Q. Economic growth in the recent past has been led by increase in labour activity.” Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity.

Model Answer: 

Economic Growth, Labor Activity, and Job Creation

Economic growth is influenced by various factors, with labor activity playing a crucial role in recent years. This statement reflects the significant contribution of increased workforce participation and employment to overall economic output.

The relationship between labor activity and economic growth can be explained as follows:

• Labor activity refers to the participation and engagement of the workforce in economic processes.
• Recent trends show increased labor force participation, especially among women and youth.
• This has led to higher employment rates and overall economic output.
• For example, India’s GDP growth rate increased from 6.1% to 7.2% between 2018-19 and 2022-23, coinciding with a rise in labor force participation from 49.8% to 52.1% during the same period.

The increased labor activity has contributed to economic growth through:
– Expansion of the workforce
– Higher productivity in labor-intensive sectors
– Increased consumer spending due to rising incomes

To create more jobs without compromising labor productivity, a balanced growth pattern is essential. This can be achieved through:

1. Promoting labor-intensive sectors:
• Focus on manufacturing (e.g., textiles, food processing)
• Encourage construction and infrastructure development
• Support service sectors like tourism and hospitality

2. Investing in skill development:
• Implement vocational training programs
• Promote industry-academia partnerships
• Encourage upskilling and reskilling initiatives

3. Fostering technological adoption:
• Promote digitalization in MSMEs
• Encourage automation in manufacturing
• Support innovation in agriculture (e.g., precision farming)

4. Supporting MSMEs and entrepreneurship:
• Simplify regulations and improve ease of doing business
• Provide access to credit and financial support
• Encourage formalization of informal sector

5. Implementing supportive policies:
• Promote flexible work arrangements
• Support gig economy and freelancing
• Develop robust physical and digital infrastructure

Conclusion: A balanced approach focusing on job creation and productivity enhancement is crucial for sustainable and inclusive economic growth in India.