A laborer drinks tea inside a brick factory on the outskirts of Agartala, in northeast India's Tripura state. Photo: Reuters/Jayanta Dey

Employment in India shrank by 0.2% in the financial year 2014-15 followed by 0.1% in 2015-16. Despite the government promising to create more jobs, employment levels shrank tremendously, as reported by KLEMS India database, a research project supported by the Reserve Bank of India (RBI).

The report analyses the growth and productivity patterns of the Indian economy and is part of the World KLEMS initiative.

According to the report, agriculture, forestry, fishing, mining, food product manufacturing, textiles, leather products, paper, transport equipment and the trade sectors saw decline in employment over the two financial years. Despite real GDP growing by 7.4% in 2014-15 and 8.2% in 2015-16, it proved to be job-destroying growth.

In the last 10 years up to financial year 2015-16, the compound annual growth rate of employment has been a staggering 0.53% only.

The fall in employment in the agriculture sector is not new as people involved in marginal farming find other jobs. However, instead of moving from low-productive work to high-productive work, the data indicated that employment was hard to find for those moving out of farming. In these two years, 70% found employment in the construction sector.

These people are mostly employed in building roads and other public works. However, productivity in real estate has been declining since 2006-07, according to the KLEMS database. People are moving away from farming and into another low productive work sector.

Employment levels are expected to get worse for 2016-17 and 2017-18, with a lower growth rate because of demonetization, which has adversely affected the informal sector, followed by the introduction of the goods and services tax, or GST.

A report by the Labour Bureau on quarterly employment in February said the manufacturing sector in India lost 12,000 jobs in 2016, which increased to 87,000 jobs in April and June 2017. The data, that looked into eight sectors – education, health, construction, trade, accommodation and restaurant, information technology, manufacturing and transport – observed the slowest rate of increase in jobs in three quarters with only 67,000 jobs added since the last quarter.