Historical experience suggests that a sustained rise in per capita incomes and improvement in emp... more Historical experience suggests that a sustained rise in per capita incomes and improvement in employment conditions is not attainable without a structural transformation that moves surplus labour from agriculture and other informal economic activities to higher productivity activities in the non-farm economy. In this paper, I analyse India's performance from a crosscountry comparative perspective, estimating the growth semi-elasticity of structural change. Using a crosscountry panel regression, I estimate the effectiveness of growth in moving workers away from agricultural and informal activities as compared to other developing countries at similar levels of per capita income. I show that the performance in pulling workers out of agriculture is as expected given its level and growth of GDP per capita, but the same is not true for pulling workers out of the informal sector. I also propose the following five indicators that need to be kept track of when evaluating the growth process: the growth elasticity of employment, the growth semi-elasticity of structural change, the growth of labour productivity in the subsistence sector, the share of the organised sector in total employment and the workforce participation rate. Comparing these indicators across periods, states, regions or countries, allows us to understand which sets of policies have worked better than others to effective improvements in employment conditions. And taken together the indicators allow us to set structural change targets as well as to say whether the current pattern of growth is going to be sufficient to meet those targets. Keywords India • Structural change • Employment • Crosscountry panel analysis This is a revised version of a Keynote paper presented at the 62nd ISLE Conference. I thank the conference participants as well as Anand Shrivastava, Zico Dasgupta and Ajit Ghose for helpful comments.
All information, ideas, views, opinions, estimates, advice, suggestions, recommendations (hereina... more All information, ideas, views, opinions, estimates, advice, suggestions, recommendations (hereinafter 'content') in this publication should not be understood as professional advice in any manner or interpreted as policies, objectives, opinions or suggestions of CII and Azim Premji University. Readers are advised to use their discretion and seek professional advice before taking any action or decision, based on the contents of this publication. The content in this publication has been obtained or derived from sources believed by CII and Azim Premji University to be reliable but CII and Azim Premji University do not represent this information to be accurate or complete. CII and Azim Premji University do not assume any responsibility and disclaim any liability for any loss, damages, caused due to any reason whatsoever, towards any person (natural or legal) who uses this publication. This publication cannot be sold for consideration, within or outside India, without express written permission of CII and Azim Premji University. Violation of this condition of sale will lead to criminal and civil prosecution.
The recently released data from the 2017-2018 Periodic Labour Force Survey have created a controv... more The recently released data from the 2017-2018 Periodic Labour Force Survey have created a controversy regarding the quantity of employment generated in the past few years in India. Estimates ranging from an absolute increase of 23 million to an absolute decline of 15.5 million have been published. In this paper we show that some of the variation in estimates can be explained by the way in which populations are projected based on Census 2011 data. We estimate the change in employment using the cohort-component method of population projection. We show that for men total employment rose but the increase fell far short of the increase in working age population. For women, employment fell. The decline is concentrated among women engaged in part-time or occasional work in agriculture and construction.
Over the past four decades, India has witnessed a paradoxical trend: average per capita calorie i... more Over the past four decades, India has witnessed a paradoxical trend: average per capita calorie intake has declined even as real per capita monthly expenditure has increased over time. Since cross sectional evidence suggests a robust positive relationship between the two variables, the trend emerges as a major puzzle. The main explanations that have been offered in the literature to address the puzzle are: rural impoverishment, relative price changes, decline in calorie needs, diversification of diets, a squeeze on the food budget due to rising expenditures on nonfood essentials, and decline in subsistence consumption (due to commercialization). Using a panel data set of 28 Indian states and the national capital territory of Delhi over four time periods (1993–94, 1999–00, 2004–05 and 2009–10), we test for these alternative explanations. Our results suggest that the puzzle can be explained by a combination of the following three factors: a food budget squeeze, declining subsistence c...
