Indicus Analytics: India's skill disorder

A majority of the country?s sizeable workforce is engaged in sectors that require low skill sets and education

Indicus Analytics / New Delhi May 26, 2011, 0:40 IST

A majority of the country’s sizeable workforce is engaged in sectors that require low skill sets and education

Agriculture continues to play a pivotal role in the Indian economy, even though its share in the national income has declined over the years. Together agriculture, forestry and fishery have the largest share of workforce. However, the agriculture sector has seen the highest drop in share of employment – from 61.7 per cent in 1993-94 to 55 per cent in 2007-08 – according to the National Sample Survey Organisation (NSSO) data. The shift of workforce away from agriculture has not been easy, with education and skill sets not meeting the demands of the economy. Consequently, the construction sector’s share in employment has moved up the most since it has ample of opportunities for those with low skills and educational levels. Construction accounted for 3.6 per cent of the total workforce in 1993-94, increasing to 6.9 per cent in 2007-08. On the contrary, the manufacturing sector’s share has remained relatively stagnant over this period, from 11 per cent to 11.6 per cent of the total workforce.

A striking feature of India’s growth performance has been the strength of its services sector, but expansion of workforce here, too, has been limited. In 1993-94, the services sector accounted for 22.5 per cent of the total workforce and in 2007-08 it increased to 25.7 per cent. Trade (wholesale and retail), hotels and restaurants – the sub-sector with the fastest growth among services – has absorbed an increasing share of labour, and is the third-largest employer now, accounting for 10.9 per cent of the total workforce. The sector comprising community, social and personal services has fallen from the third position to the fourth, pointing to the declining role of the government as an employer.

TERTIARY GAINS Sectoral share of employment
Sector	1993-94	2007-08
Agriculture, forestry  and fishery	61.7	55.0
Manufacturing	11.0	11.6
Others: services,  construction, mining, electricity, water and gas supply	27.3	33.5

The share of workforce in agriculture, forestry and fishery is more than 50 per cent in 23 states. Chhattisgarh, Bihar and Madhya Pradesh have more than 70 per cent of the workforce engaged in agriculture, while other large states where less than half the workforce is in this sector are Punjab, West Bengal, Tamil Nadu and Kerala. The dominance of the secondary sector in terms of workforce is mostly seen in the small Union Territories and states. Dadra & Nagar Haveli and Daman & Diu have become manufacturing hubs in the last decade and more than 45 per cent of the total workforce there are employed in the secondary sector. Mizoram, Assam, Chhattisgarh, Arunachal Pradesh and Nagaland are at the bottom with less than 10 per cent of the workforce engaged in this sector. When it comes to services, Chandigarh and Delhi lead with more than 65 per cent of the workforce in this sector, while Orissa, Rajasthan, Himachal Pradesh, Bihar, Jharkhand, Madhya Pradesh and Chhattisgarh have less than 20 per cent of their workforce in the services sector.

Clearly, there is a sharp asymmetry between the income and employment shares in different sectors, and the wide state-wise differences are indicative of structural imbalances across the economy. This points to the need to create broad-based employment opportunities. Also, the mismatch between the growing demand from the non-agricultural sector and the skill sets of the workforce needs to be corrected to enable a smooth transition.