Estimating Employment Elasticity of Growth in a High-growth Indian State:The Case of Maharashtra

Employment generation and job-creation in above-average growth states like Maharashtra will be critical to growth and development in India, even as India seeks to transform its status to being the world’s third-largest economy. This paper investigates the policy challenges to employment generation and the phenomenon of jobless growth facing India using the case of Maharashtra - the highest growth state and the largest contributor to India’s GDP. By applying the concept of employment elasticity to diverse data, both at the aggregate and sectoral levels for the period 2004-05 to 2014-15, the sensitivity of employment to value added has been analyzed. The paper highlights two dimensions of the employment challenge. Firstly, an aggregate employment elasticity of 0.1 at the state level, with agricultural employment elasticity of -0.4 indicates sluggish expansion in employment. State governments will be well advised to identify and concentrate on high employment generating sectors such as organized manufacturing, especially in sectors such as transport equipment, basic metals and fabricated metals and textiles, textile products and leather. Secondly, it indicates that over the next five years, 2018- 2023, the number of jobs being created in the state will not be able to keep pace with the number of job seekers. Based on these findings, state governments will be well advised to identify and concentrate on high employment generating sectors such as organized manufacturing, especially in sectors such as basic metals and fabricated metals, leather, textiles, textile products and transport equipment.