This paper contributes to the ongoing debate about economic inequality in India during the post-r... more This paper contributes to the ongoing debate about economic inequality in India during the post-reform period. We analyze consumption inequality through the hitherto neglected lens of nonfood expenditure. Using household level consumption expenditure data from the quinquennial "thick" rounds of the NSS, we show that inequality within food and non-food groups has declined, even as overall expenditure inequality has increased over time. We suggest that the rise in overall expenditure inequality is due to the increased weight in the household budget of non-food spending, which tends to be more unequal than food spending. We also show that inequality is very different across broad non-food items. Durables, education, healthcare, and consumer services show the most rapid increases in real expenditure, and also display the highest levels of inequality. Finally, we offer some possible mechanisms for this phenomenon and suggest policy measures to deal with this form of inequality.
There are two divergent perspectives on the impact of subcontracting on firms in the informal sec... more There are two divergent perspectives on the impact of subcontracting on firms in the informal sector. According to the benign view, formal sector firms prefer linkages with relatively modern firms in the informal sector, and subcontracting enables capital accumulation and technological improvement in the latter. According to the exploitation view, formal sector firms extract surplus from stagnant, asset-poor informal sector firms that use cheap family labour in home-based production. However, direct, firm-level evidence on the determinants and impact of subcontracting is thus far lacking in the literature. We apply a modified Heckman selection model to Indian National Sample Survey data on informal manufacturing enterprises (2005-06). We find that home-based, relatively asset-poor, and female-owned firms are more likely to be in a subcontracting relationship. Further, we perform selectivity-corrected Oaxaca-Blinder Decomposition and calculate treatment effects to show that subcontra...
This paper uses aggregate-level data, as well as case-studies, to trace out the evolution of some... more This paper uses aggregate-level data, as well as case-studies, to trace out the evolution of some key structural features of the Indian economy, relating both to the agricultural and the informal industrial sector. These aggregate trends are used to infer: (a) the dominant relations of production under which the vast majority of the Indian working people labour, and (b) the predominant ways in which the surplus labour of the direct producers is appropriated by the dominant classes. This summary account is meant to inform and link up with on-going attempts at radically restructuring Indian society.
The Covid-19 pandemic has created unprecedented disruptions in labour markets across the world in... more The Covid-19 pandemic has created unprecedented disruptions in labour markets across the world including loss of employment and decline in incomes. Using panel data from India, we investigate the differential impact of the shock on labour market outcomes for male and female workers. We find that, conditional on being in the workforce prior to the pandemic, women were seven times more likely to lose work during the nationwide lockdown, and conditional on losing work, eleven times more likely to not return to work subsequently, compared to men. Using logit regressions on a sample stratified by gender, we find that daily wage and young workers, whether men or women, were more likely to face job loss. Education shielded male workers from job loss, whereas highly educated female workers were more vulnerable to job loss. Marriage had contrasting effects for men and women, with married women less likely to return to work and married men more likely to return to work. Religion and gender intersect to exacerbate the disproportionate impact, with Muslim women more likely to not return to work, unlike Muslim men for whom we find religion having no significant impact. Finally, for those workers who did return to work, we find that a large share of men in the workforce moved to self-employment or daily wage work, in agriculture, trade or construction. For women, on the other hand, there is limited movement into alternate employment arrangements or industries. This suggests that typical 'fallback' options for employment do not exist for women. During such a shock, women are forced to exit the workforce whereas men negotiate across industries and employment arrangements.
The idea that service-sector industries, rather than manufacturing, can drive growth and structur... more The idea that service-sector industries, rather than manufacturing, can drive growth and structural change has caught the imagination of several scholars and policy-makers. For India, the Information Technology (IT) industry is often cited as an example of one such industry. However, empirical evidence for such claims is still weak. This article evaluates the Indian IT industry’s potential for growth. Most studies on the subject focus on the narrower segment of IT-Services in India while we take a holistic view and consider the potential of both software product and services, IT hardware, outsourced/offshored business processes, and activities involved in creation of intellectual property. We evaluate the present position and future prospects of the industry including India’s position in the technology value chain as well as future opportunities for the industry in the context of relocation of global manufacturing value chains and growth of the domestic market. We also discuss the likely impact of technology on jobs in the overall economy, direct and indirect job creation potential of the IT-BPM (Business Process Management) sector and the spill-over effects of technology as an enabler of new business models. Finally, we draw some lessons for effective industrial policy.
