How GDP Affects Creation of Jobs in India?

GDP and Employment Relationship in India

It is pertinent to note that for every 10% change in India's GDP growth rates, there is going to be a 1.8 to 2% change in employment. When we are saying 10% it means the change from the existing GDP rate.

For example, India's GDP rises from 5% to 5.5% (which is a 10% change), it means that as a nation we will be able to create new employment opportunities close to 80 lakh people in rural and urban India.

The term employment elasticity comes into play here which means that it shows the relationship between GDP growth and employment data. We can refine this term by stating the Employment elasticity as a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. The employment elasticity indicates the ability of an economy to generate employment opportunities for its population as per cent of its growth (development) process.

It is worthwhile to mention here that Planning Commission of India estimates India's average employment elasticity to be 0.20 in the decade to 2010.

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