Critiques: jobs, agriculture, industry, fiscal space and inequality

Detail

1. Growth and employment: the "jobless growth" charge

• Jobless growth means that GDP grows fast, but the number of jobs grows slowly or not at all.
• NCERT says that reform-led growth did not create enough jobs. See the employment-informal-sector note.
• Employment elasticity measures how many jobs growth creates.
• Formula: Employment elasticity = % change in employment ÷ % change in GDP.

• Worked example: GDP grows 7% and employment grows 1.4%. Elasticity = 1.4 ÷ 7 = 0.2. So every 1% of growth adds only 0.2% more jobs. A low number like this is the jobless-growth problem.

• Key labour terms (PLFS, usual status ps+ss, age 15+):

• Labour Force Participation Rate (LFPR) = (employed + unemployed) ÷ population × 100.
• Worker Population Ratio (WPR) = employed ÷ population × 100.

• Unemployment Rate (UR) = unemployed ÷ labour force × 100.

• Latest official data (PLFS Annual Report 2025, January–December 2025):

• UR was 3.1% for both men and women in 2025. For men it fell from 3.3% in 2024 [2].
• Youth (15-29) UR was 9.9% in 2025, down from 10.3% in 2024. Urban youth UR was 13.6% [2].
• WPR was 57.4% in 2025: 76.6% for men and 38.8% for women [2].
• 21.0% of people aged 15-24 were NEET (not in employment, education or training) in 2025 [2].
• About 61.6 crore people aged 15+ were employed in 2025: 41.6 crore men and 20.0 crore women [2].

• PLFS moved from the July–June (agricultural year) cycle to the January–December (calendar year) cycle in 2025 [2].

• Earlier trend: from 2017-18 to 2023-24, UR fell from 5.3% to 2.5% in rural areas and from 7.7% to 5.1% in urban areas [3].

• Why the critique still holds: job quality is the issue.
• Self-employed workers were 56.2% of all workers in 2025. Regular wage/salaried workers were only 23.6%. Casual labour was 20.2% [2].
• About 29% of tertiary-educated youth (those with college degrees) were unemployed in 2023-24. This shows a gap between the skills people have and the jobs available [5].
• The World Bank says nearly half a billion working-age Indians are unemployed or inactive (not looking for work) [5].

2. Agriculture: why the reforms hurt it (Class 11)

Public investment fell

• Government spending fell in irrigation, power, roads, market links, and research and extension.

• Extension means agricultural officers who take new seeds and methods from research labs to farmers' fields.

• These were the inputs that drove the Green Revolution.

• Less public investment → lower yields → farm incomes stagnate.
• Recent data: Gross Capital Formation (GCF) in agriculture grew 19.04% in 2022-23 (Economic Survey 2023-24) [7]. GCF means spending on long-lasting assets such as canals, tractors and storage.

Fertiliser subsidy partly removed

• Subsidy is money the government pays so that a product sells below its market price.
• When the subsidy was partly removed, fertiliser cost more → farming cost more.
• Small and marginal farmers were hit hardest because they have the least cash.

Exposure to world competition

• Import-duty cuts made foreign farm goods cheaper in India.
• Low MSP (Minimum Support Price, the price at which the government promises to buy a crop) gave farmers weak protection.
• Removal of QRs (Quantitative Restrictions, i.e. fixed limits on how much of a good can be imported) let imports flow in freely.
• The result: Indian farmers had to compete with subsidised farmers abroad.

Export orientation changed cropping

• Land moved from food grains to cash crops (crops grown for sale, such as cotton or oilseeds).
• Less land under grain → less grain supply → grain prices rise → the poor pay more for food.

Structural fact

• Agriculture is still the largest employer: 43.0% of workers in 2025, down from 44.8% in 2024 [2].
• Inside agriculture, the crops share of farm GVA fell from 61.75% (2014-15) to 55.28% (2022-23). Livestock rose to 30.23% and fisheries to 7.25% (2022-23) [8]. GVA (Gross Value Added) is the value of output minus the value of inputs.

