Mocking at the UPA much touted agenda of so called ‘inclusive’ development, in recent years, there has been shrinkage in employment in the non-agriculture sector and prospects for the future are not encouraging either. Agriculture any way has received a huge drubbing during the last decade of UPA regime.
During 2004-05 to 2011-12, there was an unprecedented reduction in the labour force employed in agriculture from 268 million to 231 million i.e. a decline of 37 million. This was largely due to a rapid GDP growth of 8.3% per annum – mostly led by growth in services especially construction.
The increase in employment outside agriculture during this period was 52 million (50% of this addition was in construction sector alone) which more than compensated for the loss of jobs in agriculture. With job creation in manufacturing more or less stagnant, the net increase was only 15 million or just about 2.2 million annually.
Juxtapose this with employment scenario during the NDA dispensation. Thus, during 1999-2000 to 2004-05, overall employment increased by 51 million (includes 12 million gain in manufacturing) or 10.2 million annualized or nearly 5 times growth during UPA regime.
During 2012-13, GDP growth nosedived to 5%, the lowest ever achieved in a decade. During current year, growth further slumped to 4.4% during the first quarter ending June 30 and 4.8% during the second quarter ending September 30, 2013.
During 2013-14, to sustain even 5% growth, economy will have to grow at 5.4% in second half which is highly unlikely especially in view of huge compression in expenditure that Government is planning to rein in fiscal deficit at 4.8% of GDP. Rating agencies estimate in the range of 4.5 to 4.7%.
That would imply a big set-back to employment generation even outside agriculture. Crisil – a rating-cum-analytics – company has projected continuation of this trend in the years ahead. Thus, during 2011-12 to 2018-19, it expects employment creation in services and industry to be 38 million. This would lead to a reverse flow of about 12 million persons to agriculture.
As it is, composition of Indian GDP versus employment is heavily imbalanced. Agriculture has a share of only around 14% in GDP. However, its share in employment is disproportionately higher. During 2011-12, this was 49% (though down from 60% at the beginning of this century).
During the current year, Government expects agriculture to rebound with an estimated growth of around 5.5%. But, that is primarily monsoon driven. There is no fundamental transformation to suggest that Indian agriculture can be catapulted to a high growth trajectory on a sustained basis.
Though, it has set a target of 4% per annum growth during the 12th five year plan (2012-13 to 2016-17) and beyond, we do not see any credible steps on ground to achieve this. Even as investment by the state continues to languish, the policy environment is far from conducive to encourage private sector.
In a recent meeting with Chief Ministers (CMs) of Congress ruled states, Mr Rahul Gandhi, Vice-President, Congress exhorted them to amend the APMC (Agriculture Produce Market Committee) Act to provide for direct selling of farmers produce to any one – bypassing the mandis – by February, 2014.
This is a reform pending for decades needed to liberate farmers from the shackles of one of the most pernicious license-cum-control raj which hamstrung investment in agriculture and its rapid growth. One has to wait and see whether something that did not happen for decades, can be done within a month or two.
India has preponderance of resource poor/small & marginal farmers. They account for 85% or 117 million out of a total of 138 million farm households. This number is up by 25 million during the last one-and-half-decade or so.
An inevitable consequence of fragmentation of land holding (primarily due to scare land getting divided among kith and kin of original land owing farmer), small farm size by itself is a huge constraint to adoption of modern farming practices.
There are no proper land records, record of ownership, pattern of land use, tenancy rights etc not to talk of a suitable legislative and policy framework to galvanize millions of these farms towards modernization and adoption of new technology.
The technology of GM (genetically modified) seeds offers unprecedented potential for raising farm productivity and farmer’s income manifold. This is amply demonstrated by the success achieved in the area of Bt cotton where within a decade, production of cotton has increased two-and-a-half times.
Yet, progress on this front even with regard to conducting research trials (to demonstrate bio-efficacy and safety) was brought to halt in 2012 with Ministry of Environment under Jairam Ramesh putting a moratorium – indiscriminate across all crops. Only, recently there is a talk of taking a re-look. One has to watch and see!
FDI in retail – after protracted delay – was approved in September, 2012. This was expected to be a game changer giving a big boost to investment in infrastructure for the entire supply chain viz., procurement, storage, handling, transport etc. Yet, this is hamstrung due to too many ‘caveats’ rendering FDI on ground totally un-attractive. Till date, not even a single proposal has come.
In short, while agriculture is expected to accommodate more and more persons for gainful employment to fresh entrants as also reverse flows from industries and services sector, the underlying fundamentals are far from conducive.
The consequences of too many persons wanting to make their livelihood from measly land resources will be horrendous. It will lead to decline in productivity, falling wages and declining farm incomes. The rampant inflation will only exacerbate their plight.
The unconscionably high share of services in GDP at close to 70% and too much dependence of people on this sector for their living makes them highly vulnerable. By nature, employment in this sector cannot be sustainable. We have seen this happening during the last 2 years and as per Crisil projections, this trend will only aggravate.
The need of the hour is to give a push to manufacturing sector which can offer reliable and enduring jobs, yet continues to languish at an unpardonably low share of around 15% in GDP.
That is a big challenge new Government will have to face!