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Fall in employment disturbing, says Planning Commission

Sudhanshu Ranade

Chennai , Feb. 6

THERE have been fears ever since the reforms were launched in 1991. But these have always been countered by the argument that the dramatic increase in growth would more than make up for the displacement of labour. The general consensus was that doubling growth from 3.5 to over 7 per cent each year would eventually make up for the displacement of labour because of downsizing and the demise of uncompetitive lines of production.

But it now turns out that this view was mistaken. Over the latest two years, for which data is available, employment in both the public and private sectors actually fell. The Planning Commission's mid-term appraisal (MTA) of the Tenth Plan did not quantify this decline.

However, it is stated in the overview and priority areas for action that "the employment situation in the economy presents a serious problem."

According to MTA calculations based on sectoral growth rates and estimated employment elasticities, "the unemployment rate for the economy as a whole, based on the current daily status of employment, would have increased from 8.87 per cent in 2001-02 to 9.11 per cent in 2004-05."

"The data on employment in the organised sector presents an even more disturbing picture, showing a decline in absolute employment between 2001 and 2003 in both the public and private sectors."

Since the Commission itself admits that there was a "disturbing" increase in unemployment in the economy, it is not clear how it was able to conclude by pointing to the "possibility" that "employment in the unorganised sector may have increased in response to growth."

The MTA's estimates of employment are not corroborated by declines in per capita expenditure of the poorer sections, either in urban or in rural areas. According to the National Sample Survey's figures, the proportion of non-food expenditure in total expenditure of low income groups seems to have been increasing in recent years; right down to the first half of 2004, the results for which have recently become available.

Whether or not this undermines MTA's pessimistic conclusions depends on the extent to which rapidly increasing farm loan disbursals are being used to directly augment consumption expenditure in rural areas.

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