The process of structural transformation in the Indian economy is a key area of concern for policymakers. This shift involves transferring surplus labor from agriculture to other sectors where productivity and average incomes are higher, particularly in manufacturing and modern services. Two recent sets of data released by the National Sample Survey Office (NSSO) and the National Statistical Office (NSO) provide insights into this transformation, particularly in relation to the agriculture and manufacturing sectors.
Understanding Structural Transformation
Structural transformation refers to a compositional shift in the economy that involves transferring surplus labor from low productivity sectors, such as agriculture, to higher productivity sectors, such as manufacturing and modern services. The goal is to raise productivity and average incomes, ultimately leading to economic growth.
The NSSO’s latest annual Periodic Labour Force Survey (PLFS) report for 2021-22 (July-June) shows that the farm sector’s share in the country’s employed labor force is at 45.5%, down from 46.5% in 2020-21, but still higher than the 2018-19 low of 42.5%. This suggests that while there has been a decline in the number of people employed in agriculture, the sector still employs a significant proportion of the country’s population.
What is PLFS?
The National Sample Survey Office (NSSO) launched the Periodic Labour Force Survey (PLFS) in 2017. The survey aims to estimate key employment and unemployment indicators such as worker population ratio, labor force participation rate, and unemployment rate in a short time interval of three months for urban areas only in the current weekly status (CWS). It also estimates employment and unemployment indicators in both usual status and CWS in rural and urban areas annually.
The Need for Structural Transformation
India’s agricultural sector generates 19% of income, yet it employs 45% of the country’s population. Even taking into account high value-addition, the sector cannot support such a large proportion of the population. Additionally, the GVA-GVO ratio, which is not a measure of productivity, is higher in agriculture than in modern manufacturing and services. This means that productivity in agriculture is low compared to other sectors, explaining why the average farmer earns less than their urban counterpart. To earn more, farmers’ productivity needs to go up, which means producing more on the same land with fewer hands.
Enabling the Transition
To enable the transition from agriculture to other sectors, policymakers must focus on creating more employment opportunities in manufacturing and modern services. This will not only raise productivity in agriculture but also help to reduce the unemployment rate in the country. Additionally, investment in education and skills training can equip workers with the necessary skills to find employment in other sectors.
About NSSO and NSO
The National Sample Survey (NSS) is responsible for conducting large-scale sample surveys in diverse fields on an All India basis. Data is primarily collected through nationwide household surveys on various socio-economic subjects, Annual Survey of Industries (ASI), etc. The NSS has four divisions: Survey Design and Research Division (SDRD), Field Operations Division (FOD), Data Processing Division (DPD), and Survey Coordination Division (SCD). The NSSO merged with the Central Statistical Office (CSO) in 2019 to form the National Statistical Office (NSO). The NSO comes under the statistical wing of the Ministry of Statistics and Programme Implementation (MoSPI) and was first envisaged by the Rangarajan Commission.
MCQs on Challenges and Way Forward for the Agricultural Sector in India
-
What is structural transformation in the economy?
A. A shift of surplus labor from low productivity to higher productivity sectors
B. An increase in the number of people employed in agriculture
C. A decrease in the number of people employed in modern services
D. A shift of surplus labor from high productivity to low productivity sectors
-
What is the purpose of the NSSO’s Periodic Labour Force Survey (PLFS)?
A. To estimate key employment and unemployment indicators
B. To survey nationwide household surveys on various socio-economic subjects
C. To estimate productivity in agriculture
D. To equip workers with necessary skills for employment
-
What is the role of investment in education and skills training in enabling the transition from agriculture to other sectors?
A. It can equip workers with the necessary skills to find employment in other sectors.
B. It can reduce the unemployment rate in the country.
C. It can raise productivity in agriculture.
D. It can create more employment opportunities in manufacturing and modern services.
