India being the second largest country in terms of population, it has a large labour force (people who are able to and willing to work). In the year 1999-2000 there were 39.7 crore employed workers in the country, which is about 40 per cent of the total population. The remaining 60 per cent population in the country are dependents.
Thus for every worker there is 1.5 dependents. These dependents constitute children, aged and the unemployed. Because of high population growth rate the percentage of children in India is higher than in developed countries.
Agriculture has been the main source of employment in India. During the period 1950-70 it provided employment opportunity to more than two-third of the labour force. The share of the primary sector (agriculture and allied activities) in GDP has declined over time in Indian economy.
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For the year 2000-01 primary sector contributed 24.2 per cent of the GDP. Compare this with the employment share. In the year 1999-2000 nearly 60 per cent of the labour forces were engaged in agriculture. We observe that the decline in GDP share of the primary sector is not accompanied by a corresponding decline in employment share.
An indication is that workers employed in primary sector have a very low productivity than in secondary and tertiary sector. In the developed economies less than five per cent of the labour force is engaged in agriculture.
It has been made possible by using modern technology and mechanisation of agriculture. In some parts of India, modern technology is employed in agriculture. However, a majority of farmers in India continue to use obsolete technology.
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A second implication is that there are too many people engaged in agriculture. In fact, agriculture has been a way of life for the households engaged in the agricultural activities. Very few children look for employment outside agriculture. And those who do not get employment anywhere else start working in the family owned land.
As a result, often we see a feature termed ‘disguised unemployment’ in Indian agriculture. It is a situation where a person is engaged fully in agriculture but his contribution is zero. It implies that if we take away the worker agricultural output will not decline. Suppose five persons are working in a field and the output is 10 tonnes of wheat.
If we reduce the number of workers to four, then also output will remain the same. Thus the fifth worker worked in the field, but he is as good as unemployed, because his contribution is zero.
It has been a policy of the government to shift the additional labour force in the agricultural sector to secondary a/id tertiary sectors. Recall that service sector contributes more than half of the GDP but provides employment to less than one-fourth of the labour force. Thus the productivity of labour is higher in the service sector.