Labour Market Contrasts: UPA's Tighter Conditions Amid Promises Versus NDA's Job Creation Amid Wage Stagnation.....

India's labour market has evolved dramatically under the two major political regimes of the last two decades—the United Progressive Alliance (UPA, 2004-2014) and the National Democratic Alliance (NDA, 2014 onwards). The UPA era featured high economic growth averaging around 6.8-7 per cent annually, driven by services and rural schemes, alongside a promise to generate employment opportunities for all new entrants into the labour force through inclusive policies like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). Despite this commitment, the period witnessed a relatively tighter labour market characterised by rising real wages and constrained labour supply relative to demand. In contrast, the NDA period, marked by policy disruptions such as demonetisation, GST implementation, and the COVID-19 pandemic, recorded lower average GDP growth of about 5.9 per cent yet claimed substantial absolute job additions. However, real wages stagnated, suggesting a looser market. This analysis examines the reasons for UPA's tighter conditions, evaluates NDA performance against available evidence including population growth of roughly 15 million annually, explores reasons for lower real wages under NDA, and assesses whether a tighter labour market equates to lower unemployment across formal and informal segments. Data reveal a complex picture: numerical job gains under NDA outpace UPA, but quality and wage dynamics tell a different story.

Key metrics highlight stark differences. During UPA's decade, employment expanded by approximately 29 million jobs overall, reflecting modest growth of about 6-7 per cent in total employed persons. Unemployment rates hovered around 5.5 per cent on average in certain measures, with usual status rates often below 2-3 per cent in earlier National Sample Survey rounds and current daily status capturing underemployment more acutely. Labour force participation rates (LFPR) were relatively stable or declining slightly in some segments, but real wages surged: rural non-agricultural emoluments grew at 6.6 per cent annually between 2010-11 and 2015-16, while overall rural wages (agricultural labourers, construction) advanced at nearly 7 per cent yearly in the years leading to 2014-15. Real per capita net national income rose by 50.3 per cent over the decade.

Under NDA (up to 2023-24), employment ballooned by over 171 million jobs according to RBI KLEMS-based estimates, pushing total employed from around 471 million in 2014-15 to 643 million—a 36 per cent jump. Annual additions averaged far above 15 million, with single-year peaks like 46 million in 2023-24. Unemployment fell from 6 per cent in 2017-18 (a 45-year high per PLFS) to 3.2 per cent by 2023-24, while LFPR climbed from 49.8 per cent to 60.1 per cent. Workforce participation rate (WPR) rose from 46.8 per cent to 58.2 per cent. However, real wage growth ground to a halt: rural agricultural labourers saw near-zero annual real increases (0.8 per cent for males, 1.1 per cent for females) from 2014-15 to 2023-24; non-agricultural and construction wages stagnated similarly. Non-farm unincorporated sector emoluments grew at just 0.5 per cent overall (0.1 per cent rural) between 2015-16 and 2022-23, with self-employed earnings (57 per cent of the workforce) rising nominally by 8.5 per cent over five years but declining in real terms amid 6 per cent average inflation. Real per capita income growth slowed to 43.6 per cent. Informal employment dominated at 80-90 per cent throughout, with self-employment shares rising to 63 per cent rural and 40 per cent urban by 2022-23. EPFO formalisation added millions of subscribers, yet open unemployment remained elevated compared to pre-2012 historical lows in some assessments averaging 8.55 per cent under NDA versus 7.99 per cent under UPA.

The UPA's tighter labour market—evidenced by accelerating real wages despite its employment-for-all pledge—stemmed from robust demand-side pressures amid high GDP expansion and targeted rural interventions. MGNREGA, guaranteeing 100 days of wage employment, absorbed surplus rural labour, bidding up wages in agriculture and construction while pulling workers from distress migration. Services sector boom (25 per cent employment growth) and manufacturing gains further tightened supply, as demographic dividend entrants were partly absorbed into education or formal-ish roles, reducing effective slack. High growth (peaking above 8 per cent early) outstripped labour force additions, creating scarcity that manifested in wage premiums rather than pure unemployment spikes. The promise to employ all new labour force joiners aligned with this tightness, as schemes mitigated open joblessness even if underemployment persisted in the informal economy.

By contrast, NDA's performance on employment creation appears strong numerically but mixed on quality and wages. Absolute additions vastly exceeded UPA's—averaging over 17 million jobs yearly versus under 3 million—surpassing the 15 million annual population growth and implying coverage of new labour entrants plus backlog absorption. Even with lower GDP growth, job numbers benefited from post-pandemic rebound, women’s LFPR surge (driven by self-help groups and schemes), and formalisation drives yielding millions of EPFO-linked roles. This suggests NDA not only matched but exceeded demographic pressures, with 2023-24 alone generating enough to cover multiple years' population increment. However, evidence indicates shortfalls in quality: many additions were self-employment or informal, lacking security or productivity gains. Real wages failed to rise, pointing to persistent labour surplus despite falling unemployment rates. Reasons include successive shocks—demonetisation and GST disrupting informal cash-based enterprises (absorbing 80 per cent+ workforce), followed by COVID-induced reversals—destroying livelihoods and flooding markets with displaced workers. Rising LFPR (more women and youth entering) amplified supply, while informal rigidities prevented wage flexibility downward but also limited upward pressure. Market concentration in formal sectors and skill mismatches (low placement rates in training programs) further suppressed earnings growth for the self-employed majority. Thus, NDA delivered volume but not the wage-led tightness or aspirational quality promised implicitly through growth narratives, resulting in a looser effective market where jobs grew but purchasing power stagnated.

A tighter labour market fundamentally signals lower unemployment, as reduced slack (low joblessness) pressures wages upward—applicable to both formal and informal economies, albeit with nuances. In the formal segment (regular salaried, EPFO-covered), tighter conditions directly correlate with lower open unemployment and contract stability, as seen in UPA's wage gains without major spikes. In India's dominant informal economy (casual, self-employed, micro-enterprises), measurement is trickier due to underemployment and seasonal rationing rather than textbook joblessness. Yet evidence aligns: UPA's tightness reduced visible and invisible unemployment spells via MGNREGA buffers and demand pull, lowering current daily status rates. Under NDA, despite PLFS-reported unemployment decline, informal shocks initially raised rationing (lean-season involuntary idleness) and prolonged recovery; recent tightness (low UR) has eased this somewhat but without wage transmission due to supply overhang. Overall, tighter markets do imply lower unemployment across segments by drawing marginal workers into activity and curbing distress idleness, though informal flexibility masks persistent underutilisation absent productivity or structural shifts.

In summary, UPA's tighter labour market arose from high-growth dynamics and rural guarantees that elevated wages despite employment promises, creating scarcity amid demographic inflows. NDA outperformed on sheer job volume, comfortably matching or exceeding 15 million annual population growth even at subdued GDP rates, with unemployment trending down and formalisation advancing. Yet lower real wages reveal underlying looseness from policy shocks and labour supply surges, underscoring gaps in quality and earnings—challenging claims of transformative creation. A tighter market indeed signals reduced unemployment formally and informally by minimising slack, but India's dual structure demands wage and productivity metrics for true assessment. Sustained inclusive growth requires bridging these gaps, prioritising informal resilience to convert numerical gains into widespread prosperity.