employment, poverty and gender equality in india

8/14/2019 Employment, Poverty and Gender Equality in India

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Unemployment, Poverty and Gender Inequality in India-

Trends, Issues and Emerging Challenges

DR. TARUN DAS, Economic Adviser, Ministry of Finance, India.

1. Unemployment, Employment and Poverty

Comprehensive data on employment and unemployment are collected by the NationalSample Survey Organisation (NSSO) through quinquennial surveys. The latest suchsurvey, results of which are available, was conducted in the 55th Round (1999-2000). Theother quinquennial surveys since 1980 with a relatively large number of households wereconducted in 1983 (38th Round), 1987-88 (43rd Round), and1993-94 (50th Round).However, the NSSO conducts mini Annual surveys in between the quinquennial surveys,although results are not strictly comparable due to small sample size.

The NSSO employs two different concepts of employment and unemployment in theirsurveys- (a) the usual status (US) where a person remains employed or unemployed for alonger period during a reference period of 365 days and (b) the current weekly status(CWS) where a person remains employed or unemployed for a major share of theworking time within a reference period of 7 days. Under each approach, persons are firstclassified as labour force and out of labour force, and thereafter labour force isclassified into employed and unemployed. For unemployment, US approach is anindicator of chronic unemployment, while CWS approach covers both chronic andseasonal unemployment. The distribution of persons as per the latest quinquennial surveyfor 1999-2000 is given in Table-1, which is self-explanatory.

Table-1 Percentage distribution of persons by broad usual activity status

Rural Urban

Males Females Persons Males Females Persons

1.Self-employed 32.0 17.0 24.7 22.0 6.2 14.5

2.Reg.wage/ salaried 5.2 0.9 3.1 21.8 4.4 13.5

3.Casual labour 17.2 10.8 14.1 9.3 3.4 6.5

4.Total working (1+2+3) 54.4 28.7 41.9 53.1 14.0 34.5

5.Unemployed 0.8 0.1 0.4 2.2 0.4 1.3

6.Studends 24.7 19.7 22.3 28.2 25.4 26.9

7.Engaged in Domestic works 0.8 31.2 15.6 0.5 45.0 21.7

8.Others 19.3 20.3 19.8 16.0 15.2 15.6

9.Not in labour force (6+7+8) 44.8 71.2 57.7 44.7 85.6 64.210.Labour force (4+5) 55.2 28.8 42.3 55.3 14.4 35.8

11.Total persons (9+10) 100.0 100.0 100.0 100.0 100.0 100.0

1.1 Labour Force and Unemployment

Indias labour force is estimated to be approximately 375 million in 2002 and is expectedto increase by 7 to 8.5 million per year in the first decade of this century and will increaseby a total of about 160-170 million by 2020, i.e., 2.0 percent per annum. Approximately

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35 million persons in 2002 are unemployed of which approximately three-fourth of theunemployed is in rural areas and three-fifth among them are educated. (PlanningCommission: Vision 2020).

As per the estimates made by the Planning Commission on the basis of NSSO surveys,

overall unemployment rate declined from 8.3 percent in 1983 to 6 percent in 1993-94 butincreased to 7.3 percent in 1999-2000 (Table-2). There were similar trends in both ruraland urban sectors with urban unemployment rates being higher than rural unemploymentrates every year. During 1993-2000, the rate of increase of unemployed persons in therural areas at 5.3 percent was significantly higher than that at 3.5 percent in urban sector.This was due to basically stagnation of agricultural employment during this period.

Table-2: Past and present macro-scenario on employment and unemployment

(CDS Basis) (Person years)

(Million) Growth per annum (%)

1983 1993-94 1999-2000 1983 to 1993-94

1993-94 to1999-2000

All IndiaPopulationLabour ForceWorkforceUnemployment Rate (%)No. of unemployed

7182612398.322

8943363166.020

10043633377.327

2.02.42.7

-0.1

2.01.31.1

4.7

Rural

PopulationLabour ForceWorkforceUnemployment Rate (%)No. of unemployed

5462041888.016

6592552415.614

7282702517.219

1.82.22.4

-1.2

1.71.00.7

5.3

Urban

PopulationLabour ForceWorkforceUnemployment Rate (%)No. of unemployed

17257529.65.5

23581757.25.8

27693867.67.11

3.03.33.6

0.5

2.72.42.3

3.5

Source: Planning Commission

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1.2 Worker Population Ratios (WPRs)

The number of persons employed per 100 persons, called Worker Population Ratios(WPRs) or Work Force Participation Rates (WFPRs), for different rounds and for malesand females in rural and urban areas by two different concepts viz. Usual Status (US) and

Current Weekly Status (CWS) are presented in Table-3. As expected, ratios are lower forCWS than those for US, the difference being larger for rural India than for urban areas. Itis observed from the table that there is very little variation in the WPRs for either malesor females during 1983-2001 implying that the employment scenario remained more orless stable over the years.

Age-specific WPRs presented in Table-4 indicate that during the period 1998-2001,WPRs for the age-group 15-59 years increased for all categories i.e. rural males, ruralfemales, urban males and urban females. In both urban and rural areas, the increase waslarger for females than for males.

Table-3: Worker Population Ratios (Number of persons employed per 100 persons)

Round (Year) Males Females

US CWS US CWS

RURAL

38 (1983) 5.5 5.4 3.4 2.3

43 (1987-88) 5.4 5.3 3.2 2.2

50 (1993-94) 5.5 5.3 3.3 2.7

55 (1999-2000) 5.3 5.1 3.0 2.5

56 (2000-2001) 5.4 5.3 2.9 2.2

URBAN

38 (1983) 5.1 4.9 1.5 1.2

43 (1987-88) 5.1 4.9 1.5 1.2

50 (1993-94) 5.2 5.1 1.6 1.4

55 (1999-2000) 5.2 5.1 1.4 1.3

56 (2000-2001) 5.3 5.2 1.4 1.2

Table-4 Age-specific Worker Population Ratios (WPRs) According to US

(Number of persons employed per 100 persons)

Age-

Group

(Years)

Rural Urban

Males Females Males Females

1998 2000-01 1998 2000-01 1998 2000-01 1998 2000-01

5-14 5.3 4.5 4.2 3.9 3.8 3.1 1.3 2.1

15-29 73.2 75.0 35.1 37.3 57.3 59.6 11.9 14.5

30-59 96.9 98.0 47.7 54.3 94.2 95.7 21.7 26.1

60+ 71.4 69.5 21.9 19.8 42.0 40.4 7.8 9.2

15-59 86.0 87.3 42.0 46.4 77.2 78.6 17.2 20.7

5+ 60.7 61.7 29.6 32.3 55.9 58.2 12.6 15.3

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Labour force includes workers and those persons who are available for work. Therefore,Labour Force Participation Rates would be higher than WPRs. Unemployment Rate (UR)is the ratio of unemployed persons to labour force. Table-5presents WPRs, Labour ForceParticipation Rates and Unemployment Rates for both rural and urban, males andfemales, for different categories of households classified by their main source on income.

