Gujarat's industrial status and characteristics: With special reference to defeminization in the labor market

Abstract

In general, the state has become richer, the people returning to work has increased, and more women have joined the labor force. However, even though Gujarat has achieved great economic development during a typical industrial structural transformation, a very small percentage of women participate in economic activities. This study aims to characterize Gujarat's low engagement of female labor force in the process of Gujarat's industrial development. First, this study has captured that Gujarat's labor market structure and industrial structure has grown asymmetrically. It has failed to bring surplus female labor out of agriculture and into manufacturing or services. Second, capital intensity is rising in Gujarat's industries, amplifying male-biased employment. Finally, low formal employment in rural areas possibly discourages participation in economic activities by surplus female labor whose education level has consistently increased.

Keywords

Gujarat industrialization manufacturing employment structure capital intensity female labor force defeminization

Introduction

India's economic growth has steadily accelerated over the last 50 years. It averaged 5.5% during the 1990s–early 2000s, and further to 7.1% in the past decade. Excluding the aftermath of COVID-19, India has enjoyed a step up in growth rates over the past few decades. The per capita income has also increased about fivefold since 2000. Millions of people have been lifted out of poverty, and key development indicators such as the birth rate and life expectancy have steadily improved.

In general, the relationship between the fertility rate and per capita income is negative. All of India has experienced a considerable fertility decline with an increased income level. The number of educated females continues to expand, and their level of education has also risen dramatically. As the number of educated females increases along with economic growth, it generally leads to their active labor force participation. According to Lewis (1954), “the transfer of women's work from the household to commercial employment is one of the most notable features of economic development.” As the economy grows and the income level rises, female labor force participation has actually risen in the emerging economies such as the Middle East, Latin America, and North Africa.

However, the Indian labor market is becoming modernized without women in the workforce. Why defeminization in the labor market matters? It ultimately hampers the state's development because it does not utilize existing resources that can make the most of it. Raising female participation in the labor force to the same level as male participation means making the best use of 1.3 billion human resources in India. This “demographic dividend” benefits the economic potential by raising the share of the working-age (15–64) population.

Among Indian states, Gujarat's performance has definitely stood out. It afforded a good example to other states referring as the “Gujarat model” because Gujarat experienced a quantum jump in its growth rate from 2002 to 2011 with the strong driving force of Chief Minister Narendra Modi. The development strategy had three major components; infrastructure development, effective governance, and attracting investment. The outcome is impressive. Gujarat's per capita income at constant (2004–2005) prices is estimated at Rs. 32,021, as opposed to Rs. 368,685 in 2018–2019, a growth of 17.69% in 1 year. Because Gujarat also showed higher income levels and lower fertility rates, the increasingly educated women are expected to participate in the labor force. However, the defeminizing characteristic in Gujarat's labor market is as an important issue reflected in major economic indicators. Gujarat is a symbolic model for economic growth and development among states, but when it comes to female labor force participation, Gujarat ranks only 17th among 35 states and union territories. Characterizing Gujarat's industrial status with special reference to low female labor force participation may explain India's paradox of high economic growth but low engagement of female labor force to some extent.

This paper consists of three main parts. First, it addresses whether industrial growth has been paired with employment growth. Second, it looks at the labor-to-capital ratio and share of wages in the Annual Survey of Industries (ASI) to examine how capital intensity affects defeminization in the labor market. Third, it points out how employment status and conditions in Gujarat make women insecure and vulnerable despite the high economic growth.

Asymmetric growth in industry and employment

Gujarat is one of India's most industrialized states with a 16.81% share in the country's industrial gross output, which is the largest share in all of India. Gujarat has recorded the highest growth of 61.76% in per capita gross state domestic products (GSDP) from 2011 to 2012 and 2015 to 2016.¹ Gujarat recorded the lowest unemployment rate in India in 2015 (1.2%).²

Table 1 shows the selected economic indicators of the latest data available. Even though India has also shown a great growth rate of 7.2%, Gujarat has gone far beyond 11.05% of the GDP growth rate. When it comes to sectoral share, in 2017–2018, agriculture, manufacturing, and services contributed 19%, 45%, and 36%, respectively, to the state's economy. In the same year, these sectors grew by 11%, 10%, and 11%, respectively.³ Gujarat is experiencing miraculous structural changes in all sectors while all of India is going through an atypical structural transformation with a spectacular proportion of the service sector.

