Transcript Structural change and employment patterns in India

Jayati Ghosh
Presentation for workshop on
“Neoliberalism in Latin America and Asia: Who gains? Who loses?:
Flacso, Mexico City, 26 November 2012
GDP growth rates in India
1951-52 to 1964-65
1964-65 to 1974-75
1974-75 to 1984-85
1984-85 to 1994-95
1994-95 to 2004-05
2004-05 to 2009-10
4.0
3.2
4.1
5.3
6.0
8.6
The absence of progressive structural change is a
fundamental underlying problem of Indian economic
growth
 The inability to shift most workers out of low productivity
activities has persisted through “planned” period as well
as period of neoliberal economic reform.
 Dramatic increase in aggregate income growth rates and
organised sector profits has not been matched by
increases in organised employment or even in total
employment generation.
 Worsening income and asset distribution are not just byproducts but even necessary features of the growth
process.
South Korea: “Kuznets-style” structural change
Structural change in South Korea
70.00
20000
18000
60.00
16000
50.00
Primary share of GDP
(right scale)
14000
Primary share of
employment
12000
40.00
10000
Manufacturing share of
GDP
30.00
8000
Manufacturing share of
employment
6000
20.00
GDP per capita (1990 $)
4000
10.00
2000
0.00
0
1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Mexico: Distorted Industrialisation
Structural change in Mexico
70
8000
7000
60
6000
Primary share of GDP
5000
Primary share of
employment
50
40
4000
Manufacturing share of
GDP
30
3000
Manufacturing share of
employment
20
2000
GDP per capita (1990 $)
10
1000
2004
2002
2000
1998
1996
1994
1992
1990
1988
1984
1986
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
1958
1956
1954
1952
0
1950
0
India: Inadequate diversification
Structural Change in India
80.00
3000
Primary share of GDP
70.00
2500
60.00
Primary share of
employment
2000
50.00
40.00
1500
Manufacturing share of
GDP
30.00
1000
Manufacturing share of
employment
20.00
500
10.00
0.00
GDP per capita (1990 $)
0
Services as Kaldorian sector?
 Dasgupta and Singh: In India this is not “pathological
deindustrialisation” , since services form Kaldorian engine of
growth, raising productivity because of the rapid technological
progress in the “new services”, e.g. IT industry.
 Chandrasekhar: Services growth reflects new dualism in India.
Jobless growth in manufacturing. IT and IT-enabled Services
are based on export of lower end software and IT-enabled
services facilitated by the availability of cheap skilled labour.
This is technology-aided extension of the earlier waves of
migration by service-providers (e.g. doctors, nurses, bluecollar workers, etc.). Total employment still less than 1% of
Indian workforce. This cannot play Kaldorian role.
Rates of growth of total employment
(15+ group, annual compound rates %)
5.00
4.00
4.00
3.14
3.00
2.66
2.49
2.21
1.92
2.00
1.00
1.70
0.83
1999-2000 to 2004-05
0.42
2004-05 to 2009-10
0.00
Total
Male
Female
-1.00
-2.00
-3.00
-1.72
Rural
Urban
Rates of growth of non-agricultural employment
(15+ group, annual compound rates %)
7.00
6.00
5.00
5.76
4.65
4.42
4.00
1999-2000 to 2004-05
2.89
3.00
2004-05 to 2009-10
2.53
2.00
1.00
0.76
0.00
Total
Male
Female
Increase in no of workers 2004-05 to 2009-10 (usual principal
status in millions)
15.0
11.4
10.0
5.7
5.0
3.6
3.1
2.2
0.3
0.0
0.5
0.6
0.1
0.0
Rural male
Rural female
-1.0
-2.6
-5.0
Urban female-0.3
-1.3 -0.3
Agriculture
Manufacturin
g
Construction
-10.0
-15.0
-20.0
-20.2
-25.0
Urban male
Global financial integration was critical to India’s boom
 Internal and external liberalisation measures generated booms in




some domestic economic activities, as India became a favoured
destination for global financial investors.
Capital inflows (mainly portfolio investment and external
commercial borrowing) sparked a retail credit boom.