The WPR is the highest for the agricultural labour households in the rural and for casuallabour households in the urban areas. This is true for both males and females.

Persons employed are categorized into three main groups viz. self employed, regularwage/ salaried and casual labour. Table-6 indicates that more than half of the employedin the rural areas are self-employed, and the proportion of self-employed in the ruralsector increased for both males and females in 1990-2000, while casual employmentremains more or less invariant. In the urban area, the proportion of self employed slightlyincreased for males but decreased appreciably for females. On the other hand, theproportion of the regular wage earners decreased for the males but increased for females.

Table-5 Worker Population Ratios (WPRs), Unemployment Rates (URs),And Labour Force Participation Rates (LFPRs) by Usual Status

(Per 100 persons of age of 15 years and above) in 2000-01

Household type WPRs Unemployment Rate LFPRs

Males Females Males Females Males Females

Rural

Self-emp. in agri. 86.5 44.4 1.0 0.2 87.4 44.5

Self-emp. in non-agri. 85.3 34.9 1.4 0.6 86.5 35.1

Agrl. Labour 89.2 57.0 0.8 0.0 89.9 57.0

Other labour 87.8 43.7 1.2 2.0 88.9 44.6

Others 69.8 21.6 4.3 0.9 72.8 21.8

All 85.2 43.3 1.4 0.5 86.4 43.5

Urban

Self-emp. 81.0 19.7 2.1 2.5 82.7 20.1

Reg.wage/ salaried 73.9 16.3 5.1 3.0 77.8 16.9

Casual labour 87.4 36.4 2.5 0.8 89.5 36.7

Others 20.1 6.6 28.2 25.8 28.0 8.9

All 75.3 19.5 3.8 3.0 78.4 20.1

Table-6 Percentage distribution of usually employed by status of employment

Males Females

1990-91 2000-01 1990-91 2000-01

Rural

Self-employed 55.7 58.9 58.6 59.3

Reg.wage/ salaried 12.8 9.5 3.8 3.2

Casual labour 31.5 31.6 37.6 37.5

Total 100.0 100.0 100.0 100.0

Urban

Self-employed 40.7 41.4 49.0 44.4

Reg.wage/ salaried 44.2 41.1 25.9 31.5

Casual labour 15.1 17.5 25.1 24.1

Total 100.0 100.0 100.0 100.0

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1.3 Open unemployment and underemployment

Open unemployment is not a major problem in India. Out of a labour force of 406million, 397 million were employed leaving 9 million openly unemployed in 2000.However, employment is characterized by very low quality of employment and low

levels of productivity. About 31 percent of the employed live blow the poverty line. Thereis no significant growth of regular employment. Organised employment as a proportionof total employment declined from 9 percent in 1993-94 to 7 percent in 1999-2000.Significant employment is taking place in services sectors and small and mediumenterprises. Main growth was observed in casual or contractual employment. Self-employment has not also increased significantly during 1993-2000. Educatedunemployment at 14.7% is much higher than normal unemployment at 2.2%.

The unemployment rates by household types (for persons above 15 years of age) given inTable-5 indicate that the urban sector has higher unemployment rates than rural areas,and in general, males have higher unemployment rates than females. Among the four

categories of persons cross classified by sex and urban and rural, urban males have thehighest URs (3.8%), followed by urban females, rural males and rural females.

Table-7 presents the trends of overall unemployment rates (for all persons in labourforce) by both usual status and current weekly status for both males and females in ruraland urban areas during 1993-2001. It is observed from the table that there is a decliningtrend of unemployment rates over time. The unemployment rates are higher for urbanareas than rural areas. They are higher among males than among females in rural areas. Inurban areas, the URs are generally higher among females than among males.

Table-7 Unemployment rates (percent in labour force)

Round (Year) Males Females

US CWS US CWS

RURAL

50 (1993-94) 2.0 3.0 1.4 3.0

51 (1994-95) 1.2 1.8 0.5 1.2

52 (1995-96) 1.5 1.8 0.8 0.9

53 (1997) 1.6 2.0 0.9 1.8

54 (1998) 2.4 2.9 2.0 2.7

55 (1999-2000) 2.1 3.9 1.5 3.7

56 (2000-2001) 1.6 2.3 0.6 1.8

URBAN

50 (1993-94) 4.5 5.2 8.3 8.4

51 (1994-95) 3.7 3.9 4.1 4.0

52 (1995-96) 4.0 4.1 3.6 3.5

53 (1997) 3.7 4.3 5.1 5.8

54 (1998) 5.3 5.4 8.1 7.8

55 (1999-2000) 4.8 5.6 7.1 7.3

56 (2000-2001) 4.2 4.8 3.8 3.9

1.4 Sectoral composition of employment

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As per the results of the latest full survey (55th Round in 1999-2000), the rate ofemployment growth decelerated from 2.7 percent per annum in 1983-1994 to 1.1 percentper annum in 1994-2000 (Table-8). The decline in the employment growth rate in the1990s was associated with a higher growth in GDP indicating a decline in the labourintensity of production. Some of the important findings emerging from the 55th Round

(1999-2000) are:

(a) The decline in the growth rate of employment was associated with a sharp decline inthe growth rate of the labour force.

(b) As in the past, the share of casual labour in total employment went up.(c) The number of unemployed increased from 20 million in 1993-94 to 27 million in

1999-2000.(d) The decline in the employment growth in 1994-2000 was attributable to a stagnation

of employment in agriculture, resulting in a drop of the share of agriculture in totalemployment from 60 percent in 1993-94 to 57 percent in 1999-2000.

(e) On the other hand, employment growth in all the sub-sectors within services, such as

trade, hotels, restaurant, transport, storage, communication and financial andbusiness services, (except community, social and personal services having negativegrowth rate) exceeded 5 percent per annum (Table-9).

Table-8: Employment growth rates in 1972-2000 (percent)

Average Annual Growth rate (percent)

Period Population Labor force Employment GDP

EmploymentElasticity w.r.t.

GDP

1972-1978 2.27 2.94 2.73 3.9 0.71

1977-1983 2.19 2.04 2.17 4.0 0.54

1983-1988 2.14 1.74 1.54 4.9 0.31

1987-1994 2.10 2.29 2.43 5.6 0.44

1994-2000 1.93 1.03 1.07 6.0 0.18Source: Planning Commission, Government of India.