Table 1.

Selected economic indicators in Gujarat and all of India.

	GDP in 2018–2019 (at constant prices)	GDP growth rate in 2017–2018 (at constant prices)	GDP by sector (2017–2018)	Female labor force participation rate in 2015–2016	Unemployment rate in 2017–2018
Gujarat	USD210 billion	11.05%	Agriculture: 19%, Industry: 45%, Services: 36%	19.9%	4.8%
All-India	USD3.3 trillion(est.)	7.2%	Agriculture: 15.4%, Industry: 23%, Services: 61.5%	25.8%	6.1%

Source: Reserve Bank of India, National Sample Survey Organization, CIA Factbook.

Hirway and Shah (2011), however, indicated the structural changes in the sources of GSDP are not reflected in changes in the structure of employment in Gujarat. Data show that more than 85% of GSDP comes from non-agriculture sectors; these sectors provide employment to only about 45% of the labor force. It means the rest of the workforce in the agriculture sector contributes less than 15% of the GSDP. Despite the high growth rate of the state economy, employment in non-agriculture sectors increased only by 1.79% per annum from 1998 to 2005.⁴ As a result, there is no structural transformation of employment pulling labor out of agriculture and into manufacturing and services.

It is worth noting that the contribution of the Gujarat manufacturing sector in job creation remains stagnant despite rapid growth in the total manufacturing sector. Gujarat has raised its manufacturing share in GSDP from 19% in 1980–1981 to 30% in 2008–2009. In a socioeconomic survey in 2008–2009, however, the annual growth of manufacturing employment in the state was only 1% in 1995–2008. Even in the later 2000s, employment generation in the manufacturing sector of Gujarat became negative (−2.6%). The high growth rate of GSDP in the manufacturing sector did not reflect the growth in employment.

Many developing countries have witnessed rising female labor force participation through labor-intensive manufacturing which has provided an important conduit for women to work outside the home (Verick, 2018). In this context, lagging job creation in the manufacturing sector results in the low engagement of women in Gujarat's workforce because Gujarat's manufacturing sector tends to be labor-intensive compared to other industrial states such as Maharashtra and Tamil Nadu.

For instance, Gujarat is well known as the “textile state of India,” establishing itself as a leader in the textile industry. An annual survey in 2017–2018 observed that manufacturing of textiles contributed 7.6% of the total industrial output of Gujarat, and it is important in terms of the number of factories and with 19.29% of total employment. However, Kumar (2014) noted that the Gujarat government consistently ignored the textile industry, which is labor-intensive and has always been considered the highest job-creating industry. Investment in the textile industry was only 1.54% of the total investment in 2010; it was around 10% until the late 1990s. In addition, despite the large scale of textile sectors, it is highly disorganized and fragmented. It is dominated by small traders and merchants who hinder the growth of the retail sector and exports. Such characteristics discourage the momentum of industrial development in textile sectors, missing opportunities to maximize female labor force participation.

Despite the successful structural changes in Gujarat, industrial growth did not affect the employment structure. Manufacturing's high GSDP contribution and comparatively low unemployment rate can be explained as part of the industrial-led growth model that India is aiming for. However, industrial growth did not create a better employment condition in the manufacturing sector, especially in the labor-intensive textile industry, which is likely to absorb the female labor force.

Rising capital intensity

As seen in the previous chapter, while investment in labor-intensive industries such as the textile industry has been decreasing, investment in infrastructure constitutes 37.59% of India's total investment. It is worth noting that capital intensity is increasing in industrial sectors. This chapter is concerned with more capital moving to industrial development.

According to the ASI in 2017–2018, Gujarat was ranked first among 35 states and union territories both in terms of fixed capital investment in industry and total invested capital. In terms of the labor-to-capital ratio, however, its rank was 27 with an annual growth of −7.05% during the past two decades (Table 2). The annual growth rate of the labor-to-capital ratio is strikingly negative.

Table 2.

Capital intensity and share of wages in the Annual Survey of Industries (ASI) sector.

