While the Indian economy is surging ahead with an almost double-digit growth rate, not every segment has something to cheer about. The organised sector of the economy seems to be in the grip of an employment crisis.

Data collected by the CMIE reveals that employment in this sector has been gradually declining in the last decade, with the sector witnessing a negative rate of growth of employment. Further, employment growth in this sector has been witnessing a slowdown post the 1991 economic reforms. Absolute employment came down from an approximate of 2.8 million in 1997 to 2.7 million in 2003 and 2.6 million in December 2004.

While it is true that only around 27.8 million workers, ie, 7 per cent of the total labour force, is engaged in the organised sector (NSSO, 1999-2000), a negative employment growth does not garner particularly well for the economy. According to HDFC chief economist Abheek Baruah, there are two broad reasons for this trend. “One, Indian companies have been rationalising and shedding their workforce to enhance productivity. Two, our labour laws are such that most companies prefer adopting capital-intensive techniques than labour-intensive ones, just so that they can avoid the hassles of dealing with labour,” he says.

Baruah, in fact, views this as a critical problem of India’s growth model, the fact that it has been ‘labour saving’ rather than ‘labour absorbing’. “However, there is one school of thought that believes that employment generation in the unorganised sector has been fairly strong, thus somewhat compensating for this decline. Even NSSO data supports this to an extent,” he adds.

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