The statement highlights the crucial role of increased labor activity in driving economic growth, emphasizing that a robust workforce is essential for productivity and development. To foster sustainable job creation without sacrificing labor productivity, India must focus on skill development, technology adoption, and sectoral diversification.

Q.11 Economic growth in the recent past has been led by increase in labour activity.” Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.

Model Answer:

Introduction

Economic growth refers to the increase in the production of goods and services in an economy over a period of time, typically measured by GDP. Labour activity encompasses the participation and productivity of the workforce. In recent years, India's economic growth has been significantly driven by an increase in labour activity. For instance, the labour force participation rate (LFPR) increased from 49.8% in 2018 to 53.5% in 2023, contributing to higher economic output.

Body

Role of Labour Activity in Economic Growth:

  • Increase in Labour Force Participation Rate (LFPR): A higher LFPR means more individuals are actively engaged in the workforce, contributing to economic activities. For example, the rise in female LFPR from 23.3% in 2018 to 27.4% in 2023 has added to the economic output.
  • Increase in Working Age Population: India’s demographic dividend, with a large proportion of the population in the working-age group (15-64 years), has provided a substantial labour force, driving economic growth.

Growth Pattern for Job Creation and Labour Productivity:

  • Investment in Human Capital: Enhancing education and skill development can lead to a more skilled workforce, increasing both employment opportunities and productivity. For instance, the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) aims to train over 10 million youth by 2024.
  • Investment in Infrastructure: Developing infrastructure such as roads, ports, and digital connectivity can create jobs and improve productivity. The National Infrastructure Pipeline (NIP) aims to invest ₹111 lakh crore by 2025, which is expected to generate millions of jobs.
  • Promotion of Labour-Intensive Industries: Encouraging sectors like textiles, construction, and tourism can create numerous jobs while maintaining productivity. The Production Linked Incentive (PLI) scheme in the textile sector is expected to generate over 7.5 lakh jobs.

Role of Labour Productivity in Economic Growth:

  • Increase in GDP per Capita: Higher labour productivity leads to more output per worker, increasing GDP per capita. For example, India's GDP per capita increased from $2,100 in 2018 to $2,500 in 2023.
  • Increase in GDP Growth Rate: Enhanced productivity contributes to higher economic growth rates. India's GDP growth rate improved from 4.2% in 2019-20 to 7.2% in 2022-23, partly due to increased labour productivity.

Conclusion

Balancing job creation with labour productivity is crucial for sustainable economic growth. Policies should focus on skill development, infrastructure investment, and promoting labour-intensive industries to achieve this balance. A comprehensive approach that includes continuous upskilling, technological adoption, and supportive regulatory frameworks will ensure that economic growth translates into broad-based employment opportunities without compromising productivity.

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