Underemployment More Serious Than Unemployment, Says NITI Aayog

"Severe underemployment" and not unemployment is a more serious problem as a job that needs to be done by one person is often performed by two or more workers, the government think tank NITI Aayog said in a report.

The opposition Congress party recently claimed that unemployment was rising in India and criticised the Narendra Modi government.

In its draft action report that covers three years from fiscal 2018 to 2020, the NITI Aayog stressed on the need for creating high-productivity and high-wage jobs. "Indeed, unemployment is the lesser of India's problems. The more serious problem, instead, is severe underemployment. A job that one worker can perform is often performed by two or more workers," NITI Aayog said in the report.

The draft report was circulated among the think tank's Governing Council members comprising all chief ministers and other officials on April 23.

The NITI Aayog said the National Sample Survey Office (NSSO), which tracks India's employment situation, has consistently reported low but stable rate of unemployment for over three decades, which goes contrary to assertions that India's growth has not been driven by job growth.

The NITI Aayog, quoting an NSSO report, said that in fiscal 2012, 49 per cent of India's workforce was employed in agriculture, but the sector contributed only 17 per cent of India's Gross Domestic Product at current prices.

In fiscal 2011, firms with less than 20 workers employed 72 per cent of India's manufacturing workforce, but contributed only 12 per cent to manufacturing output, the NITI Aayog said in the report.

An NSSO survey of service firms in fiscal 2007 found that the 650 largest companies accounted for 38 per cent of services output, but only employed two per cent of service workers, the NITI Aayog said.

"Put another way, the remaining service firms employed 98 per cent of the workforce but produced only 62 per cent of the outcome," the report said. Citing the example of China's ageing workforce, the NITI Aayog called for taking steps to attract big companies from China to India, which can provide a large number of workers at competitive wages.

"The experience of countries that managed to transform rapidly, such as South Korea, Taiwan, Singapore and China, shows that the manufacturing sector and the ability to compete in the vast global marketplace hold the key to the creation of well-paid jobs for law and semi-skilled workers," the NITI Aayog report said.

"The Make in India campaign needs to succeed by manufacturing for global markets," it said. The report said due to an ageing work force in China with high wages, many big firms in labour-intensive sectors in that country are scouting for lower-wage locations. "With its large workforce and competitive wages, India would be a natural home for these firms," the NITI Aayog report said.