Economic growth, structural changes and employment linkages in India

Abstract

PurposeIndia started economic reforms at a rapid pace to catch up the world economy by following the services-led-growth model during the post-liberalisation period. Over the years, the growing unemployment rate posits a re-look into the dynamics of growth model for wider work force participation. In this backdrop, the paper aims to examine the dynamics of structural changes in employment pattern in view of economic growth led by services-led growth model in India.Design/methodology/approachThe study employs a non-linear autoregressive model (NARDL) to examine the effect of the growth rates in three broad economic sectors namely agriculture and allied, services and industry on work force participation representing the employment opportunities in India.FindingsThe results highlight that the rapid expansion of the service sector has not occurred with enough employment opportunities by the same rate. By contrast, the growth in the industrial sector significantly creates employment opportunities in the short and long run. These results support the industry led growth model over the services for sustainable and inclusive economic growth in the country.Research limitations/implicationsThe study relies on combined labour force participation rates rather than gender-specific rates. Further, the regulatory, working conditions and economic incentives may affect the gender-specific engagement of the labour force in three broad sectors.Practical implicationsThe results offer important insight into changing patterns in employment with policy lessons. A wider workforce force participation calls for expansion of manufacturing activities through pro-industry programmes.Originality/valueThe study makes pioneer efforts to examine the dynamics of labour force participation with respect to the growth of three broad economic sectors of the Indian economy. The results provide new insights with policy implications for the changing employment pattern and policy response.