Rural Employment Strategies

The unprecedented commitment of the present Government of India to seriously address the need for employment generation is a propitious opportunity to implement strategies for generating full employment in the country. This report, which builds upon work done by the International Commission on Peace & Food in the early 1990s, confirms the potential to generate sufficient employment opportunities for all new entrants to the workforce as well as to absorb the current numbers of unemployed and underemployed. It includes strategies and policy recommendations designed to maximize the effectiveness of the Government's recently proposed initiatives for employment generation and rural prosperity. Implementation of these recommendations will be sufficient to generate 100 million additional employment and self-employment opportunities.

While many formal studies have been prepared to assess the growth and employment potential in India' formal private sector, less attention has been given to the conditions and strategies to promote rapid expansion and job creation in the rural and informal sectors. This report focuses on strategies to increase employment opportunities in India's informal sector, with emphasis on agriculture, agro-industry, rural services and related vocations. The report consists of three parts: an overview of employment in India, a business plan containing specific recommendations for implement┬Čation, and a detailed discussion of employment opportunities and strategies in agriculture.

The major findings and recommendations can be summarized as follows:

  1. The Indian economy is already generating approximately seven million employment and self-employment opportunities per annum, almost all of them in the informal sector, but in there is a serious lack of accurate information on the types and numbers of these jobs. The most effective strategy for employment generation will be to provide the missing links and policy measures needed to accelerate this natural process of employment generation.
  2. There is enormous scope for raising the productivity of Indian agriculture, doubling crop yields and farm incomes, and generating significant growth in demand for farm labour. The report present evidence to demonstrate that improving plant nutrition through micronutrient analysis and improving irrigation through deep chiselling of soil can result in a tripling of crop yields.
  3. Rising rural incomes consequent to higher productivity will unleash a multiplier effect, increasing demand for farm and non-farm products and services, thereby stimulating rapid growth of employment opportunities in other sectors.
  4. Indian agriculture is constrained by weak linkages between agricultural training and extension, crop production, credit, processing, marketing, and insurance. The report presents an integrated strategy for bringing together all these elements in a synergistic manner by
    • Establishment of village-based Farm Schools to demonstrate and impart advanced technology to farmers on their own lands.
    • Establishment of a network of sophisticated soil test laboratories capable of high volume precision analysis of 13 essential plant nutrients coupled with development of expert computer systems to interpret soil test results and recommend individualized packages of cultivation practices for each crop, location and soil profile.
    • Establishment of Rural Information Centres to act as a medium for transmission of soil test data and recommended practices, access to current input and market prices, and other essential information for upgrading agriculture.
    • Policy and legal measures to encourage contract farming arrangements between agri-business firms and self-help groups in order to increase small farmers' access to advanced technology, quality inputs, bank credit, processing, marketing and crop insurance.
    • Measures to strengthen farm credit and insurance programmes, including creation of linkages between crop insurance, crop loans, and farm school training to encourage farmers who seek credit and crop insurance to adopt improved cultivation practices.
  5. In order to ensure ready markets for the crops that are produced, the report focuses on the potential for linking crop production with huge untapped markets and specific agro-industries, including energy plantations to fuel biomass power plants, bio-diesel from jathropa, ethanol from sugarcane and sugar-beet, edible oil from Paradise Tree, horticulture crops and cotton.
  6. The report argues that the India labour force suffers from a severe shortage of employable skills at all levels and that intensive development of vocational skills will act as a powerful stimulus for employment and self-employment generation. In addition to Farm Schools to impart advanced skills in production agriculture, the report recommends establishing a network of government-certified, rural vocational institutes providing training and certification in hundreds of vocational skills not covered by the ITIs. In order to offset the shortage of qualified trainers and the costs of replicating institutions throughout the country, the report advocates creation of a national network of 'Job Shops' linked to the Rural Information Centres and offering televised multimedia training programmes and computerized vocational training programmes.
  7. The report recommends that the National Commission on Farmers arrange for employment surveys to provide accurate information on the growing demand for different occupational categories, the natural rate of employment generation by category and skill level, and other issues required to promote full employment in the country.


