Structural Transformation and its Effect on Employment Elasticity in Post-Liberalisation India
| Vol-1 | Issue-6 | June 2016 | Published Online: 15 June 2016 PDF | ||
| Author(s) | ||
| Dr. Geeta Soy 1 | ||
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1Assistant Professor Department of Economics, J.L.N. College, Chakradharpur |
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| Abstract | ||
| India's post-liberalisation growth experience has been marked by a striking paradox: rapid output growth accompanied by a sharp and sustained decline in the employment intensity of that growth, a phenomenon widely described in the literature as jobless growth. This paper reviews the evidence on structural transformation in the Indian economy since the 1991 reforms and its consequences for employment elasticity, the responsiveness of employment growth to output growth. Structural transformation in India has followed an atypical path relative to the historical experience of other industrialising economies: the share of agriculture in gross domestic product has fallen sharply, but the corresponding shift of the workforce out of agriculture has lagged far behind, with services rather than manufacturing emerging as the leading sector of the reform-era economy. Drawing on studies estimating aggregate and sectoral employment elasticities across the pre- and post-reform periods, this review documents a decline in aggregate employment elasticity from around 0.5 in the pre-reform period to figures often estimated between 0.15 and 0.3 in the decades following liberalisation, with organised manufacturing showing particularly weak employment response to output growth despite consistently high output growth rates. The review examines competing explanations for this pattern, including capital deepening, skill-biased technical change, labour market regulation, and the informalisation of employment, and concludes that India's structural transformation has been characterised by a disproportionate expansion of capital- and skill-intensive services rather than the labour-intensive manufacturing expansion that accompanied structural transformation in comparable East Asian economies. | ||
| Keywords | ||
| structural transformation; employment elasticity; jobless growth; post-liberalisation India; labour market regulation; informalisation; sectoral employment | ||
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