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Slower movement in rural Gujarat workforce migration to industry, services

By Rajiv Shah 
Latest National Sample Survey Organization (NSSO) data on India’s employment trend has suggested that there is a relatively slow movement of Gujarat’s workforce from the agricultural sector to the non-agricultural sectors than the rest of India – the secondary sector (which includes manufacturing, mining and construction; and the tertiary sector, which include wholesale and retail trade, repair work, transportation, information and communication, real state, finance and insurance, education and health, and professional services. While any movement from agriculture to industry and services is regarded by economists as a “natural” corollary to development of a vibrant economy, the slow movement, if experts are to be believed, would suggest two simultaneous trends – Gujarat’s higher capital intensive industrialization, on one hand, and failure to develop such sectors like information and communication technology as part of development of services, on the other.
The NSSO figures show that in 2005-06, 55.9 per cent of the state’s able-bodied population was engaged in agriculture and related activities, including forestry and fishing. The 2011-12 NSSO survey suggests this percentage came down to 48.8 per cent – which means that the number of persons engaged in the sector went down by 7.1 per cent in six years. This is quite low compared to 18 of 20 major Indian states, including Andhra Pradesh (7.6 per cent), Assam (7.9 per cent), Bihar (8.2 per cent), Chhattisgarh 7.4 per cent), Haryana (7.6 per pent), Himachal Pradesh (8.8 per cent), J&K (9.2 per cent), Karnataka (12.3 per cent), Kerala (10.1 per cent), Maharashtra (8.3 per cent), Madhya Pradesh (12.7 per cent), Odisha (9.3 per cent), Punjab (8.5 per cent), Rajasthan (11.5 per cent), Tamil Nadu (9.1 per cent), Uttarakhand (15 per cent), and Uttar Pradesh (9.1 per cent). The all-India average of those engaged in agriculture was two per cent higher than Gujarat’s – 9.1 per cent.
The relatively low shift of the workforce from agriculture to the non-agricultural sector has happened alongside a slow rise in the percentage of people engaged in industry and service sectors compared to most states of India. Thus, as against the national average of 5.5 per cent rise in people engaged in the industrial sector in the country as a whole, Gujarat experienced a rise of 4.8 per cent. Punjab, which is considered the wheat bowl of the country, experienced the highest growth in the percentage of people engaged in the industrial sector, 9.4 per cent, during the period in question, 2005-06 to 2011-12. The situation was not found to be very different in the shift taking place towards the tertiary sector. It was a mere 2.3 per cent in Gujarat, compared to the all-India average of 3.7 per cent. Here, Karnataka experienced the highest growth of 9.9 per cent.
If senior economist Prof Indira Hirway, who has studied the trend over the last several decades, is to be believed, the failure to experience a higher shift towards industry (secondary) and service (tertiary) sectors suggests that Gujarat has failed to provide viable employment to its population outside agriculture as fast as the country as a whole. Thus, according to her calculation, Gujarat may be ranking No 1 in the increasing capital intensity of the industrial sector, ranking No 1 among the 20 major Indian states in terms of fixed capital investment, second in terms of total invested capital and fourth in terms of total number of factories. Yet, it ranked No 18 in labour-capital ratio. The scholar finds that, especially, the organized sector of the industry has failed to get a higher employment.
Quoting Annual Survey of industry figures, she says, “The employment generated per crore of capital investment as well as the employment generated per crore of output in the industrial sector has consistently fallen. In the factory sector, where fixed capital investment grew by 7.7% annually during 1998-2008 and the total invested capital by 9.1%, the number of workers increased only by 2.8%”. This goes to suggest that people shifting from agriculture do not find employment in industry, particularly in the organized industrial sector, and they instead seek employment in the unorganized sector, particularly small and marginal industrial sector, apart from construction and mining. In the latter sectors, wages are low. To quote Prof Hirway, “Gujarat is ranked 15 in the share of wages in the net value added. Kerala is at the top with 22.47% share of wages, followed by West Bengal (21.89%), Tamil Nadu (16.37%) and Punjab (15.27%)…”
In fact, a perusal into the Gujarat government document, “Development Programme” over the last several years suggests that there is stagnation in the number of persons employed in the organized manufacturing sector. The “Development Programme” suggests that between June 2011 and June 2012, there was, in fact, a fall in the total number of employed persons in the organized manufacturing sector by minus ( — ) 0.68 per cent. As of June 2012, there were in all 6,43,630 persons employed in the organized manufacturing sector, down from 6,48,196 a year earlier. The deceleration took place after 3.15 per cent rise in jobs in the sector in the correspondent period of 2010-11. In 2009-10, there was a rise of jobs by 8.85 per cent, of 2.02 per cent in 2008-09, and of 16.86 per cent in 2007-2008.
