Analyzing “jobless growth” in post-liberalisation India: a decomposition approach

Abstract

There has been a growing concern about “jobless growth” in the Indian economy as a major problem to the significant rise in GDP. This paper comprehensively examines India’s economic growth and employment during the different National Sample Survey (NSS) rounds, with a special reference to the service sector, the main growth engine for Indian economy over the past two decades. This paper tries to examine the factors accounting for the growth in the Indian economy through the labour market and workforce behaviour. It focuses on growth decomposition to account for the factors driving growth of the Indian economy, and it looks to decompose growth across the different sectors of the economy. The methodology used here is Shapley (in: Contributions to the Theory of Games,1953) decomposition. The periods of analysis are the different rounds of NSS. The three spells of growth considered are 1993/1994 to 1999/2000, 1999/2000 to 2004/05 and 2004/05 to 2009/10. The paper reveals an interesting fact that the main cause of growth in per capita GDP in post-liberalisation India is a massive growth in output per worker across all sectors over the three growth spells. There has been negative growth associated with employment rate, implying jobless growth in India. The demographic component effect on growth has been mostly positive. At the sectoral level, the industrial and specialised service sectors show fairly positive growth in terms of employment rate, though small, the negative contribution of employment in agriculture is so large that it overshadows the positive effect of these sectors, leading to huge negative contribution to the changes in the employment rate, defining jobless growth in India.