According to a study by CARE Ratings, the pace of employment growth in India slowed down in the last two financial years. It observed job creation growth at 3.9 percent in 2017-18 and 2.8 percent in 2018-19.
The study took samples from 1,938 companies across all sectors, with value of sales in FY19 at Rs 69 lakh crore, thus covering the entire corporate sector. It included all listed public sector entities with available information but has limited representation from the SME segment.
The study revealed that between 2014-15 and 2018-19, the aggregate headcount or employment had increased at a CAGR of 3.3 percent. In comparison, GDP grew at a CAGR of 7.5 percent during this four-year period. Ideally, the rate of growth in employment should be inclined to the growth in GDP, the broadest indicator of economic growth.
"On an annual basis the difference between the growth rate in GDP and employment was 5.5 percent in 2015-16, 4.1 percent, 3.3 percent and 4 percent respectively in the subsequent years. Therefore, there is a case that supports the argument that employment growth has not been commensurate with GDP growth with a difference of 4.2 percent in CAGR during this period," Care Ratings said.
The table shows that around half the companies surveyed had witnessed a decline in growth in employment over the reviewed period while 35 percent of them had witnessed a growth of 11.5 percent on the aggregate each with an above-average CAGR of 3.3 percent.
The agency also found that core industries witnessed, virtually, a negative growth in headcount, with crude oil merely maintaining the employment level. These industries have been impacted by not only the slowdown in GDP growth but challenges on the NPA (non-performing assets) side for banks as well.