Unemployment, Public Expenditure & Economic Growth in India During Post Economic Reform Period

Abstract

Jitendra Kumar Sinha

The paper examines the unemployment, public expenditure, and economic growth relationship in the Indian economy. A model of unemployment, public expenditure, and economic growth was formulated and the time series data were corrected for stationarity using the Hodrick-Prescott filter. The growth rate of the economy has a positive but relatively low correlation coefficient with the unemployment level in India and has influenced the unemployment rate only by 8 percent. Besides, the unemployment rate has also a low correlation coefficient with public expenditure. A log linearized version of the model has revealed that the employment elasticity of economic growth was negative and significant which indicates the notion of jobless growth applied to the Indian economy during the post-economic reform period. The high level of unemployment currently experienced in India can be attributed to the low employment intensity of GDP growth. The negative relationship between the level of employment and GDP growth rate is a pointer that investments are capital-intensive that needs to be reversed with a policy of labor-intensive investment to contribute significantly to employment generation. The government should urgently create more employment opportunities to absorb the unem- ployed workforce through the modernization of the agriculture sector, which is providing livelihood to nearly half of its population but contributing too small towards the gross domestic product.

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