Economics · Ch 11 — Liberalisation, Privatisation and Globalisation: An Appraisal
Growth and Employment
Growth and Employment
Work These Out
- In the previous chapter, you might have studied about subsidies in various sectors, including agriculture. Some scholars argue that subsidy in agriculture should be removed to make the sector internationally competitive. Do you agree? If so, how can it be done? Discuss in class.
- Read the following passage and discuss in class: Groundnut is a major oilseed crop in Andhra Pradesh. Mahadeva, a farmer in Anantpur district of Andhra Pradesh, used to spend Rs. 10,000 growing groundnut on his plot of half an acre. The cost included expenditure on raw material (seeds, fertilisers, etc.), labour, bullock power and machinery used. On an average, Mahadeva used to get two quintals of groundnut, each quintal sold for Rs. 7,000 — an income of Rs. 14,000. Anantpur district is a drought-prone area. As a result of economic reforms, the government did not undertake any major irrigation project. Recently, groundnut crop in Anantpur has been facing problems due to crop disease, and research and extension work has gone down due to lower government expenditure. Mahadeva and his friends brought this matter repeatedly to the notice of the government officials entrusted with this responsibility, but failed. Subsidy was reduced on material (seeds, fertilisers), which increased Mahadeva's cost of cultivation. Moreover, the local markets were flooded with cheap imported edible oils, a result of the removal of restrictions on imports, so Mahadeva was not able to sell his groundnut in the market as he was not getting a price that covered his cost. What could be done to stop farmers like Mahadeva from incurring losses? Discuss in class.
One of the most important tests of any development strategy is whether the growth it produces also creates jobs for people. This is exactly the point on which the reforms have been questioned.
The central concern — growth without enough jobs:
Though the GDP growth rate clearly increased during the reform period, scholars point out that the reform-led growth has not generated sufficient employment opportunities in the country. In other words, the economy has been producing more, but the additional output has not been matched by an equal expansion in the number of jobs. This situation, where output rises much faster than employment, is often described as growth that is not accompanied by adequate job creation.
Why this matters:
Rapid GDP growth is welcome, but its benefits reach ordinary people mainly through the incomes they earn from work. If growth does not create enough jobs, then a large part of the population — especially new entrants to the labour force each year — may not share fully in the prosperity that the higher growth figures suggest. High growth on paper can therefore coexist with continuing unemployment, underemployment and insecurity of livelihood.
Reading the concern alongside the growth data:
The assessment of the reform period shows that growth has been driven mainly by the service sector, while agriculture decelerated and industry fluctuated. A pattern in which the fastest-growing parts of the economy do not absorb labour on a large scale helps explain why higher output has not translated into a proportionate rise in employment. The worry, then, is not that growth is bad, but that its quality in terms of employment generation has fallen short of what a developing country with a large and growing workforce needs.
Where the topic is taken further: …