	1998–1999	2003–2004	2007–2008	2012–2013	2017–2018	CAGR 1998–2018
Fixed capital in all industries (Rs. in crore)	69,476	85,788	145,400	326,125	672,772	12.0
Total invested capital (Rs. in crore)	87,619	115,027	209,558	488,473	863,139	12.1
Number of workers	607,763	538,080	797,443	1,046,462	1,403,204	4.3
Labor/Capital	6.9	4.7	3.8	2.1	1.6	−7.05
Capital/Labor	14.4	21.3	26.2	46.6	61.5	7.53
Wages as % of net value added	11.83	9.66	8.52	9.5	12.2	0.15

Source: Annual Survey of Industries (mention the year), Gujarat.

As shown in Table 2, in all industries, both fixed capital investment and total invested capital grew approximately 12% annually from 1998 to 2018. This is high growth compared to the number of workers, which increased only by 4.3%. In a similar vein, one striking feature of Gujarat’s industrial sector is that the capital-to-labor ratio⁵ is rapidly increasing by 7.53% of annual growth from 1998 to 2018. This “capital deepening” indicates the increase in the total invested capital is faster than the increase in the number of workers. In general, a higher capital-to-labor ratio will tend to bring higher wages. But in terms of wages as proportion of the net value added, it did very poorly, reaching 0.15% per annum compared to the growth of capital-to-labor ratio from 1998 to 2018. Thus, the more capital-intensive economy may have a lower wage share than one that is more labor intensive.

A high and rising capital-to-labor ratio means that industrial upgrading inputs more capital than labor. Fixed capital and invested capital have increased with an annual growth rate of around 12%, whereas the number of workers has annually increased by about 4%, showing a big difference in the growth rate. This situation would work to defeminization in Gujarat's labor market. Historically, female labor has been characterized as being relatively cheaper and suitable in labor-intensive industries including textiles, garments, and electronics and relatively lower value-added in manufacturing.⁶ But capital intensity reduces such benefits to hire relatively cheaper female labor due to a smaller proportion of labor costs in the total cost of production (Seguino, 2005). When considering the high contribution of textiles, garments, gems, and jewelry industries to Gujarat's economy, increasing capital in such industries may considerably hamper female employment. In addition, past social and gender norms have characterized heavy, technological, or higher value-added jobs as “masculine,” so such jobs may attract and retain more males than females. In other words, industrial upgrading toward higher value-added industries is likely to amplify male-biased employment.

In Gujarat, indeed, growth has not led to a higher female labor force participation rate. Indeed, it has decreased from 24.5% in 2013–2014 to 19.9% in 2015–2016. With an increase in capital inputs compared to labor in recent years, Gujarat is likely to have more men in industrial employment, resulting in a defeminization of the labor market.

The status of employment and defeminization

As mentioned in Chapter 3, industrial upgrading with capital deepening is weakening the labor-intensive characteristics of existing industries. Another mechanism of defeminization can be elucidated further through the distribution of workers by status of employment.

In consideration of that, about 60% of Gujarat's population lives in rural areas, low formal employment in rural areas is a point to watch in the context of Gujarat's industrial development. As Table 3 shows, particularly in Gujarat's rural areas, the share of informal employment, which includes self-employment and casual workers, accounts for about 90% of all workers in recent data. Otherwise, the share of informal employment in urban areas is about 50%.

Table 3.

Formal and informal employment status in Gujarat.

	Rural		Urban
	Formal employment	Informal employment	Formal employment	Informal employment
1993–1994	6.8	93.2	40.9	59.1
2004–2005	8.7	91.3	38.9	61.1
2007–2008	8.0	92.0	42.0	58.0
2011–2012	10.3	89.7	49.5	50.5

Source: National Sample Survey (NSS) Organization.

The growth of the informal economy implies an increasing income insecurity and worker vulnerability (Unni and Rani, 2002). There are huge gaps between wages, terms of employment, and working conditions between formal and informal workers. Informal workers are covered only by some scattered labor laws, the benefits of which are few and uncertain. The share of informal workers in Gujarat is 88.60%, 97.59%, and 91.59% for men, women, and both, respectively (Hirway and Shah, 2011). Only 2.4% of women are engaged in formal and organized employment in Gujarat. This figure is much lower than the figure of women formal workers in India, which is 4.07% (NCEUS 2008). Also, Gujarat's formal rural employment rate from 2011 to 2012 ranks only 22nd among 35 states and union territories.⁷

