Employment growth rate in Secondary sector of Indian Economy

Secondary sector in an economy that is accountable for securing and processing raw materials into finished goods.  Some of the manufacturing industries like Automotive, Electrical, Textiles, Chemicals, Food Processing, Steel, Transportation Equipment, Cement, Mining, Petroleum, and Machinery are considered secondary sectors.

The employment growth in the secondary sector in India is marked by the inability to achieve prolonged spells of rapid growth despite it having shown relatively stable employment elasticity. However, some sectors like construction have high employment elasticity while sectors like manufacturing and agriculture have declining employment elasticity.

Employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. The employment elasticity indicates the ability of an economy to generate employment opportunities for its population as per cent of its growth (development) process.

In economic policymaking, it is commonly assumed that higher GDP growth will lead to higher employment growth. Amazingly, over the past three decades, we have found almost no relationship (and if anything a weak negative relationship) between GDP growth and employment growth for India (the coefficient is -0.11). The employment elasticity has gone down further and is estimated to be less than 0.1 and despite GDP growing at over 7% p.a, the employment growth is close to 0.6%. India has over 18 million people who turn 18 every year and we have over 100 million more people in agriculture than required.

One of the main reasons known is the fastest growing industries in India during the past couple of decades have tended to be modern services, which are not employment intensive. Sunrise sectors give wings to India’s economic goal but employers are struggling to bridge the talent deficit in new and upcoming sectors.

The fast-growing sunrise sector generates about 5 million direct employment opportunities powered by 40% equipment demand. But, the use of technology, and opening up to international competition coupled with skill gaps all have led to a lowering of employment growth. While talent shortage reported by employers increased marginally by 1 per cent over the past year, it nearly doubled compared to 2021, at 43 per cent. Women have been disproportionately impacted by this change and this has led to an abysmally low women’s labour force participation rate. Further, dominance of the Artificial intelligence (AI) in manufacturing industries threatens many jobs, and people and governments across the world are taking note of the disruptive potential of AI.

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