Modinomics’ Legacy ― Labour Traffic Now Flows From Factories to Farms

The ‘vikas’ train has begun to chug the wrong way, as it were.

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A worrisome aspect of the Indian economy is reflected in the share of employment in agriculture dramatically rising from 42.5% of the total employed in 2018-19 to 45.6% in 2019-20. This may signify an unusually large movement of labour from industry or services sectors to agriculture.

The total number of persons employed in India varies between 400 million and 470 million, as per credible private and government surveys which use varying measures ― from stringent to more liberal ― of actual employment status. So, a 3 percentage point increase in the share of agricultural employment in one year means that roughly 12-13 million workers have moved back from employment in industry or services to low wage agriculture in one year.

Why a large number of workers are moving from factories to rural farms needs deeper analysis and policy correctives. While the pandemic may have accelerated this process, there is little doubt that Modinomics had already provided fertile ground for this reverse flow of labour, when key policy goals of formalisation and digitisation of the economy suffered such disasters as demonetisation and a messed-up GST. The ‘vikas’ train has begun to chug the wrong way, as it were.

And don’t forget, the big increase in the share of agriculture in total employment has come at a time when unemployment itself is at a multi-decade high and women too have left the formal workforce in record numbers. This shows that the shift to rural employment is accompanied by distress. Besides, this is happening when farmers’ protests seeking higher income support are at their peak.

Historically, any period of consistent economic development is accompanied by reduction in poverty and a shift of labour from agriculture to industry and services. This is also marked by growing urbanisation and the broadening of the urban middle class, as seen in much of the developed and rapidly developing world. In India, this process had shown considerable acceleration in the boom years between 2005-06 and 2011-12, when over 37 million agriculture workers moved to non-agriculture jobs in manufacturing, construction etc.

Labour economist Santosh Mehrotra says this period saw an unprecedented shift from agriculture to non-agriculture employment. “This trend continued but it slowed down considerably after 2012 until 2018, but it never really reversed. However, for the first time, we are seeing a reversal as workers are moving from factories to farms now,” he says.

According to Mehrotra, “The really big shift in employment from agriculture to non-agriculture sectors happened after 2004 and accelerated till 2012 and continued thereafter somewhat slowly.” Interestingly, this period of 2005-06 to 2015-16 also saw the largest decrease in multi-dimensional poverty in India as 270 million people came out of poverty. It was the largest reduction anywhere in the world. This study was based on an index developed at the Oxford Poverty and Human Development Initiative (OPHI) and the UNDP. Last year in July, the Oxford Centre had warned that this progress was at risk in the context of the pandemic.

The pandemic has indeed exacerbated the problems of growth and employment which had started to manifest after 2016-17. All debate in this respect comes back to demonetisation and a badly implemented GST, as important markers of both the destruction of informal sector employment and the growing tendency for workers to move from factories to farms. This also shows up in the massive increase in demand for MGNREGA employment.

Things are so bad, Modi is now positioning himself as a sponsor of ‘Ann Mahotsav’ (free food festival) for millions of jobless migrant workers who have moved back to their villages. I recall the PM’s emphatic policy statement in 2014 ― he wanted to move the poor out of Congress’ dole economy and economically empower them to stand on their own feet. The celebration of ‘Ann Mahotsav’ makes a mockery of that objective. Indeed, the large-scale movement of workers from factories to low wage agriculture labour could end up as Modinomics’ most enduring legacy.