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    HomeBusinessHow to reduce falling employment and increase labour force participation

    How to reduce falling employment and increase labour force participation

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    The active labour force (including employed and active job-seekers) has reduced to 435 million from about 500 million in 2016 and 475 million in 2011. Total unemployed persons from the active labour force have increased to about 35 million from 25 million in 2016 and 22 million in 2011.

    By RP Gupta

    Post 2016, the problem of unemployment intensified, and with Covid-19 it got aggravated. The total employable workforce (above 15 years of age) is about 1,085 million, which increases every year by 10-12 million. The labour force participation rate (LPR) has fallen to 40% from 50.3% in 2016 and 52.9% in 2011. In several nations, it is 60-70%.

    The active labour force (including employed and active job-seekers) has reduced to 435 million from about 500 million in 2016 and 475 million in 2011. Total unemployed persons from the active labour force have increased to about 35 million from 25 million in 2016 and 22 million in 2011.The fall in the LPR and active labour force has affected the unique advantage of India emanating from the young and talented human capital. Increase in unemployment rate from the active labour force can be resolved but the restoration of LPR is a greater challenge.

    During Covid-19 crisis, the interim relief through MGNREGA and free ration was a prudent step by the government, but this isn’t a permanent solution. To resolve this problem, India must do a quick survey to diagnose the real cause for arriving at a solution.

    According to the Fifth Employment-Unemployment survey (2015-16), 46.6% of employed persons are self-employed, 36.4% are casual and contract labours, and 17% get regular salary. About 84% persons (including self-employed) earn below Rs 10,000 per month (mostly engaged in farm and non-farm small businesses). It means that besides falling employment and LPR, majority of jobs are with low income.

    The priority should be generating more jobs and improving LPR, and then raising income levels. For generating low/middle income jobs, the agriculture and MSME sectors must prosper through proactive policies. Farmers are true entrepreneurs and can generate a lot of jobs. They have made India self-dependent in food items. They need remunerative price, cheaper inputs and protection from natural calamities.

    The MSME sector, particularly micro and small businesses, is the next big job provider, but is under stress. It needs liberal credits and tax incentives. Regulatory easement and simplification of tax laws will motivate MSMEs to expand and formalise their business. That will enhance their income and generate jobs.

    India also needs large businesses for mass production in an efficient manner. They outsource goods and services and support small businesses. These can be the vehicles for boosting exports and replacing imports, for which radical reforms must be enacted. They should also invest in infrastructure for improving the efficiency of the economy, particularly in the energy, minerals and logistics sectors.

    By and large, India needs a mixed economy of small and large businesses. In the developing phase, small businesses and agriculture need incentives. Gradually, those will expand and join the formal economy. Thereafter, regular salaried jobs with middle/high income will grow. This has been the story of many Asian countries.

    Gupta is an economist and the author of ‘Turn Around India’

    Read also: ISB starts training government officials, has trained over 200

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