The creation of a mass-produced, mass-consumption lifestyle, which defines “economic development”... more The creation of a mass-produced, mass-consumption lifestyle, which defines “economic development”, has always implied the loot, displacement, exploitation and murder of a periphery for the development of the centre. The intense social conflict produced by this resourcehungry, capital-intensive mode of development is visible in the militarisation of Bastar. But very few political thinkers have made these costs the centrepiece of their critique of capitalism. Rammanohar Lohia, like Mahatma Gandhi, was one who did so. Lohia’s understanding of the centre-periphery relationship in the capitalist world system led him to struggle with the question of appropriate technology, one that accorded priority to equality over productivity, and encouraged decentralised governance and autonomous, connected villages.
The agricultural sector has performed worse than the other sectors over the years. The shares of ... more The agricultural sector has performed worse than the other sectors over the years. The shares of non-agricultural employment and output have increased, while 70% of agricultural households cannot meet their low consumption needs even after diversifi cation of sources of income. An analysis of budgetary p rovisions for the rural economy suggests that the government has not done enough to address some of these well-documented problems, and does not have the required vision to substantially increase rural employment opportunities. A fter the high economic drama of demonetisation and the resulting shocks to the economy, the 2017– 18 budget, the fourth one presented by Finance Minister Arun Jaitley, could be seen as an attempt to regain some credibility for the government and calm the general populace as well as international investors. It has been seen as a “routine” budget but also a “pro-growth” one, promising large increases in public invest ment in social and physical infrastructure...
The Indian manufacturing sector has not increased its share in output or employment along expecte... more The Indian manufacturing sector has not increased its share in output or employment along expected lines. The aggregate trends in this sector at the 3-digit level of the National Industrial Classification from 1983 to 2017 are investigated here. Using data from the Annual Survey of Industries obtained from the EPWRFITS, it identifies three sub-periods within the overall period: 1988–96, 1996–2006, and 2006–17. A shift-share decomposition is used to show that most of the decline in the labour to capital ratio can be explained by within-industry changes. Finally, industries are analysed with respect to their capacity to deliver job and wage growth.
Despite its weak performance in terms of job creation in recent years, the organised manufacture ... more Despite its weak performance in terms of job creation in recent years, the organised manufacture sector remains vital to employment policy. This paper investigates the aggregate trends in this sector, in employment, output, labour-capital ratio, as well as wage share and wage rates at the three-digit NIC level over a long period from 1983 to 2016 using the Annual Survey of Industries data. We show that three distinct sub-periods can be identified within the overall period. Further, using shift-share decomposition we show that most of the decline in the L/K ratio can be explained by within industry changes. Finally, we analyse industries with respect to their capacity to deliver job growth as well as wage growth.
The temperature-induced paralysis of comatose (comt) mutants of Drosophila is suggestive of a fun... more The temperature-induced paralysis of comatose (comt) mutants of Drosophila is suggestive of a function for N-ethylmaleimide-sensitive fusion factor (NSF) in the CNS. Mutations in the para gene encoding the ␣ subunit of the voltagegated sodium channel also result in a similar phenotype. We show that paralysis in comt flies is activity-dependent, and in the doubly mutant comt para flies comt-like paralysis does not set in until the effects of para are reversed by shifting to permissive temperatures. During recording from the thoracic flight muscles, we observed that comt flies showed a burst of spontaneous activity at restrictive temperature. This has been reported earlier as a unique characteristic of comt paralysis. The comt para double mutant showed this burst of activity not at restrictive but only on shifting back to permissive temperature. The unusual behavior and electrophysiology of the doubly mutant flies reported here indicates a role for NSF in synaptic vesicle cycling.