Table-9 Sectoral Employment in 1983 to 2000

Employment (percent to total) Annual growth rate (%)

Sector 1983 1987-88 1993-94 1999-00 1983to

1987-88

1987-88to

1993-94

1983to

1993-94

1993-94to

1999-00

Agriculture 63.2 60.1 60.4 56.7 1.8 2.6 2.2 0.02

Mining & quarrying 0.7 0.9 0.8 0.7 7.4 1.0 3.7 -1.9

Manufacturing 11.6 11.9 11.1 12.1 3.6 1.2 2.3 2.6

Electricity, gas, water 0.3 0.3 0.5 0.3 2.9 7.2 5.3 -3.6

Construction 3.0 4.4 3.5 4.4 12.1 -1.4 4.2 5.2

Trade, hotels, restaurant 7.6 8.3 8.5 11.1 4.9 3.0 3.8 5.7

Transport, communication 2.9 3.0 3.1 4.1 3.2 3.5 3.4 5.5

Financial, real estate 0.9 1.0 1.1 1.4 4.7 4.5 4.6 5.4

Community/social services 9.8 10.1 11.1 9.2 3.6 4.1 3.6 -2.1

All Sector 100 100 100 100 2.9 2.5 2.7 1.1

Source: Planning Commission, Government of India.

1.4 Poverty ratios

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Poverty ratios are estimated by the Planning Commission on the basis of the consumerexpenditure surveys conducted by the National Sample Survey Organisation (NSSO).The latest survey data are available for the 55th round covering the period July 1999 toJune 2000. Despite high population growth, the headcount ratio declined from 55 percent

in 1973 to 26 percent in 1999 for all India (Table-10) i.e. at a rate of 1.1 percentage pointper annum. The decline was fairly uniform across rural and urban areas. Rural poverty,which accounts for 75 percent of the overall poor, declined from 56 to 27 percent in1973-1999, while urban poverty dropped from 49 to 24 percent during the same period.Interstate differentials of poverty also narrowed, although these still remain high. Whileonly 6 percent of population in Punjab lives below the poverty line, the incidence ofpoverty is as high as 43 percent in Bihar.

The absolute number of the poor declined by only 61 million from 321 million in 1973to 260 million in 1999 due to population growth from 600 million in the early 1970s to991 million in 1999. In fact, the number of poor remained stable around 320 million in

1973-1994 and declined to 260 million in 1999 due to reduction of poverty ratio by 10percent in 1993-1999. This shows favourable impact of economic reforms and higheconomic growth on the incidence of poverty and employment in 1990s.

Table-10 Estimates of Incidence of Poverty in India 1973-1999

Year Poverty Ratios (%) Number of Poor (Million)

Rural Urban Combined Rural Urban Combined

1973-74 56.4 49.0 54.9 261 60 321

1977-78 53.1 45.2 51.3 264 65 329

1983 45.7 40.8 44.5 252 71 323

1987-88 39.1 38.2 38.9 232 75 3071993-94 37.3 32.4 36.0 244 76 320

1999-2000 27.1 23.6 26.1 193 67 260

It may be noted that the official poverty ratios are basically deprivation indices as thepoverty line takes into account mainly bare biological needs (calorie intake of 2400 percapita per day for rural areas and 2100 per capita per day for urban areas). It does notconsider adequately needs on health, education, housing, transport, water, power,sanitation etc. not to talk of minimum entertainment and social, cultural and religiousneeds. Poverty line assumes fixed consumption basket over time and regions, although ittakes into account price differentials among the states.

The determination of poverty line also assumes continuous relationship between calorieintake and money income levels, which is not supported by facts. Since there aredifferences in consumption habits among the states and there does not exist an optimalconsumption basket, neither the uniform calorie norm nor the substitution of calorienorms by monetary norms is justified.

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Indias progress in fighting poverty is modest when compared with some of Asiancountries (like China and Indonesia), which experienced faster economic growth (Table-11). It is, therefore, often argued that a sustained and long lasting eradication of povertydepends on creation of opportunities for broad based economic development.

Table-11 Poverty and growth in India and selected Asian countries (in percent)

Country Povertyratios1975

PovertyRatios1995

AnnualReductionIn 1975-95% Point

AverageGDP growth1970-1980(Percent)

AverageGDP growth1980-1995(Percent)

India 54.9 26.1 1.1 3.2 5.6

China 59.5 22.2 1.9 5.0 11.1

Indonesia 64.3 11.4 2.6 7.8 6.6

Korea 23.0 5.0 0.9 9.0 8.7

Malaysia 17.4 4.3 0.7 7.8 6.4

Philippines 35.7 25.5 0.5 6.2 1.4Thailand 8.1 0.9 0.4 7.2 7.9Source of data: For India, Planning Commission; for others World Bank Report on Social Consequences ofthe East Asian Financial Crisis, September 1998.

Note: For India, poverty ratios refer to the years 1973 and 1999 respectively.

More than three-fourths of the poor live in rural areas. Economic groups most prone topoverty are rural households (mainly landless agriculture labour and marginal farmers),urban casual labour and the self-employed engaged in petty services. Poverty is generatedby many factors such as unemployment, ill health, and lack of access to productiveassets. Demographic factors also interact with socio-economic and environmental factors.Gender, literacy, land-ownership, employment status, religion and caste are closelyrelated to poverty. Some social and religious groups do not believe in family planningand have large family size.

The spatial distribution of poverty in India is highly uneven; linkages betweenurbanization, state domestic product and poverty ratios are weak testifying thecomplexity of the phenomenon of poverty; and urban poverty is both an outflow ofpoverty from the rural areas as also an autonomous phenomenon.

The poor are caught by unfavourable forces at the local, national, and global levels thatcombine to form a three-tiered poverty trap. At the local level, factors include skeweddistribution of land and other assets, physical weakness, higher fertility rate, and

relatively lower power to fight against corrupt institutions. These are reinforced at thenational level by various policies ranging from tax laws to interest policies that aregenerally pro-rich. At the global level, the poor are held down by a mix of oppressivefactors such as tied grants, falling export prices and rising capital flight.

The culture of poverty theorists argue that poverty breeds poverty and a poor family has ahigh probability of staying poor as these families are associated with high risks of illhealth, high fertility rates, inadequate education, low skill, irregular sources of livelihood,

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low productive jobs, insecure shelter, limited accessibility to basic services and lack ofdynamism. With the progress of urbanization, traditional joint families progressively broke down into micro families, which are economically less viable. A generalimprovement in health services led to an increase in the expectation of life and a largerproportion of aged persons. A decline in the infant mortality and maternal mortality rates

increased the proportion of labour force in total population and that of females in thereproductive age group. But the growth of employment generally lagged behind thegrowth of labour force.

