Draft Report of the High Level Group on Services Sector


Employment in Services Sector



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Employment in Services Sector


At present services account for about 26 per cent of total organized sector employment in the country while contributing a little over 55 per cent to the national GDP. A sectoral disaggregation of the employed workforce shows that the contribution to employment of services (excluding construction) rose from 22.8 to 23.4 per cent, while the workforce increased from 397.0 to 457.8 million between 1999-2000 and 2004-05 (details in Table 1c below). Out of the increase in workforce by 60.8 million, the incremental share of services was 16.8 million. However, despite the low overall elasticity of employment in the country (at just 0.48) and not only in the services sector, the latest NSSO data shows that employment elasticity is reasonably high (and increasing) in certain services categories, with financing, insurance, real estate and business services registering an elasticity of employment of 0.94 followed by construction sector employment elasticity at 0.88.
Table 1c: Employment Statistics (disaggregated)




Sectoral Share (million)

1999-2000

Sectoral Share (%)

1999-2000

Sectoral Share (million) 2004-05

Sectoral Share (%)

2004-05

Elasticity

Agriculture, forestry & fishing

237.56

59.8

267.57

58.4

1.52

Mining & quarrying

2.27

0.6

2.74

0.6

0.82

Manufacturing

48.01

12.1

53.51

11.7

0.34

Electricity, gas and water supply

1.28

0.3

1.37

0.3

0.33

Construction

17.62

4.4

25.61

5.6

0.88

Trade, Hotels & restaurant

37.32

9.4

47.11

10.3

0.59

Transport, storage & communication

14.69

3.7

17.38

3.8

0.27

Financing, insurance, real estate and business services

5.05

1.3

6.86

1.5

0.94

Community, social and personal services

33.20

8.4

35.67

7.8

0.28

All Services excl. construction

90.26

22.8

107.02

23.4




Total

397.0

100

457.82

100

0.48

Source: C Rangarajan et al (2007), ‘Revisiting Employment and Growth’, ICRA Bulletin - Money & Finance Vol 3(2); data sourced from NSSO 2004-05, based on 61st Round Survey.

Nonetheless, drawing ready inferences from the above official data may be misleading, as it is believed that a significant portion of the Indian population presently accounted for under the agriculture/rural employment is working in the unorganized services sectors, both in the rural and the urban areas, in particular in the Trade, hotels and transport business services; and the Community, social and personal services sectors (though the employment share of this last sector is declining in the formal sector, as indicated in Table 1c above).2

The other new source of employment has been the Business Processing Outsourcing (BPO) services. Figure 2 below highlights the rapid employment growth in India’s IT and ITeS/BPO sectors. According to NASSCOM estimates, the number of total knowledge professionals employed in the Indian IT-BPO sector increased from 230 thousand in 1998 to nearly 2 million in 2007-08. Decomposition of the employees in the domestic as opposed to export sectors is shown in Table 1d.

Figure 2: Rapid Growth in Employment in India’s IT & BPO industry

Source: NASSCOM 2007


Table 1d: Knowledge Professionals Employed in the Indian IT-BPO Sector

(in thousands)




 

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08E

Software (exports sector)

110

162

170

205

296

390

513

690

865

Software (domestic sector)

132

198

146

285

318

352

365

378

427

BPO

42

70

106

180

216

316

415

553

704

Total

284

430

522

670

830

1058

1293

1621

1996
Source: NASSCOM Strategic Review 2008.

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