The real challenge of Viksit Bharat@2047

The primary hurdle of the 2047 development goal lies in job creation for surplus agricultural workers and fresh workforce entrants

There is a great deal of discussion these days about the government’s announced ambition about Viksit Bharat@2047, which is to make India a developed country by 2047. The bulk of these discussions tend to focus on achieving an average economic growth rate higher than 7 per cent per year over the next few years, in order to increase our per capita annual income from the current $2,500 to the high-income level of $14,000.  The threshold for categorising a country as developed is higher and often set at $22,000, which if India is to reach by 2047, would require an average annual growth rate of 9 per cent.

I wish to focus attention on another change necessary for India to progress from its current low middle-income status to a high-income level, or even to an upper middle-income level. This is the required change in the employment structure, more particularly a substantial decline in agriculture employment and corresponding increase in industry and service employment.

An indication of the percentage employment in agriculture in the developed economies, which India aspires to join by 2047, is about 5 per cent in the Organisation for Economic Co-operation and Development countries, which is about one-eighth of India’s current  percentage employment in agriculture. Even in the upper middle-income countries, the share of agriculture in employment is just half of what it is in India today.  Do note that even developed countries that are major exporters of agricultural goods, like New Zealand or Brazil, show a share of agriculture in employment only in the 6-8 per cent range. Hence, India will require a large shift of workers out of agriculture to industry and services if it is to attain a high-income country status by 2047, or even an upper middle-income level.

A comparison between China and India may be helpful. In 1991, according to the World Bank database, the percentage of employment in agriculture was comparable in both countries — 60 per cent in China and 63 per cent in India. Thirty years later, according to the World Bank database, this percentage had fallen sharply to 23 per cent in China and much less so to 44 per cent in India. In absolute terms, in China about 200 million agricultural workers moved out to industry and services over this 30-year period. In India, though a significant number of workers did move out of agriculture over the three decades, employment in agriculture increased by 35 million, according to the World Bank data. An even more dramatic case is that of Vietnam, where the percentage of employment in agriculture crashed from 75 per cent in 1991 to 29 per cent in 2021. A significant part of the explanation is surely the much heavier reliance on job-creating, export-oriented growth in manufacturing in both China and Vietnam over these years.

In the case of India, a comparison between 1991 and 2021 figures hides one important trend. The fall in the share of agriculture and the rise in the share of industry and services took place mainly in the 25 years from 1990-91 to 2014-15. (See the attached table based on recent July 2024 KLEMS data (1)). Since then, there has not been much change, despite the frequent generation of programmes for manufacturing growth. Perhaps the slowdown in the shift from employment in agriculture could be due to Covid-linked reverse migration to rural areas. One must also note the difference within India among states. According to the recent data in Periodic Labour Force Survey (PLFS) 2022-23, several high income and higher growth states like Tamil Nadu, Kerala and even Punjab and Haryana show a substantially lower share of agriculture in employment, with rates in the 25-30 per cent range, almost comparable to upper middle-income countries.

Looking ahead to the years up to 2047, what can we expect? Assuming that we can recreate the 25-year trend from 1991 and repeat it in the 25 years from 2022 ending in 2047, the share of agriculture in employment will come down to a level under 25 per cent, comparable to the level in upper middle-income countries. However, this is still not at a developed country level.

The crucial issue is the rate at which we can generate decent jobs in industry and services to absorb the rising number of working-age persons seeking jobs and the surplus labour shifting out of agriculture.  Projecting the official working age population (age 15-59) forecasts up to 2047 and assuming that the proportion of this group seeking work will remain at around 65 per cent, we will have about 120 million new job-seekers. A more problematic forecast is the scale of assessment of the shift of surplus labour out of agriculture. If we aim for a developed or even high-income country status then the share of agriculture has to come down to at most 10 per cent, and that means a shift of about 150 million people out of agriculture. Thus, this adds up to the creation of 270 million new jobs in industry and services to absorb the increase in employment-seeking population and the shift of surplus labour out of agriculture.

This amounts to more than 10 million new industry and services jobs per year over the next 25 years. This is twice as high as the average annual rate of job creation outside agriculture indicated in the KLEMS data in the three decades when our gross domestic product (GDP) growth averaged around 6 per cent. A more realistic perspective would be to aim at an upper middle-income status with agriculture accounting for 20 per cent of employment.  Even this would require new job creation at the rate of about 7 million a year, which also is higher than the average that has been achieved over the past three decades.

This then is the real challenge of the Viksit Bharat@2047 campaign. What this goal requires is a development policy that focuses on  a credible strategy for decent job creation in industry and services, particularly in five  states (UP, Bihar, Jharkhand, Rajasthan and Madhya Pradesh) where the current share of agriculture in employment averages around 55 per cent, and which will account for around 90 per cent of the increase in the working-age population over the next 25 years. The Viksit Bharat@2047 dialogue must focus on how best this can be done rather than on GDP growth rate projections.

desaind@icloud.com

1. This stands for well researched analysis of productivity, based on economy wide data of gross output and capital (K), labour (L), energy (E), materials (M) and services (S) done at the Centre for Development Economics, at Delhi School of Economics and supported by the Reserve Bank of India