Various studies by the World Bank (1997, 2000, 2003) made the following observations:

(a) There are sharp disparities in poverty ratios between states, between men andwomen, and between city and countryside.

(b) Although the Central government adopted a policy of growth with social justice,no state government effectively combined both policies to encourage growth anddevelop human resources and physical infrastructure.

(c) Agricultural investment, not agricultural subsidy, reduces poverty. Differentials inagricultural growth and rural wages were major factors, which led to differentlevels of poverty across Indian states (Ravallion and Dutt). Green revolution,better irrigation and infrastructure were associated with rising rural wages andincreased rural non-farm employment, such as in Punjab and Haryana, which hadthe highest per capita GDP and lower poverty.

(d) Investment on human capital reduces the extent of poverty. The human resourceapproach to poverty reduction across Indian states is exemplified by Kerala,which exported relatively skilled labour internationally and benefited fromremittances, even though its GDP growth was not rapid.

(e) Degree of urbanization was found to be less significant to affect poverty acrossstates, reflecting the capital-intensive, import-substituting nature of India'sindustrial development, its requirements for skilled rather than unskilled labour,and labour market regulations that limited the growth of organised employment.

(f) Inflation is a "harsh tax" on the poor because their incomes are not generallyindexed to prices.

2 Causes and Consequences of Unemployment

2.1 Factors responsible for unemployment

Any strategy to improve the condition of the poor hinges on improving the labour market,since income from work and quality of work are the main determinants of the livingconditions of the poor (World Bank 1996). India is endowed with an abundant andtechnologically skilled labour force, and is ranked first for both these criteria in theGlobal Competitiveness Report (GCR). However, Indias labour market has low degreeof labour market flexibility in terms of deployment of human resources, work practices,and wages. Various studies (Anant 2005, Debroy 1997; Fallon and Lucas 1993; ILO1999; OECD 1995; Surendra Nath 2005) suggest that such rigidities constrain theeffective redeployment of labour during the process of industrial restructuring andchanges in demand and technology, and act as a disincentive for employment creation.

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An industry survey and discussions with industrialists also identify labour regulation asthe second highest obstacle to the operation and growth of business (World Bank 2000).

Average labour intensity in unregistered manufacturing increased from an average of 59.3percent over 1988-9 to 1990-1 to 62.4 percent over 1993-4 to 1995-6 (World Bank 1998).

Hence, had labour markets functioned more flexibly, pensions been more mobile, andlegislation been more conducive, the organized sector might have occupied a moreprominent share of the work force. Formal sector employees might have grown morerapidly and been more mobile, and the benefits of more formal employment shared acrossa larger number of employees, including women, who have been unable to participatefully in the labour market.

Rigid labour laws and high protection of labour encouraged increasingly capital-intensiveindustries (Gangopadhyay and Wadhwa 1998). Labour legislation and public sectoremployment gave employment protection and relatively high wages to the few employedin the formal sector, which constitutes only 8 percent of total labour force. In addition,

labour mobility across sectors was hindered by the pension system in the formal sector, pensions are not mobile across jobs and many years of work are needed before anemployee becomes eligible for a pension.

2.2 Wage rate and employment

Wage is a vital factor determining employment. Although wage rate and employment areinversely related (Table-12), rise in wage is necessary for growth in a developingeconomy as higher wages increase purchasing power of workers and thereby enhanceeffective demand for goods and services, which in turn pushes up employment. Severalstudies have indicated that low employment elasticity in India is due to relatively high

wage rate, low productivity, shift in factor price in favour of capital and labour marketdistortions caused by both government regulations and private institutions. Table-12indicates that the growth in wages was very high across industries in the pre-reformsperiod than in post-reforms period.

Table-12 Real wage growth rates and Employment elasticity

Sectors Real wage growth rates Elasticity of employ-ment to wage rate

Elasticity of employ-ment to output

1983to 1993-94

1993-94 to1999-00

1993-94 1999-00 1993-94 1999-00

Agriculture 14.3 1.4 -1.36 -1.35 0.93 1.06

Mining & quarrying 8.0 6.1 -0.17 -0.67 1.04 0.55

Manufacturing 12.4 7.4 -0.85 -0.97 1.08 0.99Electricity, gas, water 8.9 8.3 0.23 -0.92 0.71 0.73

Construction 4.4 0.8 -0.72 -0.61 1.05 0.88

Trade, hotels,transport,communications

13.9 4.5 -1.73 -0.56 0.77 1.10

Community/social/Financial ser.

2.6 5.5 -0.41 -0.82 1.08 1.10

All sectors 13.5 6.5 -0.66 -0.57 0.99 1.02

Source: Bhattyacharya and Sakthivel (2005)

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2.3 Organised manufacturing and employment

Manufacturing has played a major role for improving economic growth in the East Asiancountries. For example, the share of manufacturing in GDP in Malaysia improved from

only 9.8% in 1970 to 29.2% in 2000, whereas that in India increased from 7.2% to 9.6%in the same period. Consequently, the share of organised manufacturing in employmentincreased from 4.6 percent to 14.1 percent, whereas that in India declined from 2 to 1.8percent over the same period (Table-13). Other East Asian countries had experiencedsimilar trends as in Malaysia and also sharp reduction of poverty.

Table-13 Share of organised manufacturing in GDP and employment

in India and selected Asian economies since 1970 (percent)Year Share of organised manufacturing in labour force Share of organised manufacturing in GDP

India Indo-nesia

Malay-sia

Thai-land

Korea Taiwan India Indo-nesia

Malay-sia

Thai-land

Korea Taiwan

1970 2.0 1.1 4.6 1.1 7.3 7.2 2.6 9.8 4.7 19.8

1980 2.3 1.6 9.4 2.8 13.0 30.1 7.2 4.3 14.8 30.6 35.6

1990 2.0 3.4 11.2 5.4 15.1 29.0 7.7 11.9 20.6 38.0 33.32000 1.8 4.2 14.1 6.7 10.4 26.0 9.6 17.1 29.2 26.4 38.6 27.6

Source: UNIDO Industrial Database 2003(CD-ROM),And WorldBank World Development Indicators 2003(CD-ROM)

India has not only slower growth of output but also lower employment elasticity (Table-14) and higher wage rate and lower productivity (Tables-15) than those in selected EastAsian countries.

