Economy

Corporate employment growth lags GDP growth, service sector the biggest recruiter, says report

Updated : November 19, 2019 04:34 PM IST

India’s corporate employment growth has trailed the GDP growth during the last four financial years, a study by CARE Ratings said.

The service sector has performed better than manufacturing with financial sector industries doing better in terms of higher recruitment.

Corporate employment growth lags GDP growth, service sector the biggest recruiter, says report

India’s corporate employment growth has trailed the GDP growth during the last four financial years with service sector being the biggest recruiter, a study by CARE Ratings said.

The service sector has performed better than manufacturing while the financial sector industries doing better in terms of higher recruitment. The IT sector too had an impressive performance, the report added.

The study, based on 1,938 companies spread across various sectors, revealed that aggregate headcount or employment increased at a CAGR of 3.3 percent over a period of four years in 2014-15 and 2018-19.

However, GDP growth during the period was at a CAGR of 7.5 percent.

"Therefore, there is a case that supports the argument that employment growth has not been commensurate with GDP growth with a difference of 4.2 percent in CAGR during this period," the report noted.

The top 10 sectors covering 895 companies with employment of 4.70 million in 2018-19 accounted for 75 percent of total employment of the sample companies. Further, 42.4 percent share was from three service industries while the balance was from manufacturing (30 percent) and agriculture (3 percent).

At the aggregate level the share of services is around 50 percent.

According to the report, the core industries have witnessed virtually negative growth in headcount, with crude oil segment just about maintaining the employment level, impacted by the slowdown in GDP growth as well as the challenges on the NPA side for banks.

Growth has tended to be negative for power and capital goods and just 0.4 percent for infrastructure.

However, the consumer-oriented industries show a varied pattern. In the case of agricultural and durable goods, there has been a deceleration in employment while there has been an increase for FMCG and textiles albeit at a lower than sample average of 3.3 percent.

"This is reflective of the slow uptick in consumer demand which has affected these industries not just in terms of sales as is evident from financial performance numbers but also a cautious approach to manpower planning," the report noted.

Among financial sector, the highest growth was in the NBFC segment which has added more from 2016-17 onwards as the sector also witnessed sharp growth in business.

In the non-financial sector segment, the IT and retail industries have registered near or above average growth. But telecom, hospitality and realty have witnessed negative growth reflecting the state of the economy.

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