3. Case study: Mahadeva's groundnut plot, Anantapur (Andhra Pradesh)

• Half an acre in a drought-prone district.
• Worked example: margin before the shock
• Cost = Rs 10,000
• Output = 2 quintals × Rs 7,000 = Rs 14,000

• Margin = 14,000 − 10,000 = Rs 4,000

• What went wrong:

• No major irrigation project was built, so the crop still depended on rain.
• Crop disease struck, and research and extension help had shrunk.
• Seed and fertiliser subsidies were cut → cost rose above Rs 10,000.

• Cheap imported edible oil flooded local markets after import restrictions were lifted → the groundnut price fell.

• Result: the price no longer covered his cost. His margin turned negative.

• Lesson: the reforms raised input costs and cut output prices at the same time. This squeezed the farmer from both sides.

4. Industry

• Industrial growth slowed. Two reasons:
• Demand fell because cheaper imports replaced domestic goods.

• Infrastructure was inadequate, especially power.

• Unequal opening of markets:

• Developing countries had to cut their tariffs.

• Developed countries kept high non-tariff barriers (NTBs). NTBs are trade barriers other than taxes, such as quotas, strict safety or quality standards, and licensing rules.

• Textile quotas:

• Class 11 says the USA kept quotas on textile imports from India and China.
• Update: the WTO Agreement on Textiles and Clothing (ATC) ended all its quotas on 1 January 2005, and the textile sector fully came under normal GATT rules. After that, importing countries could no longer treat different exporters differently [4].
• The phase-out took 10 years in 4 stages. Each stage brought a share of 1990 import volume under GATT rules:
  • 16% on 1 January 1995
  • 17% on 1 January 1998
  • 18% on 1 January 2002
  • the remaining 49% on 1 January 2005 [4]
• (NCERT's quota statement is outdated.)

5. Fiscal policy: shrinking fiscal space

• Fiscal space is the room a government has in its budget to spend more without putting its finances at risk.
• The reforms limited the growth of public spending, especially on the social sector (health, education, welfare).
• Tax cuts did not raise revenue. The hope was that lower rates would improve compliance and raise collections. In the 1990s this did not happen.
• The Centre's gross tax-GDP ratio fell from about 10% (around 1990-91) to about 8% (2001-02) and recovered later. (Scaffold figure. It could not be checked against an official source here, so treat it as approximate.)
• Tax-GDP ratio = tax revenue ÷ GDP × 100.

• Worked example: GDP is Rs 100 lakh crore and tax is Rs 10 lakh crore, so the ratio is 10%. If the ratio falls to 8%, the government collects Rs 2 lakh crore less from the same size of economy.

• Tariff cuts reduced customs revenue (tax on imports).

• Tax incentives for foreign investors (tax holidays, concessions) narrowed the tax base, i.e. fewer people and firms paid tax.
• Net effect: less money for development and welfare.

6. Siricilla tragedy (Class 11, Box 3.3)

• Power-sector reform ended subsidised electricity for the powerloom weavers of Siricilla.
• Power tariffs rose steeply → weavers' costs went up.
• Power cuts followed → looms stopped.
• Weavers are paid per piece of cloth → a power cut is a wage cut.

• About 50 powerloom workers died by suicide.

• NCERT is outdated here: Siricilla is now in Telangana, in Rajanna Sircilla district, not Andhra Pradesh.

• Lesson: removing a subsidy all at once, with no safety net, can wipe out small workers whose income is tied to output.

7. Distribution and the broader critique

Where growth went

• Growth was concentrated in telecom, IT, finance, entertainment, travel and hospitality, real estate and trade.
• It bypassed agriculture and industry, which provide livelihoods to millions.
• Gains in income and consumption went mainly to high-income groups.

Measuring inequality

• The Gini coefficient measures how unequally income or consumption is shared. It runs from 0 (everyone has the same) to 1 (one person has everything). As an index, the same scale runs from 0 to 100.
• The World Bank's consumption Gini index for India is 25.5 (2022-23 survey) [5].
• Official HCES data: between 2022-23 and 2023-24, the Gini fell from 0.266 to 0.237 (rural) and from 0.314 to 0.284 (urban) [6].
• Caveat: the World Bank says these figures probably understate inequality. Three reasons [5]:
• The rich are under-represented in consumption surveys.
• Adjusting the data compressed the spread between rich and poor.

