic estimates of the work force. This lack of data prevents us from rigorously monitoring the employment situation and assessing the impact of various interventions to create jobs.

Way Forward

  • Enhance skills and apprenticeships
    • The Labour Market Information System (LMIS) is important for identifying skill shortages, training needs and employment created. The LMIS should be made functional urgently.
    • Ensure the wider use of apprenticeship programmes by all enterprises. This may require an enhancement of the stipend amount paid by the government for sharing the costs of apprenticeships with employers.
  • Labour law reforms
    • Complete the codifcation of labour laws at the earliest.
    • Simplify and modify labour laws applicable to the formal sector to introduce an optimum combination of flexibility and security.
    • Make the compliance of working conditions regulations more effective and transparent.
    • The National Policy for Domestic Workers needs to be brought in at the earliest to recognize their rights and promote better working conditions.
  • Enhance female labour force participation
    • Ensure the implementation of and employers’ adherence to the recently passed Maternity Beneft (Amendment) Act, 2017, and the
    • Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act. It is also important to ensure implementation of these legislations in the informal sector.
    • Ensure that skills training programmes and apprenticeships include women.
  • Improve data collection on employment
    • Ensure that data collection for the Periodic Labour Force Survey (PFLS) of households initiated in April 2017 is completed as per schedule and data disseminated by 2019.
    • Conduct an annual enterprise survey using the goods and service tax network (GSTN) as the sample frame.
    • Increase the use of administrative data viz. EPFO, ESIC and the NPS to track regularly the state of employment while adjusting for the formalization of the workforce.
  • Ease industrial relations to encourage formalization
    • Increase severance pay, in line with global best practices.
    • Overhaul the labour dispute resolution system to resolve disputes quickly, effciently, fairly and at low cost.
    • Strengthen labour courts/tribunals for timely dispute resolution and set a time frame for different disputes.
  • Wages
    • Make compliance with the national floor level minimum wage mandatory.
    • Expand the Minimum Wages Act, 1948, to cover all jobs.
    • Enforce the payment of wages through cheque or Aadhaar-enabled payments for all.
  • Working conditions and social security
    • Enact a comprehensive occupational health and safety legislation based on risk assessment, employer-worker co-operation, and effective educational, remedial and sanctioning.
    • Workers housing on site will help to improve global competitiveness of Indian industry, along with enhancing workers’ welfare.
    • Enhance occupational safety and health (OSH) in the informal sector through capacity building and targeted programmes.
    • Ensure compulsory registration of all establishments to ensure better monitoring of occupational safety as well as recreation and sanitation facilities.
    • Enhance transparency in the labour inspection system by allowing online complaints and putting in place a standardized and clear mechanism.

Way forward

  • A study by McKinsey Global Institute entitled “India’s Labour Market – A New Emphasis on Gainful Employment” has highlighted that increased government spending, rise of independent work and entrepreneurship have boosted incremental Job for 20-26 million people during 2014-17.
  • According to an analysis by the Ministry of Tourism, the tourism sector alone has created 14.62 million job opportunities in the country during las four years. While the above statistics do not present the full extent of employment generation, but they do lend irrefutable and concrete evidence of the extent of employment being generated across the country.
  • There is certainly enough evidence to doubt and even contradict the narrative of joblessness with shrinking workforce and rise in unemployment.
  • Yet this does not mean that India has no challenges related to employment.
  • Over the last few years, India’s next challenge is to meet the aspirations of people who are employed but want higher incomes.
  • This requires creation of enough well-paying jobs for existing industrial workforce and for those who want to move out of agriculture.
  • This requires policies that encourage productivity growth in the country, which necessitate concerted efforts towards formalisation, urbanisation and industrialisation of Indian economy.

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