Fall in workforce in agriculture between 2005-06 and 2011-12 (per 1000)
A major reason for failure to attract a higher percentage of workers towards industry and service sectors than the rest of India is said to be low wages in Gujarat’s urban areas. Thus, the NSSO survey shows that as against the all-India average per day earning of salaried workers in urban areas of Rs 449.65 per day, the average payment in Gujarat was found to be just Rs 319.71. One can compare this with so-called Bimaru states – in Bihar, the average regular wage per day was Rs 412.24, in Chhattisgarh Rs 322.84, in Assam Rs 606.96, in Madhya Pradesh Rs 436.12, in Odisha 431.66, in Rajasthan Rs 416.54, and in Uttar Pradesh Rs 482.87. Regular wages and salaries in “comparable states” are — Maharashtra Rs 485.72, Andhra Pradesh Rs 395.35, Karnataka Rs 486.92, Haryana Rs 776.85, Punjab Rs 361.75, and Tamil Nadu Rs 389.81. As for casual workers, their average casual wage per day in Gujarat was Rs 144.52, which is worse than all states but four, Chhattisgarh (Rs 106.16), Madhya Pradesh (Rs 125.89), Uttar Pradesh (Rs 143.20) and West Bengal (Rs 128.24.)
The trend of the contribution of primary, secondary and tertiary sectors to Gujarat’s economy suggests that though there was a shift of contribution made by the primary sector to the secondary and tertiary sectors, it was not remarkable. In 2005-06, the primary sector contributed 19.9 per cent to total gross state domestic product (GSDP) of Gujarat, which went down to 14.7 per cent in 2011-12. The secondary and tertiary sectors did not witness a commensurate sharp rise. The secondary sector in 2005-06 contributed 36.5 per cent of the GSDP, in 2011-12 this went up to 39.3 per cent. As for the tertiary sector, its contribution to the GSDP which was 43.5 per cent in 2005-06, went up to 46 per cent. Interestingly, yearly figures suggest fluctuations – the contribution of the secondary sector, instead of going up, went down from 29.4 per cent in 2010-11 to 28.2. Scholars who have been studying the trend have witnessed a similar fluctuation earlier, too.
In a recent paper, “Performance of Gujarat Economy: An Analysis of Growth and Instability”, Anita Arya and Niti Mehta of the Sardar Patel Institute of Economic and Social Research, Ahmedabad, have said that in Gujarat growth in primary as well as secondary sector is highly fluctuating. “This can be seen from sectoral shares. While the long term trend in primary sector is of decline (42% in 1960-61 to 20% in 2007-08), it is marked by fluctuations. In terms of income agriculture is no more a dominant sector in Gujarat. After 1986-87, manufacturing replaced agriculture as the single largest activity contributing to SDP. The share of secondary sector up to mid 80s remained around 27%, thereafter there were large fluctuations. After 1999-2000, the share has been maintained between 35-36%. The tertiary sector on the other hand, shows a smooth, long term upward trend and depicts least fluctuations in its share in Net State Domestic Product (NSDP).”
Explaining why this has happened, the scholars say, “The fluctuations in trend of Gujarat’s income is the result of fluctuations in some major economic sectors and possibly also a reflection of the changing structure of the economy when new activities have been unable to offset impact of declining economic activities.” They adds, “The behaviour of the various components of the SDP during the period 1981 to 2008, shows that nearly all sectors recorded ups and downs in growth. Agriculture sector had shown largest fluctuation in value added with no discernable upward trend… Unstable agriculture still affects around 52% of population in Gujarat and 77% of the working population in rural areas.”
Against the backdrop of claims that surface irrigation has succeeded in improving agricultural productivity, the scholars underline, “Agriculture in Gujarat is affected by erratic and uneven rainfall that often leads to scarcity conditions, especially in Kutch and parts of Saurashtra. Land holdings in the state are becoming increasingly marginalized. Average size of operational land holding during 2005-06 was 2.2ha, with 86% of the total operational holdings being less than 4 hectares. Net sown area has been lost to fallow/wasteland and diverted to non-agriculture/urban uses. In the decade of 90s and early 2000s, cropping intensity too had taken a beating falling to 1.11%. By the end of 2010, the cropping intensity showed an appreciable increase to 1.16% on account of improvement in water availability.”

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