Profile of the Indian Workforce

  • Workforce: Although accurate measures of employment and unemployment are difficult in India's largely informal economy, the current labour force consists of approximately 400 million men and women.
  • Growth in Labour Force: It is estimated that the work force is currently growing by 7 million persons per year.
  • Sector-wise: Of these, about 56% are engaged in agriculture as their primary occupation which is down from 65% in the early 1990s. Another 13% are engaged in manufacturing and the balance are employed in the service sector, which has grown from 25% to 32% of total employment over the past two decades.
  • Organized vs. Unorganized: The organized sector provides less than 8% of the total jobs, about 3% in private firms and 5% in the public sector. The informal/unorganized sector is provides the other 92%.
  • Skills: Only 6-8% of India's workforce has received formal training in vocational skills, compared with 60% or more in developed and most rapidly developing countries.
  • Unemployment: Depending on the survey measure applied, unemployment is estimated to range between 25 and 35 million. Youth unemployment is 13%, but reaches a high of 35% in Kerala. Unemployment as a percentage of the workforce fell in the 1980s and rose slightly in the 1990s. Authoritative published data was not available to indicate trends after 2001-2.
  • Migration: According to sample survey estimates, approximately 27% of India's population are migrants, including those who move from one rural or urban area to another or between rural and urban areas. Approximately 57% of urban male migration is for seeking better employment opportunities. The net migration from rural to urban areas is approximately 2 million per annum, of which about 1 million may be job seekers.

Observations about Employment in India

Several significant conclusions can be drawn from this summary data:

  1. High rate of 'natural' employment generation: In spite of a large influx of youth into the workforce, unemployment is not rising dramatically. This indicates that the Indian economy is generating a very large number of additional employment opportunities by natural processes that are not well documented or understood. An understanding of these processes is will assist the formulation of effective strategies to accelerate employment generation and eliminate the remainder of unemployment and underemployment in the economy. If the unconscious process of employment generation can achieve this much, surely a conscious understanding and application can accomplish far higher rates of job growth.
  2. Urban employment: Since high rates of urban unemployment would almost invariably lead to rising discontent and violence, the relative stability of India's urban environment suggests that the urban economy is generating sufficient employment opportunities to absorb most new entrants and migrants from rural areas.
  3. Mismatch between Education & Employment: While the number of employment opportunities is rising more or less as required to keep pace with the growth of the workforce, the type and quality of these opportunities does not match the expectations of many educated job seekers, which reflects inadequacies both in the type of employment generated and type of education being imparted to youth. Ironically, despite the surging number of graduates, many firms report difficulty in recruiting educated persons with the required work capabilities to meet the growth in demand for business process outsourcing, automotive component production and many other fields.
  4. Gap in Occupational Skills: At the other end of the labour spectrum, it is increasingly difficult to obtain workers with basic skills in carpentry, masonry, electricals, mechanics, and many other trades. Although India operates a large vocational training system, it provides training to less than 2 million persons annually, which is grossly insufficient to impart skills to the 7 million new job entrants as well as the huge number of current unskilled workers. Absence of reliable information on the actual growth in employment by specific occupational categories makes it difficult to determine either the number of jobs being created in each field or the unsatisfied demand for various types of skills.
  5. Casualization of the workforce: Evidence of an increase in casual and migratory employment reflects a deterioration in the quality of jobs in rural areas as well as rising expectations of the workforce that impels increasing numbers to abandon traditional occupations in search of better employment opportunities.
  6. Agricultural Employment: While the percentage of the workforce employed in agriculture is declining, total employment in this sector continues to rise, though at significantly slower rates than in the past. A reduction in the proportion of the population employed in the primary sector is a natural and inevitable trend that is spurred by rising expectations and changing attitudes as much as by rising levels of farm productivity and mechanization. However, this does not mean that the potential for employment in this sector is being fully exploited. The findings of this report indicate that in the short term, strategic initiatives to modernize and diversify Indian agriculture can generate employment opportunities for very large numbers of people, thereby providing time for the more gradual expansion of employment potentials in other sectors.
  7. Surging Service Sector: The traditional path of economic development was a progression from agriculture to manufacturing to services. India's recent success in IT and IT-enabled services is only one indication that this formula need not necessarily apply in the context of today's global economy where the demand for services internationally can rapidly expand employment opportunities domestically. In addition, changing social expectations within the country are stimulating rapid growth in demand for services that become prevalent in advanced industrial countries at a much later stage in their development, as indicated by the proliferation of courier companies, Xerox shops, Internet cafes, fast food restaurants and retail boutiques. The rampant clamour for education at all levels, surging demand for health care services, telecommunications, media, entertainment, and financial services are other expressions of this phenomenon. The publication of six English dailies and six Kannada dailies in the city of Bangalore is only one reflection of this wider trend. Research is required to more carefully document growth of the service sector, particularly its informal portion, to assess the potential demand and most effective strategies for accelerating growth of employment. These trends suggest that rural India has the opportunity to leapfrog over the traditional path to development, moving directly from agriculture into services.