Gujarat's industrial development is not accompanied by proper labor mobility from rural to urban areas. In Gujarat, while the rural unemployment situation is better than the national average, employment elasticity remains too low in the industry and service sectors (Bagchi et al., 2005). Gujarat is an industrial state, but women's participation in regular employment, particularly in its manufacturing sector, has been poor. The agricultural sector is still bearing a large burden of rural employment despite increasing GDP share in the nonagricultural sector. In addition, rural women in Gujarat are concentrated mostly in agriculture and allied activities, which employs 81.7% of all rural women workers. It reflects the lack of appropriate and adequate opportunities for women in the nonagriculture sector, and many surplus female labor forces still remain in rural areas in spite of that labor market in rural remains unmodernized and an informal labor culture in rural areas hangs onto the past.

Table 4 clearly shows the insecure employment status of women, particularly in rural areas. The share of self-employed rural women workers has shown a considerable increase from 2004 to 2005 up to 65.4% in the last PLFS data. On a positive note, the share of casual female labor has declined consistently over the years, both in rural and urban Gujarat. Still, only about 10% of women are employed as regular rural workers.

Table 4.

Distribution of women workers by status of employment.

	NSS 61st (04–05)		NSS 68th (11–12)		PLFS⁸ (17–18)		PLFS (18–19)
	Rural female	Urban female	Rural female	Urban female	Rural female	Urban female	Rural female	Urban female
Self-employment	59.5	42.9	58.6	48.1	64.7	35.8	65.4	39.2
Regular employment	2.6	30.3	5	36.8	9.4	49.7	10.4	49.8
Casual labor	37.9	26.8	36.7	15	26	14.6	24.1	11

Source: Ministry of Statistics and Program Implementation.

Thus, Gujarat's industrialization can be characterized by a lack of high-quality job opportunities, particularly in rural areas, leading to low female labor force participation rate. The benefits of being a more industrial state are concentrated in urban areas. Surplus female labor in rural areas hardly participates in the labor force due to low-quality job opportunities, low wages, and pressure to perform domestic responsibilities. It is natural that a lack of formal and organized employment discourages job-seeking activities. Gujarat had lower female unemployment rates in rural areas than did the national level. This explains why many female workers do not seek jobs and participate in domestic work, which is not reported for unemployment. In this regard, formal employment in rural is significant for equal opportunity in the process of development to absorb surplus labors whose education level consistently increased.

Conclusion

Gujarat is a symbolic model for economic growth and development among states, but when it comes to female labor force participation, Gujarat ranks only 17th among 35 states and union territories. The below-average female labor force participation might indicate a failure of industrial-led growth in the state to engage women in production processes.

Even though Gujarat has shown a typical structural transformation growth model with a sectoral share of agriculture, manufacturing, and services contributing 19%, 45%, and 36%, respectively, it did poorly in pulling labor out of agriculture and into manufacturing and services sectors. Contextually, giving less investment to the textiles and garments industries, which is important in state-level governance, negatively affects historical “feminization in employment.” However, a senior government official saying that “Investments to the tune of Rs 3–4 lakh crore are expected in the petrochemicals sector in the next 7–10 years in Gujarat” shows confidence in more large and heavy industries. The study has shown that the capital-to-labor ratio has rapidly increased in all industries with an annual growth rate of 7.53%, whereas the labor-to-capital ratio continued negative growth. Greenstein and Anderson (2017) documented that capital deepening has a negative effect on female employment and that rising capital intensity might amplify male bias employment, resulting in the low participation of the female labor force.

Another possible explanation for rising capital intensity and defeminization is the matter of the very low formal employment in rural areas in Gujarat. Gujarat's industrial upgrading shifts many job opportunities from rural to urban, so it cannot possibly provide good quality and regular jobs in rural areas. But many surplus female workers whose education level has increased are left in rural areas.

The state must consider that success in industrial structural transformation is not always accompanied by improvement of the structure of the labor market. The results of this study ultimately suggest that Gujarat should strive to improve employment conditions for women, fully considering the higher capital intensity in recent years for sustainable economic growth and development. As Gujarat is a leading state of Indian industrialization, it should also be noted that Gujarat's industrial status and characteristics have a significant impact on the fact that India's labor market is being modernized without a sufficient female workforce.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Bodam Lee

Notes

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