Historical experience suggests that a sustained rise in per capita incomes and improvement in emp... more Historical experience suggests that a sustained rise in per capita incomes and improvement in employment conditions is not attainable without a structural transformation that moves surplus labour from agriculture and other informal economic activities to higher productivity activities in the non-farm economy. In this paper, I analyse India's performance from a crosscountry comparative perspective, estimating the growth semi-elasticity of structural change. Using a crosscountry panel regression, I estimate the effectiveness of growth in moving workers away from agricultural and informal activities as compared to other developing countries at similar levels of per capita income. I show that the performance in pulling workers out of agriculture is as expected given its level and growth of GDP per capita, but the same is not true for pulling workers out of the informal sector. I also propose the following five indicators that need to be kept track of when evaluating the growth process: the growth elasticity of employment, the growth semi-elasticity of structural change, the growth of labour productivity in the subsistence sector, the share of the organised sector in total employment and the workforce participation rate. Comparing these indicators across periods, states, regions or countries, allows us to understand which sets of policies have worked better than others to effective improvements in employment conditions. And taken together the indicators allow us to set structural change targets as well as to say whether the current pattern of growth is going to be sufficient to meet those targets. Keywords India • Structural change • Employment • Crosscountry panel analysis This is a revised version of a Keynote paper presented at the 62nd ISLE Conference. I thank the conference participants as well as Anand Shrivastava, Zico Dasgupta and Ajit Ghose for helpful comments.
All information, ideas, views, opinions, estimates, advice, suggestions, recommendations (hereina... more All information, ideas, views, opinions, estimates, advice, suggestions, recommendations (hereinafter 'content') in this publication should not be understood as professional advice in any manner or interpreted as policies, objectives, opinions or suggestions of CII and Azim Premji University. Readers are advised to use their discretion and seek professional advice before taking any action or decision, based on the contents of this publication. The content in this publication has been obtained or derived from sources believed by CII and Azim Premji University to be reliable but CII and Azim Premji University do not represent this information to be accurate or complete. CII and Azim Premji University do not assume any responsibility and disclaim any liability for any loss, damages, caused due to any reason whatsoever, towards any person (natural or legal) who uses this publication. This publication cannot be sold for consideration, within or outside India, without express written permission of CII and Azim Premji University. Violation of this condition of sale will lead to criminal and civil prosecution.
The recently released data from the 2017-2018 Periodic Labour Force Survey have created a controv... more The recently released data from the 2017-2018 Periodic Labour Force Survey have created a controversy regarding the quantity of employment generated in the past few years in India. Estimates ranging from an absolute increase of 23 million to an absolute decline of 15.5 million have been published. In this paper we show that some of the variation in estimates can be explained by the way in which populations are projected based on Census 2011 data. We estimate the change in employment using the cohort-component method of population projection. We show that for men total employment rose but the increase fell far short of the increase in working age population. For women, employment fell. The decline is concentrated among women engaged in part-time or occasional work in agriculture and construction.
Over the past four decades, India has witnessed a paradoxical trend: average per capita calorie i... more Over the past four decades, India has witnessed a paradoxical trend: average per capita calorie intake has declined even as real per capita monthly expenditure has increased over time. Since cross sectional evidence suggests a robust positive relationship between the two variables, the trend emerges as a major puzzle. The main explanations that have been offered in the literature to address the puzzle are: rural impoverishment, relative price changes, decline in calorie needs, diversification of diets, a squeeze on the food budget due to rising expenditures on nonfood essentials, and decline in subsistence consumption (due to commercialization). Using a panel data set of 28 Indian states and the national capital territory of Delhi over four time periods (1993–94, 1999–00, 2004–05 and 2009–10), we test for these alternative explanations. Our results suggest that the puzzle can be explained by a combination of the following three factors: a food budget squeeze, declining subsistence c...