Theoretical Basis for Full Employment

The International Commission on Peace and Food, in its report entitled Uncommon Opportunities: Agenda for Peace & Equitable Development, examined the process of employment generation in society and concluded that full employment was a realistic and achievable goal for all countries in the foreseeable future. It observed that efforts to achieve full employment are constrained by a vague sense of helplessness or inevitability based on the erroneous perception that the number of employment opportunities generated in society is determined by forces that are either beyond the control of government and public initiative or too complex, costly and difficult to manage without severe adverse affects on the economy. Therefore, it may be useful to examine some of the major factors that presently limit the creation of new employment opportunities and the practical scope for action at these specific points.

Economically, employment generation is determined by how fully and productively society utilizes the material, technological, organizational and human resources at its disposal. The more productive the society is, the greater the quality and efficiency with which it produces goods and services, the greater the demand for those goods and services in the marketplace, the more employment opportunities and purchasing power created. This increased purchasing power then acts as an additional stimulus to the creation of new demand and employment opportunities.

Although early economists perceived that resources were limited, we now know that the potential for enhancing the productivity of resources is not. The Commission's report points out that the productivity of resources is the result of human resourcefulness. Since no society can or does fully exhaust its potentials for enhancing social productivity, the potential for employment generation is unlimited. Land, water and minerals may be limited, but the scope for increasing their productivity is not. Land is limited in India, but the scope for raising farm yields is not.

If this is the case for purely material resources, how much more true is it of technology, organization, knowledge, skill and other less tangible society resources? The enhancement in computer performance over the past 35 years according to Moore's Law is only one dramatic instance of a general truth about technological productivity in all fields. While the power of computers keeps increasing, the cost of producing them keeps falling because of technological developments that reduce their size, material consumption and labour inputs.

Technology alone does not result in human development. The application of technology through innovative social organizations has been the chief cause for the phenomenal gains of the past century. It was not the invention of the automobile but rather the innovation of a new organization of mass production by assembly line that enabled Henry Ford to transform the car from a luxury of the idle rich into a necessity for middle and working class families. It was not the invention of the computer, but the innovation of a new organization for electronic exchange of information in a standardized format that converted the Internet from the medium of academics and military planners into the most powerful communication tool in history and led to the emergence of the World Wide Web as a global library and global marketplace. India's dairy cooperatives, micro-finance self-help groups, STD booths, export processing zones, technology parks, and private computer training centres are all examples of organizational innovations that have stimulate development and create jobs.

What is true of technological and organizational resources is even more true for other social and human resources. Information is a resource that improves the quality of decision-making and makes possible the tapping of new opportunities. The quantity, quality and speed of all types of information exchange is multiplying exponentially. Through the enhancement of skills, knowledge and attitudes, the productivity of the human resource is growing by leaps and bounds. The USA, which awarded only a single PhD in 1880, now awards for than 35,000 annually. India produces more software engineers than the USA. Tamil Nadu, which had less than a dozen engineering colleges in 1980, has more than 200 today. Five lakh Indians are taking software training courses every year. Tens of thousands of four and five year old Indian children are surfing the internet or playing chess like future grandmasters. At the same time 45 per cent of the Indian population is still illitreate, only 60 per cent of 11-14 year olds are enrolled in school, two-thirds of children drop out before completing 10th Standard, and only five per cent of the workforce in the 20-24 age category have undergone formal vocational training, compared to 28 per cent in Mexico and 96 per cent in Korea. There is enormous scope for enhancing the knowledge and skills of India's workforce.