This combined with fiscal concessions to spur consumption among
the richest sections of the population. This combined with other
measures to provide incentives for large corporate investment.
“Corruption” about which there is current outcry was integral to this
process.
Rapid GDP growth, despite public spending on basic needs, poor
employment generation and persistent agrarian crisis that reduced
wage shares in national income and kept mass consumption
demand low.
Rise in profit shares in the economy and proliferation of financial
activities, even as real indicators (e.g. human development) remain
poor.
New forms of primitive accumulation drove boom
• Nature: Expropriation of peasantry from land,
•
•
•
•
•
privatisation of water and other natural resources, overextraction and degradation.
Petty production: Simultaneous destruction of viability (of
peasant cultivation) and creation of new petty producers
because of lack of employment generation.
Use of informal labour: Especially women, and in unpaid
and “underpaid” forms, which has subsidised “modern”
industry and services.
Use of social categories (gender, caste, religion) to
reinforce surplus extraction in accumulation process.
So increasing inequality was a necessary element of this.
Failure of “human development” is an indicator of this
continued reliance on inequality for accumulation.
2009-10
2008-09
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-2000
1998-99
1997-98
1996-97
1995-96
1994-95
1993-94
1992-93
1991-92
1990-91
1989-90
1988-89
1987-88
1986-87
1985-86
1984-85
1983-84
1982-83
1981-82
1980-81
Compensation of employees in Net Domestic Product
85.0
75.0
65.0
55.0
Share in total NDP
Share in organised sector NDP
45.0
35.0
25.0
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
Unorganised sector in NDP
600.0
71.0
69.0
500.0
67.0
400.0
65.0
300.0
59.0
100.0
57.0
0.0
55.0
Index of real NNP (left axis)
63.0
61.0
200.0
Share of unorganised to total
NDP (%)
Factor shares in NDP by period
(per cent)
48.8
50.0
45.0
42.1
39.7
33.9
35.0
39.4
38.0
37.9
40.0
34.6
29.0
30.0
1980-81 to 1990-91
25.0
1991-92 to 2001-02
2002-03 to 2009-10
20.0
15.0
10.0
7.7
5.4
5.6
5.0
0.0
Real NNP av growth rate
Share of compensation of
employees
Organised sector to total
NDP
Share of surplus to
organised NDP
Rural monthly consumption by groups
(at 2009-10 prices)
2500
2000
1500
Bottom 20 per cent
Next 40 per cent
Next 30 per cent
Top 10 per cent
1000
500
0
1983
1993-94
2004-05
2009-10
Urban monthly consumption by groups
(at 2009-10 prices)
6000.00
5000.00
4000.00
Bottom 20 per cent
Next 40 per cent
3000.00
Next 30 per cent
Top 10 per cent
Average
2000.00
1000.00
0.00
1983.00
1993-94
2004-05
2009-10
Ratios of consumption of different groups
16.00
14.32
14.00
12.30
11.38
12.00
10.45
10.33
10.00
9.14
1983
8.00
1993-94
6.96 7.14
2004-05
5.68
6.00
5.63
5.94
2009-10
5.06
4.00
2.00
1.50 1.62
1.91 1.96
0.00
Urban to rural average
consumption
Urban top to bottom decile
Rural top to bottom decile
Urban top to rural bottom
decile
Share of Rural Decile Groups in Increased Rural
Consumption between 1993-94 and 2009-10
RURAL INDIA
Top 10% appropriated more
than 36% of total increase in
consumption.
Bottom 10% received 3%.
Bottom 40% managed to get
slightly more than 15%.
Share of Urban Decile Groups in Increased Rural
Consumption between 1993-94 and 2009-10
The inequalities in consumption
have been expressed not just in
spatial differences but also in
terms of significantly increased
vertical inequalities.
URBAN INDIA
Top 10% Appropriated 45% of total
increase in consumption.
Bottom 10% got less than 1%.
Bottom 40% got 8%.
Note: Price adjusted to CPI, agricultural labourers for rural and industrial workers for urban.
Source: Calculated from different rounds of NSSO data.
