The limits of sectoral growth

Context: There is an issue with basing the employment figures on the Gross Value Added (GVA) growth, which sets the limit of sectoral growth in sectors like construction.

Rise of construction amid pandemic:

• The construction sector showed a 15% increase in gross value added (GVA) in the last quarter as compared to the same quarter in the last financial year (Nearly double the growth experienced by the sector in the previous year (7.7%)).
• The Chief Economic Advisor has recently pointed to the high growth rates in construction, possibly to indicate that growth would address the needs of the beleaguered workforce.
• The Union budget 2021 has also allocated a considerable sum towards infrastructure and construction - The government allocated 34.5% more than last year to infrastructure development, giving emphasis to roads and highways, railways, urban infrastructure, power, port, shipping, and airways.

Limits of sectoral growth: An increase in GVA does not always translate into growth in employment.

• Mere growth in a sector may not necessarily translate into benefits for its workers.
  • Based on Consumer Pyramids Households Survey (CPHS) data- In the last quarter of 2019-2020, when construction GVA grew at nearly 8%, employment in the same sector grew by 3%.
  • In the last quarter of 2020-21, as construction GVA grew at twice the rate, employment grew only by 2%.
• Employment grew only because construction remained the only fallback option for many.
  • For example, about 20%  of workers employed in the manufacturing sector had moved into construction,
• The massive GVA increase in this sector has not been accompanied by a commensurate increase in its employment capacity.
  • During “normal” times, the sector typically employs around 60-65 million workers — only about 10-15% of India’s total workforce.
  • Even if this sector were to expand in line with its GVA growth, it would not be able to provide employment beyond a certain level.
• Earnings for an average daily wage worker in the sector have actually declined: In January 2020, according to CMIE, the monthly earnings for a construction worker were around Rs 8,900; this has declined to Rs 8,600.
• Declining labour share: In the last quarter of 2019-20, of the roughly Rs 2.75 lakh crore GVA, labour share was 21% based on official estimates of GVA and CMIE-CPHS estimates of employment.
  • A year later same sector having grown by twice the rate, labour share actually fell to 18%.

Conclusion: The growth that the construction sector has experienced has not “trickled down” to the workers employed in it.  The need of the hour is to go beyond relying on sectoral growth as a means of delivering relief to workers. Direct transfers of cash and food are also needed, as is livelihood support through employment guarantee programmes.