Data last week showed that for the first time the proportion of people employed in agriculture fell below 50%
Every so often when someone gets down to debating India’s economic potential or profile its workforce, we get to hear this standard cliché: “More than 70% of our workforce subsists on agriculture, which accounts for less than 15% of the country’s gross domestic product.”
Beginning last Thursday, you have had to stop using this cliché, or at least rephrase it. The data from the 68th round of survey by the National Sample Survey Office (NSSO), released last week, shows, among other things, that for the first time the proportion of people employed in agriculture (in case the purists baulk, it broadly corresponds to what is officially defined as the primary sector) fell below 50%.
There are many takeaways from this for sure. But the most significant is the reiteration of the maturing of the Indian economy with an estimated gross domestic product (GDP) of $1.8 trillion. The direction is clearly being established, while we may quibble about the pace of change. As an economy grows, it forces a sectoral shift away from agriculture towards manufacturing and services. This had already taken place in terms of the sectoral contribution of GDP, but was seemingly sticky with respect to employment.
It is indeed a structural shift that has been in the making through the previous decade: from about one in four in 1999-2000, the proportion of people employed in agriculture dropped to less than one in two by 2011-12. The trend has, however, witnessed a clear acceleration in the latter half of the decade. What has been the loss of the agriculture sector has been the gain of manufacturing (again, a broad correspondence to the secondary sector) and services (tertiary) sector. In terms of share of GDP, manufacturing accounts for little over 25% and services just under 60%.
Just as agriculture was absorbing a workforce disproportionate to its contribution to GDP, we see almost a similar trend, but diametrically opposite, playing out for services. While accounting for a little under two-thirds of GDP, it accounts for just a little over one-quarter of the total employment in the economy. One possibility could be that this segment is very productive.
In the case of manufacturing, its share in GDP is nearly the same as its share in employment. The good news is that it is rapidly reducing the gap with the services sector in terms of employment share. While it was nearly six percentage points in 1999-2000, it shrunk to about three percentage points by the turn of this decade.
Now that it is established that employment in agriculture is shrinking, is the quality of India’s workforce good enough to sustain this trend? Because one of the key issues challenging the country is the skill deficit, as a result of which the mid-rung in organizations—a critical segment—is almost missing.
And even those seemingly equipped have found to be wanting in the desired skills. Something that has forced India’s software giants such as Tata Consultancy Services Ltd and Infosys Ltd to set up mini-universities to retrain the engineering graduates to make them job ready. It is evident that the country’s education regime has been behind the curve. Vocational studies is something that is just gaining traction.
In the case of those exiting the primary sector, the lack of skills—of the variety needed to move up the value-added chain in either manufacturing or services sectors—is likely to be more acute.
It is clear then that there has been a structural shift that has taken place in the employment profile of India. The bad news is that the country seems ill-equipped to tap into it, just as it has been found wanting in its ability to harvest the favourable demographic profile.
