Growth and Determinants of Employment in Indian Agriculture

Abstract

Accelerating economic growth, transition from an agrarian economy to an industrial or modern economy would depend on how well the agricultural sector enables this transition. Recognizing that the majority of workers are employed in agriculture where labour productivity is low, a faster growth of agriculture is necessary to make employment more remunerative. While no significant increase in the number of workers can be expected in Indian agriculture, greater use of underemployed and unemployed persons becomes important. Taking this into consideration, the present paper examines the employment dynamics in agriculture by looking at the trends in growth and empirically estimates the effects of determining factors by using the data from 1972–73 to 2009–10. Considering the Keynesian theoretical explanation about the change in employment which depends on expected output or change in output, the empirical estimations corroborate the view that performance of agriculture determines the capacity to generate employment in the sector where employment is positively influenced by High Yielding Varieties (HYV), terms of trade and public investment and variables like non-agricultural output and productivity have a negative relation with labour in the sector. It is necessary for the agricultural sectors to absorb the underemployed and unemployed persons so as to induce the technology, investment and favourable terms of trade.