If the technological, organization and human potentials are unlimited, what is it that determines the actual extent to which a society develops these potentials? It is the awakening of the society. Socially, employment generation is determined by the aspirations of people, by rising expectations, by the urge to achieve and enjoy more. The higher the aspirations of society that actively yearn for fulfilment, the greater the energy and activity of the society and the greater the potential for employment generation. Government does not create jobs. No government can create and sustain full employment primarily by means of programmes. What government can and should do is to help awaken the people to the opportunities for higher accomplishment and to formulate policies and programmes that will help to release the initiative and support the efforts of the population for its own upliftment.

Social Factors Responsible for Employment Generation

Society progresses by the development of new activities and their gradual integration with all other existing strands of the social fabric. Therefore, employment generation is not so much a question of finding out where to engage people in work, as it is how to stimulate the natural growth of the factors that result in job creation. These factors are innumerable and their interactions are very complex. They include, for example,

  • New products - motor vehicles, cell phones, cut flowers, designer clothes
  • New services - Xerox, courier, yellow pages, Internet cafes, credit cards, neighborhood newspapers, various insurance products
  • Growth in domestic demand - energy, motorcycles, cars, tourism, pharma, health care, insurance, financial services
  • Growth in export demand - textiles, software, automotive components, mangoes, grapes, fish
  • Technological innovation - Internet, mobile phones
  • Higher quality &/or productivity - automotive and farm exports
  • Organizational innovation - STD booths, World Wide Web, Internet cafe
  • Higher skills - software, BPO, journalism, sales & marketing
  • Better access to information - Internet job sites, E-choupals
  • Increased speed - money flows, transport, communication, decision-making
  • Legislation & law enforcement - e.g. safety and environmental regulations
  • Administrative responsiveness - speed, transparency, less red-tape
  • Environment/health consciousness - bottled water, recycling, organic foods
  • Change of attitudes - regarding consumption, investment, entrepreneurship

Approaches to Accelerate Employment Generation

There are three broad approaches can be adopted to stimulate greater employment generation:

Expand existing activities

Introduce measures to stimulate more rapid proliferation of existing activities that are already growing rapidly, such as nursery schools, tutorial institutes, English language teaching, etc.

Adopt activities prevalent in other countries which have not yet come to India

Examples of new activities that have recently been adopted by India include credit rating agencies for businesses and individuals, collection agencies, trade shows, network marketing, health clinics, etc.

Promote culturally compatible activities based on Indian environment

Examples include mini-power plants, rural information centres, contract farming agencies, STD booths, chit funds, marriage halls, etc.

Several different modes of action can be adopted to stimulate these activities:

  • Increase access to credit
  • Provide incentives for new initiatives
  • Strengthen or enforce legislation
  • Impart training
  • Use insurance as a stimulus
  • Publicize opportunities in the media

The recommendations contained in this report encompass all three broad approaches and utilizes all the modes of action listed above.

Prosperity 2000

Development of agriculture is critically important for ensuring food and nutritional security for the hundreds of millions of people that still live below the poverty line, for raising rural incomes and generating employment opportunities, and for stimulating industrialization and overall economic development of the country. Raising the productivity of irrigated and rain-fed agriculture, combined with rainwater harvesting and water conservation techniques and assured access to remunerative markets for agricultural produce through linkages with agro-industries can dramatically raise rural incomes, generate millions of on-farm and non-farm employment opportunities, eradicate poverty and usher in a prosperity movement throughout rural India.