• The survey weights give a low share to urban people.

• Consumption surveys also miss income and wealth gaps, which are usually much wider.

Poverty fell, but the gains were uneven

• Extreme poverty (below $3 a day, 2021 PPP) fell from 27.1% (2011-12) to 5.3% (2022-23) [5].
• At the $4.20/day line it fell from 57.7% to 23.9% [5].
• Poverty is now more concentrated in a few states:
• 46% of India's poor lived in Uttar Pradesh, Bihar and Maharashtra in 2022-23, up from 41% in 2011-12 [5].
• 72% of the poor live in ten lagging states [5].

Was inequality the cause of the crisis itself?

• Some studies read the 1991 crisis as an outcome of deep-rooted inequality.
• They argue that the externally advised package (IMF–World Bank conditions) made that inequality worse.

Globalisation: opportunity or strategy?

• Supporters point to market access, technology, and Indian firms going global.
• Critics see a developed-country strategy that widened gaps between nations and between people.

Class 10, Globalisation and the Indian Economy

• Well-off urban consumers gained: more choice, better quality, lower prices.
• Small producers bore the costs. Examples: batteries, capacitors, plastics, toys, tyres, dairy, vegetable oil.
• Workers moved into "flexible" jobs, meaning insecure jobs with no fixed hours, benefits or job security.
• The chapter calls for a "fair globalisation": benefits shared by all, labour laws enforced, and fair WTO rules. See the globalisation-mnc note.

Closing thoughts

• K.R. Narayanan (Class 11 epigraph): "GDP is not necessarily a measure of progress of a society."
• Farmer distress is the most lasting critique of the reform era. See the agri-marketing-msp-pds note.

Prelims Hooks

• Employment elasticity = % change in employment ÷ % change in GDP. A low value means jobless growth.
• UR = unemployed ÷ labour force × 100, not ÷ total population. This is a common trap.
• PLFS is run by the NSO, MoSPI. Since 2025 it uses a calendar-year (January–December) cycle, not July–June [2].
• PLFS 2025: UR (15+) 3.1%; youth UR 9.9%; agriculture's share of workers 43.0%; self-employed 56.2% [2].
• The WTO Agreement on Textiles and Clothing ended on 1 January 2005, after a 10-year, 4-stage phase-out (16%, 17%, 18%, 49%) [4].
• NTBs are barriers other than tariffs (quotas, standards, licensing). QRs are one kind of NTB.
• NCERT examples:
• Siricilla is a powerloom town, now in Telangana (Rajanna Sircilla district). NCERT still says Andhra Pradesh.

• Anantapur is where the groundnut case study is set.

• Gini runs from 0 (perfect equality) to 1 (perfect inequality). India's consumption Gini index is 25.5 (World Bank, 2022-23) [5].

• Class 10 lists the sectors hit by imports: batteries, capacitors, plastics, toys, tyres, dairy, vegetable oil.

Mains Points

• Jobless or low-quality growth:
• Headline UR is low: 3.1% in 2025 [2].
• But only 23.6% of workers hold regular salaried jobs, and 43% still depend on farming [2].

• Reforms moved output into services without moving workers out of agriculture. Labour-intensive manufacturing, MSMEs and skilling are the policy levers.

• Agrarian distress as a design failure:

• Lower public investment, withdrawn subsidies and import exposure came together, with no safety net.
• The Mahadeva case shows the cost-price squeeze.

• This links to MSP reform, irrigation (PMKSY-type spending), extension services, and calibrated import duties on edible oils.

• Fiscal trade-off:

• Tariff cuts and investor tax incentives shrank the tax base in the 1990s and squeezed social-sector spending.

• Argue for widening the base (for example through GST) instead of cutting rates, so that social spending is protected during consolidation.

• Equity vs efficiency:

• Poverty fell sharply: $3/day poverty went from 27.1% to 5.3% between 2011-12 and 2022-23 [5].
• But consumption Gini figures probably understate inequality, and poverty is concentrated in a few states [5].
• Use the Siricilla and Class 10 small-producer examples to argue for "fair globalisation" and sequenced reforms with transition support.