Here we detail about the six employment strategies used to reduce employment.

Strategy 1# Use of Labour-intensive Technology:

Both the organised and un-organised sectors must adopt labour-intensive technology if sufficient employment opportunities are to be generated in both the rural and urban sectors of the economy.

The decline in employment elasticity of output growth is primarily due to the increasing trend in capital intensity in the organised industrial sector as well as in agriculture.

Increasing mechanization of agriculture in various states has lowered the employment elasticity of growth of agricultural output. Therefore, for raising labour intensity, suitable monetary and fiscal measures need to be adopted to discourage the use of capital-intensive techniques.


Of course, the use of labour-intensive techniques with lower productivity of workers in the industry and agriculture may lower the growth of output. Thus, there might be same trade off between employment and growth of output. In our view due to the seriousness of unemployment problem some output growth should be sacrificed for the sake of more employment.

Strategy 2# Accelerating Investment in Agriculture:

Second, an important reason for slow growth of employment in agriculture and rural sector has also been a shortfall in investment or capital formation in agriculture. Both the public and private sector investment in agriculture has declined since the early nineties. Of special importance from the viewpoint of employment generation is investment in irrigation, rural roads, flood control projects, power generation and other infrastructure.

It is worth noting that investment not only generates employment directly but also has a multiplier effect which operates through backward and forward linkages. Therefore, UPA government’s Common Minimum Programme (CMP) which provides for stepping up of investment in agriculture and rural infrastructures is a greatly welcome step for employment generation.

The announcement by the government to furnish more credit to farmers at lower than market rates of interest from commercial banks will also ensure that the small and medium farmers will be able to buy fertilizers, other high-yielding inputs, and arrange for their irrigation.


This will raise their productivity and tend to reduce under­employment and disguised unemployment. Despite more than five decades of planned industrial development, agriculture continues to be principal source of employment in the Indian economy. Though the share of GDP from agriculture has come down to around 22 per cent, still about 58 per cent of labour force continues to be employed in agriculture. In fact, agriculture continues to be the parking lot of the unemployed in the country.

But a good number of persons engaged in agriculture and related activities are not productively employment. In fact there is widespread under-employment and disguised unemployed. Economic reforms initiated in 1991 have by and large neglected agriculture which even now does not get enough credit from commercial banks.

No wonder that there has been a fall in investment or capital formation in agriculture both by the private and public sectors. This is an important reason why employment opportunities in agriculture have not risen much causing increase in rural unemployment. Now, UPI (United Progressive Alliance) government with Dr. Manmohan Singh as Prime Minister, has set before itself the task of making substantial investment in agriculture so as to generate enough employment opportunities in this sector.

Strategy 3# Diversification of Agriculture:

Besides there is urgent need for diversification of agriculture. For example, there is an urgent need for a relative shift from growing of crops to horticulture, vegetable production, floriculture, animal husbandry, fisheries etc. which are more labour absorbing and higher income-yielding. In addition to this, promotion of agro-processing industries for export purposes has a large employment potential.


For the rapid growth of employment opportunities in agriculture and related sectors and agro-processing industries, investment in infrastructure including irrigation, rural reads, power supply, and development of agricultural markets are required.

Strategy 4# Labour-Intensive Industrial Growth:

For solving unemployment problem in the urban areas, the organised industrial sector must also absorb a sufficient number of workers. The failure of the organised industrial sector to generate enough employment opportunities is due to the use of capital-intensive technologies imported from abroad.

The tendency to use the higher capital-intensive technology by the Indian industries in the post reform period has been intensified because they are trying to improve competitiveness to face competition from imported commodities.

The other factor responsible for the use of higher capital intensive technologies is the factor-price distortions such as cheap capital and relatively higher wages of workers who have strong labour unions. Capital has become relatively cheap due to various fiscal concessions such as liberal depreciation and investment allowance and low interest rates on borrowed funds for investment. Consequent to the use of high capital-intensive technologies in our industries the labour productivity has been increasing while employment has been growing at a snail pace.

Therefore, to encourage the use of relatively more labour-intensive technologies and thereby to generate more employment opportunities, fiscal and monetary concessions mentioned above on use of capital must be withdrawn. In this case there is bound to be some loss of workers’ productivity. Therefore, this will involve some trade-off between employment and output. In our view, because unemployment problem is very serious and greatly hurts people’s welfare, some growth of output is worth sacrificing for more employment opportunities.

Strategy 5# Services and Employment Growth:

The growth of services in India has a large employment potential. In 1993-94 to 1999-2000, next to the construction sector the employment elasticity of output growth in services was higher and was estimated at about 0.50. Of special mention are software services and BPO (Business Processing Outsourcing) which have a lot of employment potential, especially for the educated youth of the country.

The other services such as finance, insurance, trade, hotels, and restaurants have also a lot of employment potential. But an important thing to note is that growth of these services is dependent on industrial and agricultural growth in the economy.

Strategy 6# Education, Health and Employment Generation:

Lastly, the expansion of education and health care not only promotes accumulation of human capital and thereby contributes to growth of output, it will also generate a good deal of employment opportunities. More schools, hospitals, health care clinics in the rural and urban areas will not only create employment during their construction but also, and more important, when they start working to provide education and health services. Their working provides employment to both the educated and unskilled persons. Therefore, a higher allocation of resources is required to be made for them in government budgets and in our future plans.