In 1991 the International Commission on Peace & Food (ICPF) conducted a country study of employment potentials in India and drew up a strategy entitled Prosperity 2000 to generate 100 million additional employment opportunities within 10 years. The strategy was adopted by the then Government of India and the Small Farmers' Agri-Business Consortium was established by the Government for implementation. Two subsequent studies were conducted that confirmed the feasibility of this strategy at the local level: a study of Pune District by the Agricultural Finance Corporation for the Government of Maharasthra and a study of Pondicherry by the Mother's Service Society. Although Rs 100 crores were allocated in the 1992 Union Budget by the then Finance Minister, Dr. Manmohan Singh, for a variety of reasons the Prosperity 2000 strategy was never implemented.

The thrust of the Prosperity 2000 strategy was to directly utilize agriculture as an engine to raise on-farm incomes and purchasing power, generate additional on-farm employment opportunities, and stimulate rural industrialization and services. These would in turn increase demand for agricultural products, manufactured goods and services throughout the economy, creating a multiplier effect that generates jobs in other sectors. The specific focus on the strategy was on raising on-farm productivity and fostering closer linkages with industry and markets through innovative approaches to the organization of the rural economy.

In reviewing ICPF's strategy 13 years later, we find that some of the potentials it identified have been partially exploited, such as the dramatic increase in production of fruits and vegetables, export of grapes and mangoes from Maharashtra to Western Europe, the rise in production and per capita consumption of sugar, and grow of inland aquaculture. The report examined the current levels of food consumption and dietary nutrition among the Indian population-at-large and projected growth in demand that would result from the gradual rise in living standards for fruits, vegetables, sugar and dairy products. The actually rise in demand for fruits and vegetables has nearly matched ICPF's projection.

In retrospect, we find that the technological and market potentials identified in the original study remain valid today. The scope for improving farm productivity, the potential for improving linkages with processing industries, and the scope for dietary enhancement is as great as before. However, the organizational mechanisms required to fully tap these potentials need to be re-examined in the light of the current role of government and private agencies in the development process. In addition, we need to take into account changing external conditions that open up new opportunities and present new challenges, especially the rise in international energy prices and the increasing opportunities for textile exports after the removal of quotas in January 2005.

Vocational Training

The speed of a nation's development is directly related to the quantity and quality of vocational skills possessed by its workforce. The wider the range and higher the quality of vocational skills, the faster the growth and more prosperous the society.

In the coming decade, an additional eight million young people will enter India's labour force every year in search of employment. Currently only 5% of the country's labour force in the 20-24 age category have formal vocational training, compared with 28% in Mexico, 60 to 80% in most industrialized nations, and as much as 96% in Korea.

The availability of employable skills is one of the major determinants of how readily new job seekers find employment. The very low level of employable skills makes the search for work much more difficult. It reduces the market value of the job seeker and adds to the costs of employers that must train new recruits from scratch.

India has over 4200 industrial training institutes imparting education and training 43 engineering and 24 non-engineering trades. Of these, 1654 are government run ITIs (State governments) while 2620 are private. The total seating capacity in these ITIs is 6.28 lakh. Most of this training is conducted in classroom style in the form of 1 to 2 year diploma courses.

In addition, about 1.65 lakh persons undergo apprenticeship vocational training every year in state-run enterprises. If a wider definition of applied courses is taken that includes agricultural, engineering and other professional subjects, the total number receiving job related training is about 17 lakh per annum, which still represents only 14% of new entrants to the workforce.

The limitations in the existing approach to vocational training have been highlighted in the Planning Commission Report of the Task Force on Employment Opportunities (2001). They include outdated courses for which there is little demand, shortage of suitably trained faculty, inadequate infrastructure, and unreliable testing.

There is a great unmet need for shorter vocational training programmes that job seekers can take on their own time and at their own pace and at relatively low cost. In addition there is also need for a wide range of vocational courses for those who are already employed but seek to broaden or upgrade their skills to keep pace with changing needs and to further their career opportunities.

The ITI's offer training on a very narrow range of skills, primarily those required by manufacturing industries. These include 43 engineering related skills and 24 non-engineering trades. But the range of skills required by the country for its development includes literally hundreds for which no formal training is presently offered.

