Jobless Growth In Gujarat: Some Statistics

By Sanjeev Kumar

21 April, 2014
Countercurrents.org

One can imagine the concern of a State for providing employment for her citizen, were there has not been a single Public Service Commission exam held in last 10 years. NSSO’s data shows that the growth rate of employment in Gujarat during 1993-94 to 2004-05 was 2.43% which reduced to near zero per cent during 2005 to 2010. The stagnant employment growth in the last five years in Gujarat is better than negative employment growth rate at the national level but lags far behind other equally well off states such as Maharashtra and Tamil Nadu. Unemployment rate in Gujarat in 2009-10 was 9.9% while the national figure was 9.3% and 5.8% for Tamil Nadu, 5.9 for Maharashtra and 8.6 for Haryana.1 It rose to 10% in 2011-12 for Gujarat.2

The increase in number of factory during 2000-01 to 2009-10 was 10.54% while in employment it was only 54% while increase in net value added was 434.10%.3 Gujarat account, 14% of India’s manufacturing gross value added, 18.6% of fixed capital, 10% of total number of factories but only 9% of employment generated in India.4 Gujarat’s contribution to India’s total employment generation is 10.14% but her contribution to value of output is 17.22% while only 12.55% in net value added. This means Gujarat gives priority to increase in production over increase in net value added while priority to employment generation has been least. Question could also be asked, if Gujarat’s output is 17.22% but she adds only 12.55% value to India’s wealth, where does other 4.7% (17.22 - 12.55 %) go? Of course, it goes to capitalist in form of subsidies.5 However, it was not always the case. In 2002-04 the value of output was 16.07% while the Net Value Added was 19.77% of the Indian total.6 This change in priority cannot be considered as the good indication for an welfare economy.

The CAG’s report on “Performance Audit of MGNREGA” indicates poor performance of Gujarat. In terms of its benefits to the female worker Gujarat’s performance is 50% lesser then national average. In terms of awareness among the worker about the number of days they worked or entitlement they have, the performance of Gujarat is worst then even Odisha and Bihar.7

Gujarat ranks first in terms of issuing direct industrial license but ranks seventh in employment generation; Tamil Nadu ranks seventh in investment in IEMs (Industrial Entrepreneur Memorandum) but ranks first in its share of creating employment from this investment. During 2006-10, Gujarat signed MoU worth Rs 5.35 lakh crore with potential of 6.47 lakh jobs. But Maharashtra and Tamil Nadu with Rs 4.20 lakh crore and Rs 1.63 lakh crore worth MoUs, expected to create about 8.63 lakh and 13.09 lakh jobs. 8

The above figures make it clear that Gujarat is producing employment lesser then her real potential. It has been so despite the fact that she has more attraction for the investors. The explanation for this unnatural relation between investments without employment can be found in Gujarat Government policy of encouragement to capital intensive sector of economy and capital intensive production system. Nearly 50% of net employment generated in Gujarat in the last two decades has come from service sector and followed by 30% from agriculture but Government is ignoring these sectors continuously. During 1993-94 to 2009-10, the employment in agriculture increased by 76% in rural Gujarat while in case of Manufacturing it was reduced by 17% in rural and increased by 28% in urban Gujarat. The highest growth rate of employment at national level has been seen in construction sector but in case of Gujarat it is agriculture.9 In 2004-04, 49.9% of employment was in primary sector which increased to 54.4% in 2008-09. This means dependence of people of Gujarat on agriculture and its allied sector has been increasing while the contribution of secondary and tertiary sector is decreasing.10

The contribution of Gujarat’s manufacturing sector in generating employment remained stagnant while share of Gujarat’s manufacturing sector in India’s total manufacturing increased rapidly. On the other hand, Tamil Nadu did well in this aspect with a balanced growth of both employment and production. In second half of 2000s employment generation in manufacturing sector of Gujarat became negative with -2.6%.11 In addition to poor gains in employment, the manufacturing sector in the State is also characterised by slow growth in wages (1.5 per cent in the decade of 2000 when the all-India wages grew by 3.7 per cent), increasing use of contract workers (from 19 to 34 per cent between 2001 and 2008), and overall reduced position of workers (with the lowest share of wages in Gross Value added in the decade of 2000s in comparison to Haryana, Maharashtra and Tamil Nadu).