This paper contributes to the ongoing debate about economic inequality in India during the post-r... more This paper contributes to the ongoing debate about economic inequality in India during the post-reform period. We analyze consumption inequality through the hitherto neglected lens of nonfood expenditure. Using household level consumption expenditure data from the quinquennial "thick" rounds of the NSS, we show that inequality within food and non-food groups has declined, even as overall expenditure inequality has increased over time. We suggest that the rise in overall expenditure inequality is due to the increased weight in the household budget of non-food spending, which tends to be more unequal than food spending. We also show that inequality is very different across broad non-food items. Durables, education, healthcare, and consumer services show the most rapid increases in real expenditure, and also display the highest levels of inequality. Finally, we offer some possible mechanisms for this phenomenon and suggest policy measures to deal with this form of inequality.
There are two divergent perspectives on the impact of subcontracting on firms in the informal sec... more There are two divergent perspectives on the impact of subcontracting on firms in the informal sector. According to the benign view, formal sector firms prefer linkages with relatively modern firms in the informal sector, and subcontracting enables capital accumulation and technological improvement in the latter. According to the exploitation view, formal sector firms extract surplus from stagnant, asset-poor informal sector firms that use cheap family labour in home-based production. However, direct, firm-level evidence on the determinants and impact of subcontracting is thus far lacking in the literature. We apply a modified Heckman selection model to Indian National Sample Survey data on informal manufacturing enterprises (2005-06). We find that home-based, relatively asset-poor, and female-owned firms are more likely to be in a subcontracting relationship. Further, we perform selectivity-corrected Oaxaca-Blinder Decomposition and calculate treatment effects to show that subcontra...
This paper uses aggregate-level data, as well as case-studies, to trace out the evolution of some... more This paper uses aggregate-level data, as well as case-studies, to trace out the evolution of some key structural features of the Indian economy, relating both to the agricultural and the informal industrial sector. These aggregate trends are used to infer: (a) the dominant relations of production under which the vast majority of the Indian working people labour, and (b) the predominant ways in which the surplus labour of the direct producers is appropriated by the dominant classes. This summary account is meant to inform and link up with on-going attempts at radically restructuring Indian society.
The Covid-19 pandemic has created unprecedented disruptions in labour markets across the world in... more The Covid-19 pandemic has created unprecedented disruptions in labour markets across the world including loss of employment and decline in incomes. Using panel data from India, we investigate the differential impact of the shock on labour market outcomes for male and female workers. We find that, conditional on being in the workforce prior to the pandemic, women were seven times more likely to lose work during the nationwide lockdown, and conditional on losing work, eleven times more likely to not return to work subsequently, compared to men. Using logit regressions on a sample stratified by gender, we find that daily wage and young workers, whether men or women, were more likely to face job loss. Education shielded male workers from job loss, whereas highly educated female workers were more vulnerable to job loss. Marriage had contrasting effects for men and women, with married women less likely to return to work and married men more likely to return to work. Religion and gender intersect to exacerbate the disproportionate impact, with Muslim women more likely to not return to work, unlike Muslim men for whom we find religion having no significant impact. Finally, for those workers who did return to work, we find that a large share of men in the workforce moved to self-employment or daily wage work, in agriculture, trade or construction. For women, on the other hand, there is limited movement into alternate employment arrangements or industries. This suggests that typical 'fallback' options for employment do not exist for women. During such a shock, women are forced to exit the workforce whereas men negotiate across industries and employment arrangements.
The idea that service-sector industries, rather than manufacturing, can drive growth and structur... more The idea that service-sector industries, rather than manufacturing, can drive growth and structural change has caught the imagination of several scholars and policy-makers. For India, the Information Technology (IT) industry is often cited as an example of one such industry. However, empirical evidence for such claims is still weak. This article evaluates the Indian IT industry’s potential for growth. Most studies on the subject focus on the narrower segment of IT-Services in India while we take a holistic view and consider the potential of both software product and services, IT hardware, outsourced/offshored business processes, and activities involved in creation of intellectual property. We evaluate the present position and future prospects of the industry including India’s position in the technology value chain as well as future opportunities for the industry in the context of relocation of global manufacturing value chains and growth of the domestic market. We also discuss the likely impact of technology on jobs in the overall economy, direct and indirect job creation potential of the IT-BPM (Business Process Management) sector and the spill-over effects of technology as an enabler of new business models. Finally, we draw some lessons for effective industrial policy.
