Overview Of Employment In India Reveals ‘Challenges Ahead’

The concept of employment in India is quite amorphous, given the fact that a large part of the workforce is in the unorganized sector where the definition gets fuzzy. The corporate sector provides some insights into employment trends though would be biased to the extent that such information is available for the medium to larger companies and hence, excludes the SME sector which is dominant in the employment space.

Yet, notwithstanding this limitation, a look at such trends is still illuminating as it reflects certain critical facets of employment in the corporate sector. Data presented in this study must be interpreted with caution as the sample size does determine to an extent the differing trends. Further, some of the industries classified here may not be representative given the data gaps. It is however believed by this research that these numbers are broadly indicative of the trends witnessed in the last two years.

An overview of Employment In India, by Care Ratings, analyzed for a period of five years provides a prelude to the issue of job creation by the corporate sector. The Care sample comprised 715 companies and in FY17 had an aggregate of 3.92 mn employees rising from 3.85 mn in FY13 (Table 1). This is a CAGR of just about half a percent, which is quite low. This, however, is not in consonance with GDP growth at the macro level, which grew by an increasing rate till FY16 before slowing down in FY17. This indicates that the organized corporate sector did not witness the growth in accordance with the GDP growth.

While considering Employment In India in the 1,473 companies for the past 3 years, the employment rose from 5.01 mn in FY15 to 5.18 mn in FY17- a growth of 2.25% in FY17 that was higher than the growth rate of 1.18% in FY16. Compared with the growth of a sample of 715 companies, employment growth of 1,473 companies was lower at 1.18% in FY16. However, in FY17, the aggregate employment growth of 1,473 companies outpaced the growth registered by 715 companies.

Despite, the employment growth has been much lower than the GDP growth and also indicated opposite growth trend in FY17 – increased employment growth and fall in GDP growth. This corroborates the fact that organized corporate sector growth was not aligned to the GDP growth.

Sectoral Distribution of Employment in India

• Sectoral bifurcation of employment suggests that banks were seen to employ the highest number of employees in FY17 (21.3%).

• Top 5 sectors with the highest number of employment are banks, IT, mining, healthcare, and textiles, collectively accounting for nearly 60% of the total employment.

• 11 sectors having more than 1 lakh employees account for nearly 80% of the total employment.

• Out of 31 sectors, 13 sectors registered increase in employment in terms of growth such as retailing (47.89%), healthcare (12.46%), plastic products (8.30%), IT (6.66%) and electricals (5.74%) in FY16 while in FY17, as many as 16 sectors recorded positive growth in the employment, the highest being in electricals (14.85%), finance (11.24%) and trading (6.53%).

• 10 sectors witnessed growth in employment in both the years FY16 and FY17 such as retail, textile, healthcare, banks, electricals, IT, logistics, plastic products, chemicals and non-ferrous metal products.

• Conversely, 12 sectors recorded negative growth in employment in FY16 as well as in FY17.

• FMCG, media & entertainment and paper exhibited fall in employment in FY17 after increasing in FY16.

• On the other hand, crude oil, infrastructure, trading, automobile & ancillaries, finance and hospitality, which had recorded negative growth in employment in FY16, witnessed growth in FY17.

If we step-wise exclude sectors with the highest employment, the aggregate growth in the employment turns negative. In FY16, the employment growth is dragged down by a decline in employment in automobile and ancillaries, mining, power, and finance while in FY17, the negative employment growth has emanated from a reduction in employment, especially in the mining, telecom, and power sector.

In the recent years, employment in the corporate sector has grown, though, the growth has been quite lackluster given the ever growing working population in India. In addition, the employment growth has not kept pace with the economic growth of the country that is growing at an average growth rate of 7%. While the services sector has extended some relief with regard to job creation, manufacturing has failed to create jobs in recent times. Banks, IT, retailing, and healthcare continue to provide increased job opportunities while sectors like mining, power, telecom have witnessed a reduction in the employees.

“It, thus, becomes a major cause of concern for a developing country like India and calls for some proactive measures. The
recent initiative by the government to push infrastructure in the country is likely to pave way for creation of jobs that might change the scenario going forward. Further, as shown in the study, growth per se cannot foster employment generation and has to be backed by strong investment and new business opportunities” concludes Care Ratings.