Table-14 Employment and Output Growth

Country Average annual GR of employment (%)

Average annual GR ofgross output (%)

Employment elasticityw.r.t. Output

1. India (1970-1996) 1.9 7.0 0.27

2. Indonesia (1975-1996) 9.4 14.7 0.643. Malaysia (1971-1996) 6.9 11.7 0.59

4. Korea Rep. (1970-1996) 6.9 14.2 0.49Source: UNIDO Industrial Database 2003(CD-ROM),

Table-15 Characteristics of employment in organised manufacturing

No. of workers employed to produce PPP$1Million worth of value added

Ratio of wage per worker to GDP per capita

Textiles Paper &Products

Electricalmachinery

All manu-facturing

Textiles Paper &Products

Electricalmachinery

All manu-facturing

India 84 55 33 54 4.3 3.3 4.7 3.3Indonesia 45 25 10 38 0.9 1.5 1.5 1.0

Korea 21 12 11 13 1.3 1.5 2.2 1.5Malaysia 34 29 31 30 1.1 1.3 1.2 1.2

Taiwan 40 23 34 30 1.1 1.2 1.21.5 1.2

Thailand 50 12 24 24 1.2 2.0 1.4Source: UNIDO Industrial Database 2003(CD-ROM),

and WorldBank World Development Indicators 2003(CD-ROM)

2.4 Women and Child Labour

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Women in the workforce

Women constitute significant proportion of the labour force. The female participation inlabour force however, varies across urban-rural areas. According to the 57 th NSSO round(July 2001-June 2002), the Work Force Participation Rate (WFPR) for females went up

in rural areas but declined in urban areas compared to the WFPR in the 56th

round (July2000-June 2001). In rural areas it went up by 8 percent from 433 to 463. In urban areas, itdipped from 195 to 185.

Eighty-eight percent of women workers are engaged in the rural areas, primarily inagricultural activities, and related sectors such as animal husbandry. In the urban areas, asignificant proportion of women workers are employed in the unorganized sectors inhousehold industries, petty trades and services, building and construction activities, etc.Most of these activities are low paid or unpaid. According to National Institute of PublicFinance & Policy (NIPFP) study on Gender Budgetingthe average female wage is almost80 percent of the male average in urban areas, while it is less than 60 percent of the

corresponding male rate in rural areas.

The employment of women in the organized sector (both public and private) as on 31 st

March, 2002 at 4.95 million, constituted 18.1 percent of the total organized sectoremployment in the country, compared to 17.9 percent in 2001. The distribution of womenemployees across industries reveals that community, social and personnel services sectorsemployed 56.5 percent of women workers followed by manufacturing (20.6 percent),agriculture and allied occupation (9.4 percent) and finance, insurance, real and business(5.2 percent). The proportion of women in the organized sector also varies betweenStates, the employment of women being higher where literacy rates are better amongfemales.

Improvement in the quality of womens employment depends upon increased access toeducation and skill development training. Several initiatives have been made in thisdirection in order to provide training for women in the labour force. There are about 776Institutes (224 Women Industrial Training Institutes and 552 Women Wings in GeneralIndustrial Training Institutes (ITI)/Private ITI), which provide about 47,472 training seatsfor vocational training facilities for women at craftsman level.

Female unemployment rates are generally higher than male unemployment rates thoughdifferences narrowed down over time and were nearly eliminated in rural areas in 1999-2000. Female unemployment rate in urban areas at 9.8 percent was more than the maleunemployment rate at 7.2 percent underlying the need to create employmentopportunities for females in urban areas.

The employment of males and females depends not only on their levels of education butalso on their socially defined roles in the households. Indian boys are generally broughtup and educated with the expectations that they be main bread-earners. But girls areviewed as future housewives and homemakers rather than paid workers in labourmarkets. The educational levels of the labour force by sex (Table-16) indicate very high

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incidence of illiterate female workers in both rural and urban areas, although theincidence has a declining trend over time. The illiterate women are crowding intounskilled and manual labour jobs that are low paying and sometimes hazardous to theirhealth and safety. To some extent, this is due to desperation and poverty inducedcompulsions that women are forced to enter paid labour markets. However, one positive

outcome is that better educational attainments are providing women with the opportunityto undertake jobs hitherto not accessible. In fact, the gap between male and femalegraduates in urban areas has almost vanished in 1999-2000 (Table-16).

Table-16 Percentage distribution of labour force by educational status1987-88 1993-94 1999-2000

Males Females Males Females Males Females

Rural Urban

Rur Urb Rur Urb Rur Urb Rur Urb Rural Urban

Illiterate 48 20 82 52 43 18 78 46 40 16 74 41

Primary 30 30 12 19 28 25 14 19 27 22 16 17

Middle 12 16 3 7 14 18 4 9 16 19 6 10

Secondary 8 22 2 12 11 25 3 14 14 26 4 16Graduate 2 12 1 10 3 15 1 12 3 17 1 16

Total 100 100 100 100 100 100 100 100 100 100 100 100

In the Unorganised sectors, bulk of the womens labour about 72 percent is engaged inagriculture activities. In the organized sectors, there is excessive concentration of womenemployment in community, social and personal services and in manufacturing (Table-17). Even these are at the lower range of the job hierarchy implying lower incomes andrelatively low status.

In rural areas, women are better paid than men in public utilities, construction, while inurban areas they are better paid in construction, trade and hotels, transport and

communications and financial services. (Table-17).

Table-17 Percentage distribution of female workers in organised sectors

Sectors 1991 1998 % Changeduring

1991-98

Female/Male wageratio in 1999-2000

Rural UrbanAgriculture 10.3 9.8 -4.3 0.70 0.42

Mining & quarrying 1.5 1.4 -1.4 0.31 0.58Manufacturing 21.8 21.0 -2.8 0.50 0.75

Electricity, gas, water 0.9 0.9 2.3 1.12 0.85Construction 1.4 1.6 11.8 1.06 1.05

Trade, hotels, restaurant 0.9 0.9 0.0 0.92 1.32

Transport, communication 3.6 3.7 2.9 0.82 1.19Financial, real estate 4.7 4.8 3.1 0.58 1.04

Community/social services 54.9 55.8 2.5 0.97 0.77

All Sector 100 100 0.7 0.90 0.83

Child Labour

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The problem of child labour is a major social concern. The number of working childrenin the country declined from 2 percent of the total population and 6 percent of the totallabour force in 1981 to 1.34 percent of the population and 3.59 percent of the total workforce respectively in 1991. The estimated number of working children in the country as

per the 55th

Round of NSSO Survey (1999-2000) is 10.4 million. Children continue tobe employed in the unorganized and home-based industries and domestic services. TheState with the highest child labour population in the country is Andhra Pradesh, whichhad 1.66 million working children. Other States having a child labour population of morethan a million (as per 1991 Census) are Madhya Pradesh, Maharashtra and Uttar Pradesh.

