Unemployment & Imbalances in the Economy

By Dr. V. M. DANDEKAR

Summary

Delivered as the seventh A. D. Shroff Memorial Lecture under the auspices of the Forum of Free Enterprise in Bombay on 27 October 1972, V. M. Dandekar’s address takes stock of the employment failure of two decades of Indian planning. Using provisional 1971 Census data, he shows that while the population grew by 24.6 per cent between 1961 and 1971, the recorded number of workers actually fell by 2.6 per cent; even setting aside the suspicious decline in female workers and confining the analysis to males, he calculates a net addition of at least ten million workers to the backlog of unemployment over the decade. Dandekar locates the failure not in agriculture — whose employment expanded by 19.8 per cent against the limited scope for absorbing more labour — but in the non-agricultural sector, where employment grew by only 6.9 per cent. Within that sector, the organized portion (about a third) grew by 42.2 per cent while the unorganized portion contracted by 6.7 per cent, leaving the agricultural countryside to passively absorb a surplus population that industry could not employ.

The second half of the rendered pages builds the policy critique. Dandekar argues that to even stabilize agricultural employment at 100 million workers, industrial employment would have to grow at roughly 11.6 per cent per annum during 1971-81 — more than three times the 3.6 per cent rate actually achieved in the previous decade. He is sceptical of fashionable ‘crash programmes’ such as running factories seven days a week, comparing them to dieting by skipping a meal a week to plug a food deficit. The deeper diagnosis is one of imbalances: between the production capacities of different industries (inter-industry imbalance), and between the deployment of capacity and the structure of consumption demand. He notes pointedly that faulty production planning is ‘not a monopoly of the public sector’ and traces under-utilisation to wrong technology choices and the import of expensive equipment that was never genuinely needed.

Dandekar closes the rendered portion by turning to the strain in current thinking that blames industrial labour unrest and argues for stricter discipline. He rejects this framing, calling the wage-profit fight a classical class conflict that ‘cannot be resolved on the Forum of Free Enterprise’ and warning that the country cannot afford it at the present juncture. He then dismantles the employment-orientation argument for industrial policy: because every industry is linked to every other through backward and forward linkages, employment cannot be attributed to a single industry, and the purpose of industrial production is not employment per se but meeting the present and future needs of the population. The discussion of labour-intensive technology choice has just begun when the rendered chunk ends.

Key points

• Frames the lecture around a paradox in the 1971 Census: population up 24.6 per cent over the decade, but the recorded labour force down 2.6 per cent.

• Estimates a net addition of at least 10 million male workers to the backlog of unemployment between 1961 and 1971 even after allowing for under-recording.

• Identifies the agricultural sector’s 19.8 per cent employment growth as ‘remarkable’ given limited scope, and pins the failure on non-agricultural employment growing only 6.9 per cent.

• Decomposes non-agricultural employment into an organized sector that grew 42.2 per cent and an unorganized sector that shrank 6.7 per cent, with government service growing ‘autonomously’ regardless of the rest of the economy.

• Calculates that to stabilize agricultural workers at 100 million by 1981, industrial employment would have to grow at 11.6 per cent per annum versus 3.6 per cent achieved in the previous decade.

• Dismisses crash programmes (e.g. running factories seven days a week) as arithmetic gimmicks and argues that under-utilization of capacity stems from deeper imbalances, faulty planning, and inappropriate technology choices — ‘not a monopoly of the public sector’.

• Rejects the suggestion that industrial labour unrest is the cause of low productivity growth, calling the wage-profit dispute a class conflict between entrepreneurs, capital-owners, managerial class and workers that cannot be resolved on the Forum of Free Enterprise.

• Argues against the ‘employment-orientation’ framing of industrial policy: through backward and forward linkages employment is indirect across the whole economy, and the purpose of industry is to meet population needs, not to provide jobs per se.

Generated by the v1.5 extraction pipeline. Awaiting editorial review.