The creation of a mass-produced, mass-consumption lifestyle, which defines “economic development”... more The creation of a mass-produced, mass-consumption lifestyle, which defines “economic development”, has always implied the loot, displacement, exploitation and murder of a periphery for the development of the centre. The intense social conflict produced by this resourcehungry, capital-intensive mode of development is visible in the militarisation of Bastar. But very few political thinkers have made these costs the centrepiece of their critique of capitalism. Rammanohar Lohia, like Mahatma Gandhi, was one who did so. Lohia’s understanding of the centre-periphery relationship in the capitalist world system led him to struggle with the question of appropriate technology, one that accorded priority to equality over productivity, and encouraged decentralised governance and autonomous, connected villages.
The agricultural sector has performed worse than the other sectors over the years. The shares of ... more The agricultural sector has performed worse than the other sectors over the years. The shares of non-agricultural employment and output have increased, while 70% of agricultural households cannot meet their low consumption needs even after diversifi cation of sources of income. An analysis of budgetary p rovisions for the rural economy suggests that the government has not done enough to address some of these well-documented problems, and does not have the required vision to substantially increase rural employment opportunities. A fter the high economic drama of demonetisation and the resulting shocks to the economy, the 2017– 18 budget, the fourth one presented by Finance Minister Arun Jaitley, could be seen as an attempt to regain some credibility for the government and calm the general populace as well as international investors. It has been seen as a “routine” budget but also a “pro-growth” one, promising large increases in public invest ment in social and physical infrastructure...
The Indian manufacturing sector has not increased its share in output or employment along expecte... more The Indian manufacturing sector has not increased its share in output or employment along expected lines. The aggregate trends in this sector at the 3-digit level of the National Industrial Classification from 1983 to 2017 are investigated here. Using data from the Annual Survey of Industries obtained from the EPWRFITS, it identifies three sub-periods within the overall period: 1988–96, 1996–2006, and 2006–17. A shift-share decomposition is used to show that most of the decline in the labour to capital ratio can be explained by within-industry changes. Finally, industries are analysed with respect to their capacity to deliver job and wage growth.
Despite its weak performance in terms of job creation in recent years, the organised manufacture ... more Despite its weak performance in terms of job creation in recent years, the organised manufacture sector remains vital to employment policy. This paper investigates the aggregate trends in this sector, in employment, output, labour-capital ratio, as well as wage share and wage rates at the three-digit NIC level over a long period from 1983 to 2016 using the Annual Survey of Industries data. We show that three distinct sub-periods can be identified within the overall period. Further, using shift-share decomposition we show that most of the decline in the L/K ratio can be explained by within industry changes. Finally, we analyse industries with respect to their capacity to deliver job growth as well as wage growth.
The temperature-induced paralysis of comatose (comt) mutants of Drosophila is suggestive of a fun... more The temperature-induced paralysis of comatose (comt) mutants of Drosophila is suggestive of a function for N-ethylmaleimide-sensitive fusion factor (NSF) in the CNS. Mutations in the para gene encoding the ␣ subunit of the voltagegated sodium channel also result in a similar phenotype. We show that paralysis in comt flies is activity-dependent, and in the doubly mutant comt para flies comt-like paralysis does not set in until the effects of para are reversed by shifting to permissive temperatures. During recording from the thoracic flight muscles, we observed that comt flies showed a burst of spontaneous activity at restrictive temperature. This has been reported earlier as a unique characteristic of comt paralysis. The comt para double mutant showed this burst of activity not at restrictive but only on shifting back to permissive temperature. The unusual behavior and electrophysiology of the doubly mutant flies reported here indicates a role for NSF in synaptic vesicle cycling.
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