The policy of the government is to prohibit the employment of children below age 14years in factories, mines and hazardous employments and regulate the working conditionsof children in other non-hazardous areas of employment. The government of Indiaadopted a National Policy on Child Labour in 1987 with three-fold objectives viz. legalaction plan, general developmental programs and project based action plan. Under project

based action plan, the Government of India has adopted two schemes, namely, NationalChild Labour project Scheme (NCLP) and Grant-in-Aid to voluntary organizations fortaking up action oriented programs in the field of rehabilitation of child labour. There arecurrently 100 National Child Labour Projects (NCLPs) covering 2.08 lakh activitiesundertaken under the NCLP are the establishment of special schools to provide non-formal/formal education, vocational training, healthcare, stipend and supplementarynutrition, etc. to children withdrawn from employment. Under the scheme of NCLPs, sofar about 1.87 lakh children has approved the continuation of NCLP Scheme during theTenth Plan period and its further extension to 150 more child labour endemic districts.Under the Gant-in-Aid Scheme, the Voluntary Organizations involved in rehabilitation ofchild labour are provided financial assistance for the projects undertaken by them in theareas, which are not covered by the scheme of NCLP.

2.5 Labour laws and labour markets

Labour is highly protected and Indian labour laws do not allow hire and fire policy. Asper existing laws under the Industrial Disputes Act 1947, no employer cannot close anestablishment or declare lock out or retrench any labour without taking prior approval ofthe concerned government authority if the establishment employed more than 100laborers on permanent basis in the previous 12 months. Various researchers in the pasthad concluded that this clause stood in the way of further organised employment and ledto growth of more capital-intensive industries. Therefore, this protection is counter-productive and acts against the overall interest of the workers.

Labour figures in the Concurrent List (for both Centre and States) of distribution oflegislative powers in the Constitution. As both Centre andStates can legislate in this area,India has perhaps the largest number of legislations on labour in the world. There areover 165 labour legislations including 47 labour related laws enacted by the Centralgovernment (Debroy 1997) dealing with industrial relations, social security, industrialsafety and health, child and women labour, minimum wages and bonus, labour welfare,

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emigration, employment exchange and miscellaneous issues. There is a considerabledegree of overlap among these acts, and there are wide variations as regards basicconcepts such as employee, workman, wages, factory, child labour and industry. Forexample, the term wage is defined in 11 different ways in 11 different labour laws.Court case laws also differ among different states causing further confusion. Many

studies have suggested simplification of rules and procedures, harmonization andrationalization of acts, and grouping these acts under five or six broad and comprehensiveacts dealing with basic issues.

Labour regulation has been identified by many researchers (Stern 2001 and Sachs et al.1999) as an important factor influencing the investment climate in India. As Besley andBurgress (2004) show, policy choices of the Indian state governments as regards labourlegislation strongly affected manufacturing performance. The study by Besley andBurgress (2004) based on state level panel data for the period 1958-1992exploits twoimportant facts: (a) labour regulation only applies to the registered manufacturing sectorand (b) the Indian constitution empowers the state governments to amend central

legislation. The principal central legislation is the Industrial Disputes Act of 1947. ThisAct has been extensively amended by the state governments since 1950s. Besley andBurgress (2004) read the text of each amendment and classified these as pro-worker (+1),neutral (0) and pro-employer (-1).

Besley and Burgress (2004) then show that pro-worker labour reforms are closelyassociated with an increase of urban poverty but do not affect rural poverty. This is due tothe fact that labour legislation applies basically to the registered manufacturing units,which exist primarily in urban areas. Moreover, they observe that the adverse affects arelarge. For example, the state of West Bengal, which is ruled by the communist parties forthe last three decades, had passed large number of pro-worker amendments during hisperiod. Had it not taken these labour policies, its urban poverty ratio would have been 11percent lower in 1990. These results suggest that attempts to redress the balance of powerbetween capital and labour can end up actually hurting the poor in the medium and longterm.

Besley and Burgress (2004) further observe that a pro-worker labour legislation isassociated with lower per capita manufacturing output. This is due to the fact that pro-worker legislation led to less output in registered manufacturing sector. States with morepro-worker labour regulation tend to have less investment in the registered manufacturingsector, and larger informal manufacturing sectors. As organised trade unions are able toextract more wages and benefits in the registered sectors, capitalists prefer to remain inthe unorganised sectors where labour has no power.

These results on labour regulations are mirrored in the relationship between urbanpoverty elasticities and labour regulation. States that had more pro-worker legislation hadbeen less effective in reducing poverty at a given level of growth. States, which enactedpro-employer labour legislation, achieved significantly higher growth rates.

3 Government Policy responses

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3.1 General policies

In various five-year plans, employment generation was viewed as a by-product ofdevelopment and growth, and not as a goal to be pursued independently of economicdevelopment. 1970s and 1980s witnessed the emergence of various employment

generation and self-employment programs as a part of poverty alleviation programs.Although level of employment expanded over the years, the growth rate of employmentstill lags behind that of labour force.

Anti-poverty programs have been strengthened over the years to generate moreemployment, create productive assets, impart technical and entrepreneurial skills andraise the income level of the poor. Most of the poverty alleviation and employmentgeneration programs are targeted towards the rural development, as majority of the poorlive in rural areas.Most evaluations of the poverty alleviation programs, done by the government or others,conclude that these programs are not very effective in reducing poverty. They suffer from

ill defined and multiple objectives, limited targeting, under-funding, complexadministration, high administrative costs and leakage, lack of proper accountability andadequate monitoring. A recent study of the Public Distribution System (PDS) suggestedthat only 25 percent of food grains actually reach the poorest 40 percent of thepopulation, and administrative costs account for 85 percent of total expenditure andtherefore far outweigh the income gains to the poor.

3.2 Active labour market policies

(a) Rural development and poverty alleviation programs

Growth with social justice had been primary objective of Indian planning since itsinception in 1951, and several anti-poverty measures are in operation for decadesfocusing the poor as the target groups. These include welfare programs for the weakersections, women, children, and a number of special employment programs for self- andwage employment. Ongoing economic reforms since 1991 strengthened these programsto generate more employment, create productive assets, impart technical skills and raisethe income levels of the poor.

