e Economic Outlook Employment to grow by 1.1% in 2023-24 (%) 10 91 8 72 68 6s 6 57 4 39 38 2 44 07 10 ° 3 43 4 Growth rates 61 [employment 53 [Bi Rea cop $8 2017-18 201819 2019-20 2020-21 2021-22 2022-23 2023-24 Year Centre for Monitoring Indian Economy Pvt. Ltd., 22 Aug 2023, The employment-growth tango by Natasa Somaya k ‘The general understanding based on economic theories is that employment grows in tandem with economic growth, When an economy expands, it s expected to further job creation and reduce unemployment. This phenomenon has been observed in India since 2019-20, barring 2020-21, with both real GDP and employment recording positive growth. ‘The annual growth rates, however, are quite volatile, ‘A.useful measure to capture this relation between employment and economic growth is employment elasticity Employment elasticity is the percentage change in employment associated with a one percentage point change in ‘economic growth. Itis indicative of an economy's ability to generate employment opportunities as a per cent of its {gross domestie product (GDP) growth, In other words, it provides a way of capturing the employment intensity of growth, Employment elasticity in India was in the negative in 2017-18 and 2018-19. These years witnessed an expansion in the economy while employment contracted. Real GDP grew by a healthy 6.8 per cent and 6.5 per cent in the two years, respectively. Total employment in the country fell by 0.3 per cent, from 412.7 million in 2016-17 to 411.4 milion in 2017-18. It slipped further to 406.1 million in 2018-19. This is a substantial drop of almost 1.3 per cent. Between 2016-17 and 2018-19, there was a clear movement of labour from agriculture and industry to the services ‘sector. Employment in industry fell by close to 18.5 milion in this period, witha large fall of 10 million jobs in 2017-18 alone. The number of people employed in the agricultural sector dropped by almost 4 million in 2017-18 and further by around a milion in 2018-19. A bulk of the jobs lost in industry and agriculture was regained in the services sector. This sector added over 13 milion jobs in 2017-18 and 4.1 million jobs in 2018-19. Correspondingly, industry witnessed a 5-6 per cent growth in gross value added (GVA) in the years 2017-18 and 2018 19, Owing to the drastic fallin employment in industry in these years, employment elasticity stood at around -1.4, This ‘suggests a high productivity growth in the sector, relative to employment growth, as output per worker increased. 42The services sector, on the other hand, displayed labour intensive growth, The employment elasticity in this sector in 2017-18 was at a high of 1.52. This implies that a one percentage point growth in value added by services was associated with a 1.5 per cent increase in jobs added in services. In the pandemic year of 2020-21, there was a massive fallin employment in India, of 21.7 million, This corresponds to 5.3 per cent decline in employment. The fallin real GOP was even higher, at 5.8 per cent. The hardest hit sector in. terms of employment was industry. This sector witnessed a close to 14 per cent decline in jobs during the pandemic. ‘The GVA by industry, interestingly fell by a much smaller 0.9 per cent, ‘The huge fallin employment did not create a big dent in the value added by the sector. The remaining workers were able to keep the output buoyant to a large extent. As a result, labour productivity improved in industry during the pandemic year, with output per worker rising. This trend in industry was mainly driven by the manufacturing sector. In the services sector, on the contrary, drop in employment had a much more pronounced impact on value added by the sector. Employment in services fell by 6.7 per cent in 2020-21, and the real GVA by the sector contracted by 8.2 per cent, Fast forward to 2022-23, the employment elasticity stood at a timid 0.14. While real GOP grew by 7.2 per cent in the year, the creation of jobs was relatively lacking. Employment in 2022-23 grew by around one per cent, with the ‘addition of close to 4 million jobs. Industry added around 11.2 million jobs, while services added around 3 million jobs Inthe year. Employment in agriculture fell by 10.3 milion, ‘The huge increase in employment in industry is also reflected in the employment elasticity of the sector. Industry GVA ‘grew by 4.4 per cent in 2022-23, accompanied by a 11.4 per cent growth in employment in the sector. Within industry, the manufacturing sector, followed by mining, has proven to be the biggest absorber of labour. A one percentage point increase in the GVA by manufacturing industries was associated with a 9.7 per cent increase in employment in this industry. For mining, the employment elasticity was 2.8 in 2022-23. In comparison, the recovery in the services sector was less labour intensive. A 9.5 per cent GVA growth in services was accompanied by a 2.1 per cent increase in jobs. This sector recorded positive employment elasticities since 2017-18, owing to positive growth in GVA and employment in all years barring 2020-21 In 2023-24, CMIE expects India’s real GDP to grow by 5.7 per cent. The average employment elasticity has been ‘around 0.2 per cent in the period between 2017-18 and 2022-23. Accordingly, the employment growth is expected to be around 1.1 per cent. At this level of employment growth, the size of India's workforce may inch up to 410.3 million in 2023-24, Growth in employment and real GDP (%) moe a 3 22