Inequalities in Calorie Intake
Average Per Capita Expenditures (Total And Food) Over Time
Source: Compiled from NSSO Reports, Various Rounds
Expenditure on Food has increased at lower rates than total Expenditure,
leading to a fall in the proportion of the former to the latter.
Rural Sector has higher proportion of food expenditure out of total
expenditure, and has witnessed lower reduction as well.
Can developing countries “decouple”?
Quarterly real GDP growth rates
(annualised %)
15
10
5
Advanced economies
Emerging and developing economies
-5
-10
2011Q4
2011Q3
2011Q2
2011Q1
2010Q4
2010Q3
2010Q2
2010Q1
2009Q4
2009Q3
2009Q2
2009Q1
2008Q4
2008Q3
2008Q2
2008Q1
2007Q4
2007Q3
2007Q2
2007Q1
0
-40
-60
-80
2007m9
2007m7
2007m5
2011m11
2011m9
2011m7
2011m5
2011m3
2011m1
2010m11
2010m9
2010m7
2010m5
2010m3
2010m1
2009m11
2009m9
2009m7
2009m5
2009m3
2009m1
2008m11
2008m9
2008m7
2008m5
2008m3
2008m1
2007m11
-20
2007m3
2007m1
Merchandise exports
(annual growth rate % of 3 month moving averages)
80
60
40
20
0
Advanced economies
Emerging economies
Can China emerge as an alternative
growth pole for developing Asia ?
India's balance of payments
($ mn)
150000
100000
50000
Trade balance
0
Current account
2000-01
2001-02
2002-03
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
2010-11
Capital account
Change in reserves
-50000
-100000
-150000
Elements of capital account
120000
100000
80000
Other capital
60000
NRI deposits
Rupee debt service
40000
Commercial borrowing
Foreign aid
20000
Foreign investment
0
2000-01
-20000
-40000
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08 2008-09
2009-10
2010-11
Trade balance ($ mn)
Main export destinations
($ mn)
60000.0
50000.0
40000.0
EU
US
Japan
30000.0
OPEC
SAARC
China
20000.0
Other developing Asia
Africa
Latin America
10000.0
0.0
Challenges and opportunities for economic policy
• Process outlined here can continue for some more time if
region remains favoured destination for mobile global
capital – but recent “bad press” has already affected it.
• Internally, limits to this growth process are increasingly
being felt: in finance (bubble will burst eventually), in
internal imbalance (agrarian crisis and rising food prices),
external imbalance (BOP problems), in ecology, in
employment and livelihood and associated social
tensions.
• New rights-based demands (employment guarantee in
India, food and education demands) generate need of
system to respond, in however limited a form.
• Change in macroeconomic approach becoming
increasingly necessary.
So what is the good news?
• Crisis offers a significant opportunity to shift away from
current economic growth strategy, which in any case has run
its course and can no longer deliver.
• Different macroeconomic orientation: generation of decent
work as a means to sustainable growth, as well as an end in
itself, relaying on strong multiplier effects on of public
spending on social services and positive supply effects of
public infrastructure investment to create virtuous cycles of
employment and productivity growth.
• This allows for more stable economic growth that is based on
expanding the domestic market, but it does not need to
conflict with increasing exports.
• Greater curbs on finance and revival of basic function of
finance in developing economies.
Shift in macroeconomic orientation
 Need growth strategy that allows and encourages labour




productivity increases overall while significantly expanding
expenditure – and therefore income and employment opportunities
– in social sectors.
Focus of macroeconomic policies must be on the generation of decent
work and on improving conditions of life, not on income growth per se.
Provision of basic needs (employment as well as access to food,
sanitation, housing, health and education) and improving the quality of
life of all citizens as the central guiding principles.
Quantitative GDP growth targets can distract from these goals and even
be counterproductive.(E.g., a chaotic, congested and polluting system
of privatised urban transport generates more GDP than a safe, efficient,
affordable and “green” system of public transport.)
Such an approach can generate strong positive multiplier effects to
create virtuous cycles of employment and productivity growth.
Gracias por su atencion!
Thanks for your attention!