Government relied mainly on two approaches for poverty alleviation: the first based onthe anticipation that economic growth will have a trickle down effect on the levels ofliving of all groups; and the second that direct anti-poverty programs are also required.Government shifted public expenditure away infrastructure and industry towards socialsectors, and improved targeting of subsidies through changes in the public distributionsystem. Central government expenditure on social sectors (comprising education, health,water supply, sanitation, housing, slum development, social welfare, nutrition, ruralemployment and minimum basic services) as a ratio to total expenditure increased from7.7 percent in 1990-91 to 11.7 percent in 2005-06, and as a ratio to the GDP increasedfrom 1.3 percent to 2 percent over the same period.

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One of the better-targeted programs is the Integrated Child Development Services. Foodfor works program is also more successful at targeting the poor and improved their livingstandards at a relatively low cost.

As unemployment is the root cause of poverty and the population growth in India is very

high, there should be more emphasis on family planning. For an urban family a child isborn by parental planning and family size is limited to the necessary minimum. Oncontrary, in rural India a child is regarded as an asset and is expected simply because ofnormal life cycle progressions.

Government is trying to change this environment by suitable public policy on education,health and family welfare, and economic incentives for micro families. But thesemeasures have marginal impact on the net reproduction rates and the family size as socio-cultural-religious environment put a constraint on the effectiveness of family planning.Female education, awareness and better standard of living would create the requiredconsciousness among the people that smaller families are desirable. If the needs for

health and family welfare services are fully met, it will be possible to achieve substantialdecline in the family size and enable the families to improve quality of life.

Low productivity of small landholders leads to poverty, low energy in-take and undernutrition, which in turn prevents the development and creates a vicious circle. In most ofthe States, non-farm employment in rural areas has not grown very much and cannotabsorb the growing in labour force due to high population growth. Those who are gettingeducated specially beyond the primary level do not wish to do manual agricultural work.They would like better opportunities and more remunerative employment in rural areas.This can be done by developing agro-based and rural resource-based enterprises.

Government provides several fiscal and monetary incentives for the small-scaleindustries, many of which are based on agricultural goods and rural resources. But thesesmall industries suffer from lack of modern technology, adequate bank credits, skilllabour and efficient network of markets. It is imperative that a program of skilldevelopment, vocational training and technical education is adopted on a large scale inorder to generate productive employment in rural areas for those living there. The entiregamut of existing poverty alleviation and employment generation programs may have tobe restructured to meet the newly emerging demand for employment.

(b) Education and training

The National Policy on Education (1986) provides a broad policy framework for totaleradication of illiteracy and sets a goal of expenditure on education at 6 percent of theGDP. As against the goal of 6 percent, the total expenditure on education in India iscurrently 4 percent of GDP. A high priority has been accorded in this sector in the TenthFive Year Plan, with an emphasis on basic education, training and adult education. TheBudget for 2004-05 imposed an education cess at the rate of 2 percent on all taxes andduties to finance the program on universal education. For workers, there are variousindustrial training centres and the vocational courses.

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Higher technical and professional education in the country has played a significant role ineconomic and technical development by producing quality manpower. There are atpresent 1,265 approved engineering colleges at the degree level. Apart from this 1,034institutes impart courses on Master of Computer Application (MCA). There are 958

approved Management Institutes imparting MBA courses. All India Council forTechnical Education (AICTE) has delegated the powers of approval of diploma leveltechnical institutes to the State Governments. Strong linkages have been developedbetween technical institutions and the industry. For strengthening technical education andimproving the quality of polytechnic pass-outs, various steps have been taken throughtechnician education development programs.

3.3 Protective safety nets

In India, positive discrimination in favour of the weaker sections as an instrument of socialjustice has been accepted both socially. There are job reservations in the public sector forscheduled castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), women,handicapped, minority ethnic groups etc. Social security is listed in the Concurrent List ofthe Constitution placing responsibility on both the Centre and the States. However, the provision of effective social security continues to be a challenge in view of financialconstraints, high incidence of poverty, unemployment, illiteracy and the large size oflabour force in the unorganized and informal sectors.

The permanent social security benefits provided through legislative measures likeMinimum Wages Act, Industrial Disputes Act, Workmens Compensation Act, EmployeesState Insurance Act, Employees Provident Fund & Miscellaneous Provisions Act,Maternity Benefit Act, and Payment of Gratuity Act, etc. cater to mainly organised urbanlabour comprising only 8 percent of the total labour force. Most of the states have pensionschemes for the old and disabled, but due to eligibility criteria of income and age, only 9percent of old-age population gets the benefit of pension. Most of the States implementedthe Minimum Wages Act, but the levels of minimum wages and coverage vary from stateto state. Some special employment Programmes are also being implemented by some stategovernments like the Employment Guarantee Scheme in Maharashtra and the self-employment Scheme for Registered Unemployed in West Bengal.

Immediately after the independence, the Government enacted the Industrial Dispute Act(IDA), 1947 for protection of workers. IDA permits lay-off, retrenchment and closure inall undertakings, which do not employ more than 100 workers. In the case of larger units,

as per the Act, no retrenchment, lay-off or closure is allowed without taking priorpermission from the government and the affected workers not being served at least threemonths notice in writing indicating reasons for such actions.

In addition, in order to mitigate the possible adverse impact of economic reforms, aNational Renewal Fund (NRF) has been established to fund schemes for compensation,retraining and redeployment of workers affected by restructuring. The NRF is beingfinanced partly by disinvestments of government equity in public enterprises and partly by

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contributions made by the World Bank and individual country donors. Since its inceptionin 1992 the Fund has financed the voluntary retirement of 100,000 workers who haveopted for voluntary retirement.

Some important initiatives taken over the years to improve the well-being of the

weaker sections like the scheduled castes, as well as Other Backward Classes include: (I)Reservation of jobs to the extent of 22 percent for SCs/STs in both public and privatesectors, (ii) Reservation of 27 percent of jobs for Other Backward Classes (OBCs) in theCentral Government and Public Sector Undertakings, excluding the creamy layer. (iii)Setting up a National Commission for Backward Classes, (iv) A scheme for educationcomplexes in low literacy pockets for improving literacy among tribal women, (v) settingup of a National Backward Classes Finance and Development Corporation to promoteeconomic and other development activities of the backward classes. (vi) Providing riceand wheat to the tribal dominated areas at concessional prices even lower than the publicdistribution prices. (vii) Establishment of the Tribal Cooperative Marketing DevelopmentFederation, and (viii) creation of new Ministry for tribal welfare in October 1999 by the

coalition government.

Commercial banks are required to lend at least 40 percent of their credits towards the priority sectors consisting of small-scale industries, agriculture, retail trade, smalltransport operators etc. Banks also provide loans at concessional interest rates to theweaker sections, minority communities and persons affected by natural calamities, riots,disturbances etc.

