september 25, 2010
Jobless Growth
The years of rapid economic growth have been years of jobless growth; does the government care?
T
he latest National Sample Survey (NSS) estimates of em-
ployment and unemployment in the country indicate that
in an overall complex employment picture the rate of job
creation during the years of rapid growth has been poor. The
estimates in the recently released NSS report on the 64th round
(2007-08) are the first ones after the UPA government took over in
2004 and the first such numbers after the last quinquennial
round of 2004-05. The 2004-05 NSS survey had suggested that 12
million jobs had been created every year or a growth of 2.85% a
year between 1999-2000 and 2004-05, which even exceeded the
growth rate of the population. It was this high growth in employ-
ment which was reflected in the government’s first “Annual Re-
port on Employment” released last July, when it credited itself
with creating enough jobs in the economy. However, the results
of the 64th round not only suggest that the high GDP growth dur-
ing the 2004-07 period failed to create enough jobs, they also con-
firm the earlier consensus that the high growth of employment
during 1999-2005 was essentially distress-driven and a result of
push factors operating due to the agrarian crisis and a decelera-
tion in real wage growth.
The latest NSS results show that the total employment created,
according to the usual status, between 2005 and 2008 was only
2.4 million, which was just 0.8 million per year or a mere fraction
of the 12 million created per year between 1999-2000 and 2004-05.
The total number of workers increased from 457.9 million in
2004-05 to 460.2 million in 2007-08, a growth rate of just 0.17%
per year as against the 2.85% per year growth rate achieved
between 1999-2000 and 2004-05. This is the lowest rate of em-
ployment generation in the last three decades, even lower than
the previous spell of jobless growth of 1993-2000 when employ-
ment increased by less than 1% per year.
What has happened and in which category has employment
been created? A detailed examination of the trends indicates
that while employment generation decelerated considerably in
urban areas, increasing by only 4.4 million between 2005 and
2008, it actually declined by two million in rural areas. But in
both rural and urban areas, the decline was largely in the female
workforce. Overall, employment of males increased by 5.2 million
per year but declined by 4.4 million per year for females. Sectoral
trends also suggest that the trend of non-farm diversification
in employment in rural areas, which was also the focus of the
Economic & Political Weekly  EPW   september 25, 2010  vol xlv no 39
Eleventh Plan, has not yielded any results with the 2007-08
estimates showing almost no non-farm employment diversifica-
tion compared to 2004-05.
These trends are also confirmed by the daily status measure of
employment – which better reflects the extent of employment and
unemployment from day to day – that show that the person days
of employment in rural areas declined from 93.8 billion person
days in 2004-05 to 92.9 billion person days in 2007-08. This de-
cline in person days of employment would have been far greater
had it not been for the National Rural Employment Guarantee
Scheme (NREGS). The employment created by public works (in-
cluding the NREGS) increased from 221 million person days in 2004-
05 to 939 million person days in 2007-08. While these estimates do
suggest a serious problem in job creation, they also suggest a
need for careful analysis of the presumed linkage between eco-
nomic growth and employment creation. Seen in conjunction with
the very high employment creation during 1999-2005, a large
part of these fluctuations is because of the way women partici-
pate in the labour force. It is clear that a major part of the high
growth rate in employment between 1999-2000 and 2004-05 as
well as subsequent jobless growth is a result of the “income
effect”. What seems to have happened is that a large majority of
women workers moved into the labour force during 1999-2005
and looked for work outside the home due to the agrarian crisis and
distress in rural areas. And it is these women workers who have
moved back into their homes as soon as the situation improved
because of higher agricultural productivity between 2004-05 and
2007-08. This was also aided by increased incomes due to pro-
grammes such as the NREGS and the consequent increase in wage
rates. The growth in wage rates for casual workers which deceler-
ated to less than 1% per annum during 1999-2005 shows an increase
of more than 4% per annum during 2004-07.
Even discounting the income effect and the subsequent decline
in the size of the female workforce, the aggregate picture does
confirm apprehensions that economic growth between 2004-05
and 2007-08 has failed to create enough jobs in the economy.
Not only has male employment growth remained sluggish,
growing at 1.66% per annum, marginally better than during the
previous episode of jobless growth in the 1990s, it shows almost
no non-farm diversification. The other worrying signal is the
slow pace of employment creation in the sectors that are driving
7
EDITORIALS
GDP growth. While aggregate employment in the primary sector
declined in absolute terms, the growth rate of employment in
the secondary sector and services was only 1% per annum.
The NSS numbers are nowhere close to the claims of employ-
ment creation made in the Mid-Term Appraisal of the Eleventh
Plan of the Planning Commission. These also betray the tall
claims made by the Economic Advisory Council of the Prime
Minister which said a few years ago that a growth rate of
9-10% would be sufficient to absorb the annual addition of
around 12 million to the labour force purely as a result of the
demographic dividend.