The lack of vocational training applies at all levels, from basic mechanical skills needed for operating and repairing equipment to jobs in sales, administration and management, including specialized occupations such as bookkeepers, insurance agents, pharmaceutical marketing, travel agents, food service managers, journalism, etc. It applies also to a wide range of value-added skills for enhancing the performance of workers in different occupations, such as safe driving, industrial safety, quality control, pollution control, water conservation, rainwater harvesting, energy conservation, customer service, etc.

The overall importance of upgrading vocational skills in India is highlighted by the following statement of the Task Force on Employment Opportunities:

"To summarise, the rate of growth of economy cannot be accelerated, in particular in the labour intensive sectors, if there is a general lack of skills among the work force. The example of software industry is sufficient to illustrate what can be done by the Indian youth if the right training facilities are afforded by the society. This requires strengthening of the existing training system. The role of public sector has to be restructured and conditions created for inflow of funds at a much larger scale than at present. Role of private sector has to be expanded sharply if the requisite resources are to be brought in to bridge the large capacity gaps that exist. The vocational training policy has to respond to this challenge."

The current situation in India is summarized below:

Students Completing 8th-9th standard 300 lakhs
Students entering 10th-11th 150 lakhs
New entrants to workforce (per year) 70 lakhs
Those receiving vocational training in engineering, agriculture & other fields 20 lakhs
New entrants to workforce w/o training 50 lakhs
Existing unemployed youth (15-29) of which 80% are educated upto 10th 150 lakhs
Exisiting workers to be trained to raise non-ag skilled portion ion to 25% 350 lakhs
Additional vocational capacity required to fully address the country's need 100 lakhs

India's problem today is not a shortage of jobs. It is a shortage of employable skills. Provide skills and they will create their own employment and self-employment opportunities.

Guaranteed Employment

The generation of employment opportunities is as natural for a society as the spontaneous growth of plants on fertile soil. Every person born brings with him an assortment of material and other needs that natural create employment opportunities for himself and others to meet. The problem of shortage arises only when the structure of society prevents the spontaneous growth of employment opportunities. Employment is a problem of reconciling the potential with the actual. Like the shortage of water for agriculture in India, it is not a genuine question of economic scarcity but rather a problem of management.

Information about the actual process of employment generation in India is severely limited. We know that some seven to eight million persons are entering the labour force every year. We know that the rate of unemployment is relatively stable over time. Therefore, we must conclude that the society is spontaneously creating approximately seven million jobs a year, of which only a few percent are in the private organized sector. This fact shows that the Indian economy is vibrant and fully capable of creating the additional employment opportunities necessary to absorb the unemployed and underemployed. Minor adjustments in the structure of laws, policies and institutions can accomplish it.

It was with this understanding that the International Commission on Peace & Food first proposed to the United Nations in 1994 that employment be considered a basic human right to be constitutionally guaranteed. At the time, the proposal appeared visionary and unlikely to be given serious consideration. Now, a brief decade later, the proposal has been endorsed by the Government of India and is in the process of being converted into law. Naturally, it is neither possible nor desirable that Government tries to directly create all the necessary jobs. What it can do is to make the necessary adjustments in laws, policies and institutions and supplement them with some selected programme initiatives that will accelerate the creation of new employment opportunities by the society. The recommendations given in this report are conceived to accomplish this objective.

The growth of any sector of the economy depends on the growth of and support it receives from other sectors and the extent of integration between activities in different sectors. Until now the growth of Indian agriculture has been severely constrained by the weakness of its linkages with other key sectors, including industry, agricultural education, banking, insurance, marketing and infrastructure. A conscious effort to strengthen these linkages can stimulate rapid growth in this sector resulting in rapid growth in employment opportunities. The recommendations contained in this report are intended to provide or strengthen critical linkages for a quantum jump in the growth of employment and income opportunities in India's rural farm and non-farm sectors.


For implementation strategies (part II) and technical information on the potentials of Indian agriculture (part III), see the complete report | here