India Manufacturing Lull Fuels Farm Surge --- Agricultural jobs rise by tens of millions despite Modi's push for factory positions

"INDORE, India -- The sudden lockdown in 2020 sent workers streaming from cities back to villages in rural India, an exodus many thought would be an easy-to-reverse blip on India's journey to becoming an industrialized nation.

Instead, the ranks of India's farmworkers have swelled by some 60 million over the past four years, a shift fueled in part by a food-welfare program that feeds hundreds of millions of people. Even last year, when much of the country had put the pandemic behind them, India's farms added 13 million workers, and Prime Minister Narendra Modi said the food program would remain for another five years.

Meanwhile, jobs in manufacturing nationwide haven't budged, and factories say they are struggling to hire.

"This is catastrophic: You see millions going back to agriculture," said Santosh Mehrotra, a development economist and visiting professor at the University of Bath whose analysis of government employment data shows the farm workforce growing since 2019. "This is the reversal of the structural change happening in our economy."

It is the opposite of the path many economists would have expected India to be on, with gross-domestic-product growth outpacing that of other major economies. The country of 1.4 billion, which is estimated to have surpassed China last year as the world's most populous, has average per capita income of roughly $2,400 -- less than that of Bangladesh.

Instead of seeing the masses move onto factory floors -- a shift that helped raise the standard of living for millions of Chinese -- India appears to be deindustrializing prematurely.

That puts India at risk of missing out on the benefits of a huge labor force, while much of its population struggles with chronic unemployment or underemployment. It also means that the world -- which benefited when China's economy grew, fueling demand for commodities and providing consumers with cheap goods -- might not be able to count on India to be as powerful an engine of global economic growth.

Modi has long promised to create tens of millions of jobs. But some blame his signature economic policies, including measures enacted in his first term aimed at combating tax evasion, for instead creating headwinds to job growth.

Economists and factory owners also say that for some workers, the food program, which the government has billed as among the world's largest welfare programs, is helping to tilt the scales in favor of staying on the farm.

The prime minister's office didn't respond to requests for comment.

During the pandemic, India started offering about 11 pounds of rice or wheat each month to help those who had been affected by the lockdowns, a benefit that covers 800 million people. With elections looming in early 2024, the government in November said it would extend the program for five years at a cost of $145 billion.

The number of people working in farming in India started declining around 2005, hitting a low of just under 200 million by early 2019, economist Mehrotra's calculations show. Since then, their numbers have soared to over 260 million -- not far from the number of farmworkers India had two decades ago, at the peak of agricultural employment. Many of them aren't working for pay, but on their family farms.

Employment in cities has declined by nearly nine million over roughly the same period.

The rise in rural employment comes despite Modi offering tens of billions of dollars of incentives to companies to set up shop in India, as companies seek to move some of their manufacturing from China because of growing U.S.-China tensions. Economists said companies have used the incentives to set up more manufacturing in sectors such as electronics and pharmaceuticals, but those factories haven't translated into a significant boost in jobs nationwide.

Manufacturing's contribution to India's GDP has fallen from around 17% two decades ago to 13% in 2022, according to the World Bank. India has added only five million manufacturing jobs since shortly before Modi was first elected, for a total of 65 million such jobs now.

Because manufacturing has been so lackluster, India's economy -- which will grow at around 7% in the year that ends in March, according to its central bank -- is instead being fueled by sectors including information technology and financial services that don't need to employ lots of people.

"The growth has come from sectors that aren't job-intensive," said Amit Basole, a professor of economics at Azim Premji University in Bengaluru. "So for a fixed amount of output growth, you don't get as much employment growth."

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In Industrial Hub, 'There Are Hardly Any Workers'

In an industrial hub home to some 1,000 factories in the central Indian city of Indore, the managing director of Porwal Auto Components, a foundry and machine shop, said he used to count on about 1,000 welders, spray painters and other skilled workers before the pandemic. Now Devendra Jain said he is operating with about 700, and struggling to complete orders for components for the truck industry and railways.

"There are hardly any workers," he said, attributing the shortages to benefits that workers receive in their home villages. "Getting to full production is going to be a challenge."

Mahesh Khatri, a businessman in the northern state of Haryana, near India's capital, also is struggling to fulfill orders to supply 10,000 cardboard boxes and adhesive tape every month with 38 workers, from an earlier workforce of 55.

Khatri offers free accommodation, but it hasn't helped. "They prefer being poor in their villages to being poor in cities," he said.

Manufacturing's contribution to India's GDP has fallen from about 17% two decades ago to 13% in 2022, according to the World Bank." [1]

1. World News: India Manufacturing Lull Fuels Farm Surge --- Agricultural jobs rise by tens of millions despite Modi's push for factory positions. Li, Shan; Agarwal, Vibhuti.  Wall Street Journal, Eastern edition; New York, N.Y.. 05 Jan 2024: A.16.