The Economic Survey 2006-07 points out a reversal of the declining trend in employment growth -- from an annual 2.1 per cent in the 10 years ending 1993-94 to 1.6 per cent in the five years ending 1999-2000 to 2.5 per cent in the five years ending 2004-05.

Finance Minsiter P Chidambaram presented the Economic Survey in the Lok Sabha on Tuesday.

Calling this trend an encouraging development, the Survey nevertheless adds that there is need for faster employment growth for not only absorbing the addition to the labour force, with the ongoing demographic changes but also reducing the unemployment rate.

The Survey highlights that while employment has grown faster than before rate of unemployment also went up marginally from 2.8 per cent to 3.1 per cent during 1999-2000 to 2004-05. This, the Survey feels, is because of the slowing down of growth of agriculture. The share of agriculture in total employment has come down from 61.67 per cent in 1993-94 to 54.19 per cent in 2004-05. With the declining share of agriculture in GDP, the scope for absorbing substantial additional labour force in agriculture appears limited.

While construction and services, particularly transport, storage & communication, contributed in maintaining employment growth in the economy, employment growth in manufacturing fell short of its potential.

The Survey however, finds it worrisome that there has been a marginal decline in employment in the organised sector between 1994 and 2004 which has raised some disturbing issues about optimal regulation and incentives.

The annual employment growth in the organised sector decelerated from 1.2 per cent during 1983-94 to 0.38 per cent per annum during 1994-2004. This deceleration happened despite an acceleration in annual employment growth in the private sector from 0.44 per cent to 0.61 per cent during the reference periods as this acceleration was not enough to make up for corresponding decline of employment in the public sector.

The Survey feels that while rightsizing of the public sector whose primary objective is to deliver essential services such as education, health, roads and irrigation and not providing direct employment, is a welcome development and should continue, there is an urgent need to step up employment in the organised private sector.

• Economic Survey 2006-07: Complete Coverage