India Intelligence Report

   Economic Census Says Rural Sectors Growing Faster



  • Rural areas growing faster than urban

  • Top 5 states employ 49% of workforce

  • 2 North-East states in top 5 states and Jammu & Kashmir has highest employment

In the first sign that economic reforms are working, the “Economic Census 2005” has shown that 61.3% of rural enterprises to be growing faster than their urban peers and a lot of fast-paced development is happening in the neglected North-East.

Minister for Statistics and Implementation GK Vasan presented some very interesting data thrown up by the census challenging basic assumptions made by many analysts:

    Enterprises have grown at 4.8% a year in 1988-2005, against 2.36% in the previous Census. On the other hand, employment has grown at the rate of 2.5% per annum in the past seven years, compared to 1.7% in the last Census period.

    In the past 7 years, enterprises in rural areas grew at 5.53% compared to 3.71% in urban areas.

Despite15 years of insurgency, Jammu and Kashmir leads in employment in industrial units with a growth rate of 6.82% annually.

Of the 421 lakh (1 lakh = 100,000) enterprises, 258.1 lakh (61.3%) are in the rural areas while the remaining 163.1 lakh (38.7%) are in towns and cities.

Tamil Nadu has the largest -- 44.4 lakh (10.56% of the total enterprises), followed by Maharashtra, with 43.7 lakh (10.93%) enterprises in terms of number.

In terms of employment, Maharashtra employs 118 lakh people (11.95%) among a total of 989.7 lakh employed and Tamil Nadu employs 9.89 lakh (9.97%).

The best five States are Mizoram (9.6%), Kerala (8.93%), Tripura (8.79%), Tamil Nadu (8.49%) and {Assam} (6.57%).

The employment growth rate in rural areas also witnessed a 3.33% growth against 1.68% in the urban areas.

The number of enterprises has grown at 4.8% against 2.36% during the previous economic census.

There are 76.8% non-agricultural enterprises in rural India and 23.2% agricultural enterprises.

As much as 20.9% agricultural enterprises in the rural areas deal with the non-crop production and plantation activities

Andhra Pradesh, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal account for about 49% of total employment in the country.

Adult female workers make up about 19% of the total workforce with 24% in rural areas 14% in urban areas.

Even with these numbers of growth across the board and more importantly in the rural areas, one trend that stands out is that growth is predominantly capital driven and less labor driven. Principal Economist of rating organization CRISIL said that “The organized sector numbers have shown that overall employment has been declining, not just for the public sector but also for private sector corporate sector. The trend in manufacturing has been such that it has not favored labor but capital intensive modes of production. I think part of the problem lies with our labor laws.”

s Communists have been relentlessly criticizing jobless growth brought in by liberalization and completely ignoring the repressive socialism-inspired protectionist laws. Employment in the past was driven by social spending that essentially creates disguised unemployment. Driven by capital market and investor requirements, private companies hire personnel on a need basis and not based on providing employment.

While the census focused on enterprises and organized sector, there is a large population (about 252 million or 56%) who are not accounted for. This population works either in agriculture, do small business not yet accounted by the census. India needs a concerted effort to increase its manufacturing base currently not attractive because of repressive labor laws.

The important message is that the population needs some form of employment to sustain itself. Communist driven handouts, disguised employment, or welfare entitlements are not the answer and will simply nullify the optimal capital usage in India.