The share of Industry in GDP increased in Gujarat during 2004-05 to 2009-10 but its contribution to employment generation decreased.12 During 2001-2008 the employment growth in Mining and Quarrying sector was -2.4%; in construction it was -2.8%; and in Transport, Storage and Communication it was -2.9%.13 The GDP growth rate of agriculture during 2004-09 was 3.19 while growth in employment in this sector was -1.59%.

Textile has always been considered as the most employment generating industry but recent Gujarat government consistently ignored this sector. In 2010 the investment in textile industry is only 1.54% of the total investment while it was around 10% till late 1990s. On the other hand investment in infrastructure sector constitutes 37.59% of total investment while its share in employment generation is only 21%.14 Thus Gujarat shifted from employment intensive model of development to capital intensive model of development.

In 2009-10, the capital investment per worker in Gujarat was around Rs 26 Lakhs, which was way above the all India average of Rs 14.76 Lakh.15 The share of wages in the Net Value Added in 2001-02 was 14.96% which came down to 5.71% in 2010-11.16 Work participation rate in Gujarat for the year 2009-10, as per the labour bureau report was 48.9% which is the sixth highest in the country. In 2011-12 it slipped to 7th position. In terms of LFPR also Gujarat is on 7th position.17 The growth rate of labour productivity in Gujarat during 1980s was 14.45% which became 7.96% in 2000s. But in case of India it shots up from 7.77% to 8.52, and in Maharashtra it increased from 11% to 13%.18 Gujarat has experienced a very low employment elasticity of output and lowest shares of wages in GVA in India, one of the highest use of contract workers in the organised manufacturing in the country and rising trends of casualization of the workforce. Contract workers in the organized manufacturing sector currently constitute around 37 per cent of the total workers, up from 27 per cent a decade ago. This means that what Narendra Modi did is to shift the labourers from unorganised sectors to organised sectors by destroying unorganised sector and small scale industries which is also called informalisation of formal sector.

In Gujarat SSI (small Scale Industries) units has increased from 29% in 1985-86 to 90 percent in 1997-98.19 In last ten years 60,000 small scale industries have been closed down.20 The total number of Residence cum other use of census houses in Gujarat decreased from 542930 in 2001 to 416806 in 2011. These kind of Residence-cum-other use of census house found mostly in Rural areas for the purpose of small scale industry.21 The decrease in this kind of houses simply mean that Gujarat state is discouraging small scale rural industry. Similarly in 2002-03 total number of members of agricultural societies were 7901000 which came down to 7119000 in 2010-11. Gujarat government is providing subsidy of maximum 3.33% for self employment in industry and that also, if your unit’s cost is more than 5 lakh (Shree Vajpayee Bankable Scheme).22

The condition of wage worker is also not good in Gujarat. The growth rate of wage in Gujarat during 1990s was 3.70% which became 1.48% during 2000s while national figure increased from 1.54% to 3.78%.23 In terms of annual wages per worker Gujarat stands at 10th position.24 According to 68th round (2011-12) of NSSO report, daily wages for urban casual labour in Gujarat is Rs 144.52, in compare to Rs 170.10 of national average. In terms of wages to rural male casual workers the rank of Gujarat slipped from 9th in 1999-00 to 14th in 2007-08. Very similar is the case with urban female during the same period. In case of regular worker also Gujarat ranks 17th in rural male worker, 18th in urban male, 13th in urban female and 9th in rural female worker.25

There is a sharp regional difference in employment outcomes with rural Gujarat experiencing negative growth rates in the last five years. Only 6% regular employment in Gujarat went to rural areas in compare to 12 % at national average. Rural worker are being pushed towards construction and agriculture while keeping them away from manufacturing and services. During 2004-05 to 2009-10 the employment Growth Rate in rural area in agriculture was -1.7%; in Manufacturing it was -7.9%, in services it was -2.3% while 6.1% in Construction.26

This one sided policy of Gujarat government to favour capital intensive business and corporation can also be seen in decreasing amount of capital receipt of state. The capital receipt of Gujarat decreased from 24624 crore in 2002 to 17055 crore in 2010-11. This is show despite the fact that total receipt increased to 69419.25 crore in 2010-11 from 42499.52 crore in 2002-03 and total expenditure increased from 42192.51 crore to 71629.08 crore. This mounting difference between capital receipt and total receipt is largely due to increasing spending of state on paying interest on debt. In 2002-03 Gujarat was paying 4948.76 crore as interest which increased to 9627.32 crore in 2010-11. 27

