© The Indian Express Pvt Ltd
Tags:
Journalism of Courage
India’s middle class after Independence was largely created by the public sector.
Employment in the public sector stood at 194.7 lakh and that in the organised private sector only at 80.6 lakh as on March 31, 1995. The former — employees in the central and state governments plus quasi-governments (public sector undertakings) and local bodies — fell to 176.1 lakh and the latter rose to 119.7 lakh by March 31, 2012.
The Ministry of Labour & Employment doesn’t seem to have compiled or released statistics on organised public and private sector employment after 2011-12 (April-March). Even the data last published in the Finance Ministry’s Economic Survey for 2018-19 stops at 2011-12.
But it is fair to assume that the trend of organised employment shifting from the public to private sector — especially post the economic reforms of 1991 — has gathered pace after 2011-12.
One indicator of that is the number of regular employees with the Indian Railways. Between 1990-91 and 2022-23, these plunged from 16.5 lakh to 11.9 lakh. Even after accounting for the increase to 12.5 lakh last fiscal, the drop from the 1990-91 peak works out to 4 lakh or almost a quarter. Still sharper is the reduction in employment with Central public sector enterprises: From 22.2 lakh in 1990-91 to just over 8.1 lakh in 2023-24 (see chart).
On the other hand, take the information technology (IT) industry, the symbol of India’s post-reform “second middle class”. Tata Consultancy Services (TCS) and Infosys already had 45,714 and 36,750 employees respectively at the end of 2004-05, which soared to 4,48,464 and 2,42,371 fifteen years later.
The real boom, though, took place after Covid-19. As the pandemic triggered increased demand for digitisation even among businesses that were hitherto slow in adoption, it had a beneficial impact on India’s exports of software services and also employment in IT companies.
The total headcount in the big-five firms — TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra — went up from below 11.5 lakh in end-March 2020 to above 16 lakh in end-September 2022.
Although the numbers have dipped slightly since, the big-five IT companies together had 15,34,708 employees as on December 31, 2024 (table 1). That’s more than the 12,52,180 regular employees with the Indian Railways as of 2023-24. It is also more than the currently estimated 14.2 lakh officers, soldiers, airmen and sailors in the three defence services.
Another, not as much highlighted, Middle Class 2.0 story is the banking industry.
In 1991-92, scheduled commercial banks in India had a total employee strength of about 9.8 lakh. Public sector banks had a lion’s share of nearly 8.5 lakh or 87% in that. The latter number registered a decline to 7.7 lakh by 2020-21, but still exceeded the 6 lakh employees in private sector banks.
The period 2022-23 was a landmark, when private sector banks, for the first time, overtook their state-owned counterparts in employment. At the end of 2023-24, their employee strength was 8.74 lakh, as against the less than 7.5 lakh of public sector banks. This, even as the banking industry overall today employs roughly twice what it did in 1991-12 (table 2).
A better idea of the private sector-led transformation can be had at an individual bank level.
The big-five private sector banks — HDFC, ICICI, Axis, Kotak Mahindra and Bandhan Bank — together had 6.1 lakh-plus employees in 2023-24. HDFC’s employee strength of 2,13,527 was marginally lower than the 2,32,296 of the State Bank of India. The numbers at ICICI (141,009) and Axis Bank (104,332) were higher than the 1,02,349 of the second largest public sector lender Punjab National Bank. The employee strength at Kotak Mahindra (77,923) and Bandhan Bank (75,748), too, was comparable to that in other state-owned banks: Canara Bank (82,643), Union Bank of India (75,880) and Bank of Baroda (74,886).
Simply put, liberalisation and globalisation opened up new industries and opportunities for private enterprise.
That, in turn, led to unprecedented employment generation – whether in IT and finance (banking, insurance, mutual funds, market intermediation/brokerages, etc) or accountancy, legal, health, hospitality and tourism, transportation and logistics, aviation, media, advertising, sports and entertainment, real estate and retail services.
The private sector-led Middle Class 2.0’s expansion happened just when the post-Independence government-created Middle Class 1.0 started shrinking with the initiation of reforms.
The above job generation, however, has had a major limitation. It has been mainly in services. India, unlike China and most industrialised countries, has not experienced “structural transformation” involving the large-scale transfer of surplus labour from agriculture to sectors — particularly manufacturing and modern services — where productivity (output value per worker) and average incomes are higher.
Official Periodic Labour Force Surveys (PLFS) show the farm sector’s share in India’s workforce decreasing from 64% in 1993-94 to 48.9% in 2011-12 and further to 42.5% in 2018-19, but subsequently going up to 46.2% in 2023-24.
Manufacturing’s share climbed initially from 10.4% in 1993-94 to 12.6% in 2011-12, only to come down to 11.4% in 2023-24. The latest 2023-24 PLFS report reveals the 11.4% share of manufacturing in the total employed labour force to be below that of construction (12%), trade, hotel & restaurants (12.2%) and “other services” (11.9%).
Thus, while the services sector has expanded, with India even becoming a “back office to the world” (like China is its “factory”), the well-paying jobs have been more for the better educated. Not everyone can be a software programmer, doctor, financial analyst, accountant or lawyer.
Most services sector jobs are informal and low-paying: Construction and headload labour, sanitation, security staffing, domestic help, shop assistant, petty retailing and gig work.
Uber has over 10 lakh drivers using its platform, as per the cab aggregator’s 2024 India Economic Impact report. Zomato engaged 4,80,000 average monthly active food deliverers and 1,45,000 quick-commerce riders during October-December 2024. Its rival Swiggy had 5,43,562 average “transacting delivery partners” for the same quarter.
But these jobs cannot, beyond a point, get people to join the Middle Class 2.0. And therein lies India’s real employment challenge.
