Employment increases in rural India

Synopsis: In all the major labour market metrics, it is rural India that shows big improvements. Labour conditions improved in urban India also but not as much as they did in rural India.


Labour participation in Rural India increased 0.20 percentage points in last month as compared to a much smaller 0.02 percentage points increase in Urban.

Further, the employment rate rose by 0.85 percentage points in rural India in comparison, urban India saw a smaller increase of 0.47 percentage points in its employment rate in the same months. This translates to a big 8.5 million increase in employment during the month.

Consequently, the all-India unemployment rate fell by 1.46 percentage points. The fall was larger in rural India than in urban India.

How rural India has impacted India’s Employment scenario?

Of the 8.5 million additional people employed in September, 6.5 million were in rural India. Rural India accounts for about 69 per cent of total employment. But 76.5 per cent of the additional employment created in September was in rural India.

This is an extraordinary increase in rural India in the month of September when the demand for labour from agriculture is usually low. It is estimated that around 6 million were absorbed in non-farm rural jobs.

The construction industry in rural India was the largest absorber of additional labour in September, taking in 7.55 million people.

What are the reasons?

First, investment in road building has been growing steadily. Road projects worth Rs 1 trillion were completed in 2020-21, and Rs 1.27 trillion worth of projects are expected to be completed in 2021-22.

The Ministry of Road Transport and Highways had spent Rs 780 billion this year against Rs 374 billion in the last year or Rs 322 billion in the year before. This accelerated spending and the expectation of more road projects being completed in the year could have created the additional demand for labour in the construction industry.

Second, a somewhat less likely reason, is that it is possible there was some acceleration in employment under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).

Third, rural India also saw a substantial increase in employment in the manufacturing sector in September. Employment in rural manufacturing industries increased by 4.7 million during the month. Food industries, metal, and textile were the major contributors

However, the rural services sector unemployed a substantial 6.8 million jobs. Most major services industries shed jobs in September. These included retail trade, personal non-professional services, travel and tourism, and education.

This suggests that, people have moved from the services sectors to construction and manufacturing industries in rural India. Most of the new jobs created in rural India were of daily wage labourers.

Source: This post is based on the article “Employment increases in rural India” published in Business Standard on 5th October 2021.

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