All insurance companies, both life and general, are wholly nationalized, and play a majorrole for providing social security in the form of various schemes such as insurance for life,floods, fire, earthquakes, riots, war risks, accidents etc. In recent years, they haveintroduced several special schemes such as Medi-claim Policy, Comprehensive CropInsurance Scheme (CCIS), Social Security Scheme for Poor Families in the age group of18-60 (to provide personal accident insurance), Hut Insurance Scheme for Poor families inrural areas (to provide fire insurance cover for huts and belongings of landless labourers),Railway passengers Insurance Scheme (to cover cases of deaths and injuries to bona fidepassengers on account of terrorist attacks, bomb blasts etc.), Professional IndemnityInsurance, Teak wood Insurance, Tea Plantation Insurance etc. A Social Security Fund hasbeen set up with contributions from the Government and the Life Insurance Corporationfor the purpose of providing social security through group insurance on the lives ofpersons forming part of weaker and vulnerable sections of the society.

In the last few years, group insurance schemes for landless agricultural labourers, lifeinsurance scheme for integrated Rural Development Program (IRDP) beneficiaries andgroup insurance for certain categories of workers belonging to weaker sections of a thesociety have been introduced. In 1999 the government launched a new Crop InsuranceScheme replacing the existing Comprehensive Crop Insurance Scheme and widened itsscope to cover almost all food and non-food crops and to help farmers to stabilize theirincomes particularly in disaster years.

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3.4 Gender specific issues

Despite significant progress, indicators of human development, such as life expectancy,literacy, school enrollment and medical care, in India lag far behind those of most EastAsian countries. Still more than 35 of the adult population are illiterate. Wide gender

disparities also exist in India with regard to economic, health and educational attainment.More than 40 percent of Indias illiterates are girls or women. The incidence of infantmortality and child malnutrition is more pervasive for females; however, female lifeexpectancy at birth has improved during the last decade and now exceeds male lifeexpectancy. The generally poorer health of women is caused by dual work burdens inproduction and reproduction tasks and skewed pattern of intra-household food allocationin favour of male members. Regional variations are also observed in gender disparitiescorrelated to poverty incidence.

3.5 Labour market reforms

At present, amendments to 13 acts are being examined by all stakeholders. Evenamendments of simple issues relating to definitions and scope have taken much longerperiod than expected due to existing parliamentary procedures for amendment and lack ofpolitical consensus. While China drastically reformed its previous employment relationspushing the workers to a more insecure regime and transferring substantial bargainingpower to the employer within a decade of reforms, India virtually did nothing to changeits labour laws even after 14 years of reforms (Saha 2005). In the absence of labourreform, the only avenue of downsizing was voluntary retirement schemes (VRS), pursued both by the private and the public sector, which resulted in high costs and longadjustment period. The methods of recruitment were also predominantly contractual, andwhere that was not possible, firms resorted to outsourcing. This led to dualism withinfirms, slower growth of permanent employment and abnormally high share (82 percent)of Unorganised employment in total labour force.

China made significant reforms in labour markets within a decade of initiating reforms.As for the labour relations within an enterprise, the reform went deeper by transferringthe bargaining power mostly in favour of the employer, while the enterprise union and thestate machinery are expected to protect the workers interest under the general guidelinesfor labour welfare and protection. The employer has freedom in hire and fire and to makehis employees work according to a mutually agreed contract. This particular provision ofallowing firm-specific contracts to govern the employment relation has reduced thestates role drastically. In practice, things can go wrong, if the state agencies do not playtheir roles properly and workers are forced to accept unfair terms.

Chinas long history of extreme employment security might have compelled them toreverse almost all the previous provisions. In the absence of domestic privateentrepreneurs, liberalised labour market was perhaps necessary to attract foreigninvestors (Henley 2004). But it has made redistribution of surplus within the Chineseenterprises biased in favour of employers (Ostrovisky 2003).

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China was successful in creating a new labour market, which enhanced mobility oflabour. Although this led to mass layoffs and open unemployment, sustained highindustrial growth especially in the coastal regions helped their redeployment. In spite ofharsh working conditions led by competition, workers seemed to have benefited fromwage growth, significant new job creation and opportunities for self-employment (Saha

2005). In sum, Chinas manufacturing sector experienced a sort of industrial revolution,which reduced peoples dependency on agriculture.

Despite various studies done in India indicating such benefits from liberalisation oflabour markets, Indian labour laws still remain highly restrictive due to political economyconstraints. India has not achieved remarkable improvement in manufacturing growth.Although industrial output has grown at a faster rate than before, employment growth hasdecelerated in the recent years. This suggests that labour reforms are necessary to allowfor larger investments in manufacturing. Manufacturing growth is crucial for theabsorption of semi-skilled and unskilled workers and to reduce the dependency of labouron agriculture, which employs 58% of labour force but contributes only 20% of GDP.

The different courses of reforms taken by India and China can be explained partly bytheir policy history, political institutions and industrial relations framework. In the case ofChina, the history of extreme employment security compelled a complete reversal oflabour policy to attract foreign capital, which was very important, as there was very littleentrepreneur class within the country. Political institutions and one trade union policyfurther restricted the Chinese workers from conducting true collective bargaining. Hence,they suffered on the redistribution front (Chen et.al.1996, Kanbur and Zhang 2005).

Currently the median age of the Indian working population is, at 24.3 years, one of thelowest among the large nations. India is likely to add 83 million to its working agepopulation of 675 million by 2010 according to the estimates by the United Nations.However, existing restrictive labour laws have been a deterrent to employers forcingthem to prefer capital-intensive options for production, even if they would have otherwisepreferred labour-intensive options due to low wages in India (Ahya and Sheth 2005).Despite various well-researched studies, which recommended initiating a structuralapproach to labour market reforms, the government has avoided confronting the issue ofunemployment head on (Aya and Sheth 2004). Politicians efforts to protect labour in thepublic sector add to inflexibility in the labour market.

Only 8% of Indian labour force are employed in the organised sector and almost 60% ofmanufacturing output comes from unregistered companies. A large number of factoriesremain outside any regulations. Although certain industries took the advantage and grewin terms of size, profit, skill and technology, most others existed for bare survival. A prolonged regime of import substitution damaged their business instincts. While theorganized sector provided too much of job-security for too long, the unorganised sectorprovided too little to too many. Unfortunately, political parties preferred retaining thisdualism in order to preserve their vote banks in organised labour force. Consequently,good research works and policy prescriptions on labour reforms remained on paperleading to poor uptake of research by the policy makers.

employment, poverty and gender equality in india

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