Compulsory Licensing of Pharmaceutical Patents
It is scandalous that India is yet to issue a single compulsory licence for a drug after the 2005 amendment.
F
ive years have gone by since the reintroduction of the
product patent regime for pharmaceuticals and it is time
public policy reckoned with the implications of local firms
being debarred from producing and selling a patented drug even
if they develop the processes of manufacturing the same, unless
they are granted a compulsory licence (CL). The latter is a right
granted by the government that allows parties other than the
patent holder to produce and sell a patented product or use a pat-
ented process, without the consent of the patent holder. Even the
Government of the United Kingdom, where neoliberalism was
first conceived, takes advantage of CLs in order to reduce costs in
the National Health Service, but the Government of India, which
can also avail of CLs for non-commercial purposes, for example,
to authorise the production of patented medicines for free or sub-
sidised distribution in government hospitals, has not done so.
The interests of the transnational pharmaceutical companies
holding the patents seem more important than the public interest.
Indeed, in the aftermath of the “Doha Declaration on the TRIPS
[Trade-Related Aspects of Intellectual Property Rights] Agree-
ment and Public Health” of November 2001, a number of coun-
tries have issued CLs, some of them in the context of the HIV/AIDS
crisis. For instance, Brazil, Ecuador, Kenya, Malaysia, South Africa,
and Thailand have issued CLs for anti-HIV/AIDS drugs. India has
around 25 lakh persons suffering from HIV/AIDS, but only 12% of
them are being treated. The first generation drugs are now less
effective, and it is time they are all administered the second and
third generation drugs. The National AIDS Control Organisation can
distribute these patented drugs to many more of those affected if
the government takes advantage of CLs for non-commercial use.
(Of course, a CL can also be granted for commercial purposes
upon a potential licensee not being able to obtain a voluntary
licence on reasonable terms and within a definite time frame.)
Surprisingly, it is still not sufficiently clear, though there should
have been no ambiguity on this count after the Doha Declaration
(mentioned above), that “Each member has the right to grant com-
pulsory licences and the freedom to determine the grounds upon
which such licences are granted”. The government now seems to
be waking up to the implications of this Section 5(b) of the Doha
8 september 25, 2010  vol xlv no 39  EPW   Economic & Political Weekly
But more than the issue of employment estimates, the lack of
employment generation in the first three years of the UPA government
is a serious question mark on its commitment to inclusive growth.
Available evidence also points to an increasing inequality in in-
comes and opportunities. Not only has the intersectoral productivity
gap widened, the share of wages in value added has continued to
show a decline with that of profits rising. The 64th round of the
NSS also suggests a widening of the wage gap between the skilled
and unskilled labour force at a faster rate than before. Clearly,
the challenge of decent employment creation will prove to be a
stumbling block in realising any measure of inclusive growth.
Declaration and has put up a Discussion Paper on “Compulsory
Licensing of Patents” on the web site of the Department of Industrial
Policy and Promotion of the Ministry of Commerce and Industry,
soliciting views/suggestions of the public by 30 September 2010.
The paper highlights the fact that “No CLs have been issued in India
under the amended Patents Act”, this despite the fact that “65%
of the Indian population still lacks access to essential medicines”.
The paper draws the attention of the readers to two significant
cross-border acquisitions –Ranbaxy Laboratories by the Japanese
transnational Daiichi Sankyo and Piramal Health Care by the US
transnational Abbot Laboratories, both of which are in the list of
the top 10 pharmaceutical companies operating in India. The
authors of the paper are concerned that “If large Indian generic
companies with the capability to manufacture drugs based upon
a CL ... are themselves taken over, then the regime of cheap and
effective drugs may be threatened...” The paper goes on to discuss
what it calls the “flexibilities” incorporated in the Patents Act, 1970
as amended in 2005 in its Chapter XVI entitled “Working of Patents,
Compulsory Licences and Revocation”, which deals with the issue of
CLs. We need not go over this ground, but a few comments are
called for. Why cannot the government put in place a CL system
which is simple and easy to administer and implement? Has the
government really taken full advantage of all the “flexibilities”
that the TRIPS Agreement post-the-Doha-Declaration provides?
What are of practical importance are the grounds for grant of a CL
and the procedure. The grounds of “reasonable requirements of the
public” or “reasonably affordable price” can be legally challenged
and such a process can be lengthy and its outcome uncertain. So
such grounds need to be clearly and unambiguously elaborated
upon. As regards the question of a “reasonably affordable price”,
the discussion paper has some suggestions, among which are the
very reasonable guidelines of the Japanese Patent Office.
What then seems to be holding back the government from tak-
ing advantage of the instrument of the CL in the public interest?
Frankly, the government seems more bothered about the interests
of the large transnational pharmaceutical companies. We are
reminded of the top priority the then Indian Prime Minister Atal
Behari Vajpayee gave to resolving the issue of “data exclusivity”