One major reason for large units favouring capital- intensive technology is that capital is made cheap through large monetary and fiscal incentives and subsides offered to them by governments. The rates of incentives and subsidies in Gujarat increase with the size of the units. The incentives to the large and capital intensive corporate unites add up to 40% of the total public expenditure while incentives to small and medium units constitute a mere 2.27% of the total incentives given to industries. Though there are high subsidies on capital, land and water, there are no subsidies on labour or on employment.28

(This is part of a report on Gujarat’s model of development, written by me for Jagriti Natya Manch. I am the script writer, director and founding member of the Manch. This theatre group consists of students from JNU, DU and IIMC 

Email: Subaltern1987@gmail.com)

1[1] Atul Sood, Poverty amidst prosperity: Essays on the Trajectory of Development in Gujarat,2012, Aakar Publication, p. 269, table 9.1

2[1] http://www.thehindu.com/opinion/lead/poverty-amid-prosperity/article4147478.ece

3[1] Socio-Economic Review, Gujarat State 2012-13, p. XIII and Socio-Economic Review, Gujarat State 2011-12 p XXIX

4[1] Sood, 2012, p. 36

5[1] Socio-Economic Review, Gujarat State 2012-13, p. 25

6[1]Socio-Economic Review, Gujarat State 2005-06, p. XIV

7[1]http://www.icisa.cag.gov.in/performance%20audit/performance%20audit%20reports/performance%20audit%20%20report%
20on%20national%20rural%20employment%20guarantee%20act/introduction.pdf (http://www.accountabilityindia.in/accountabilityblog/2640-highlights-cag-performance-audit-mgnrega).

8[1] Annual Survey of Industries (factory sector) 2008-09, Vol. 1, GOI, pp. S-2-1, 11-12 and 20 (http://mospi.nic.in/Mospi_New/upload/asi/Annual_Survey_of_Industries_Vol_I_2009-10.pdf)

9[1] Sood, 2012, p. 256, table 8.2

10[1] NSSO Report and Socio Eco Review of Gujarat

11[1] Sood, 2012, p. 241, table 6.1

12[1] Ibid, 2012, p. 241, table 6.1

13[1] Socio Economic Survey 2008-09, Govt of Gujarat,

14[1] Ibid, 2012, p. 221, table 3.4

15[1] Santosh Kumar Das, ‘Sources and Patterns of Private Investment in Gujarat’, edt. By Atul Sood, 2012, p. 59

16[1] Indira Hirway & Neha Shah, ‘Labour and Employment in Gujarat’ Economic & Political Weekly, November 5, 2011 Vol. xlvI No. 44 & 45, p. 63; and http://mail.mospi.gov.in/index.php/catalog/142/download/1622

17[1] Atul Sood, 2012, pp. 35-36

18[1] Ibid, p243, Table 6.5

19[1] Govt of Gujarat, Industries in Gujarat (Some Statistics), Industries Commissionerate, Gandhinagar, 1992, p-16

20[1]Director, Department of Economics and Statistics, Government of Gujarat.2011-12

21[1] Socio-Economic Review, Gujarat State 2012-13, p 89; Socio-Economic Review, Gujarat State 2005-06, pp S-92-93

22[1] Socio-Economic Review, Gujarat State 2012-13, p 28

23[1] Atul Sood, 2012, p. 243, Table 6.6

24[1]Atri Mukherjee, Monsoon 2011, p 118, table 5, http://rbidocs.rbi.org.in/rdocs/Content/PDFs/OCRIF261012_SN1.pdf)

25[1] NSSO 1999-00 and 2007-08

26[1] Atul Sood, 2012, p 257, Table 8.4 & 8.13(NSSO Report: 50th, 61st and 66th round,)

27[1] Socio-Economic Review, Gujarat State 2005-06 & Socio-Economic Review, Gujarat State, 2012-13

28[1] Indira Hirway, ‘Partial View of Outcome of Reforms and Gujarat Model’, EPW, October 26, 2013, vol xlviii no 43