The two divergent economic faces of Uttarakhand
The first is a formal-non formal sector divide. The second is an urban-rural divide
In terms of economic wellbeing before and after the pandemic, two divergences appear to characterise Uttarakhand—India’s 20th largest state by economic output and eighth-largest by per capita income, and which votes for a new assembly on Monday. The first is a formal-non formal sector divide. While the formal sector, centred in Uttarakhand’s three urban districts, has clawed back, the stress felt by non-formal participants has lingered. The second is an urban-rural divide, with Uttarakhand’s urban districts demonstrating better economic health than its rural districts, shows monthly government data on formal and distress employment, bank credit and vehicle sales.
As per the 2018-19 periodic labour force survey (PLFS), 47% of Uttarakhand’s working population was employed in agriculture. However, agriculture accounted for only 3% of the state’s economic output in 2019-20, according to the Reserve Bank of India. Leading the way were industry (36%), manufacturing (27%) and services (27%). In other words, at current levels of industrialisation, a large part of its workforce is still dependent on agriculture.
The distribution of formal-sector employment in Uttarakhand is concentrated in its three large, urban districts, shows data from the Employees’ Provident Fund Organisation (EPFO). Haridwar (36%), Dehradun (29%) and Udham Singh Nagar (24%) together account for 89% of formal-sector workers in the state. They also account for 81% of firms that have more than 20 employees and are mandated to contribute EPF for them.
Over the last three years, while the count of such firms in Uttarakhand has increased at a higher rate than the national average, Uttarakhand has trailed India in employee growth. The state was seeing its count of formal workers decrease even before the pandemic. In the three lockdown months of April to June 2020, the contraction in formal sector employees in Uttarakhand was severe and nearly twice the national average. The subsequent recovery, though, has been good. In September 2021, while India had 1.8% more employees in the formal-economy fold compared to January 2019, the corresponding figure for Uttarakhand was a decline of 2.6%. This suggests things have improved, but employment pangs remain.
One sphere where employment pains get reflected is the demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS), a government scheme that assures 100 days of employment to every rural household. Since 2017, Uttarakhand has recorded higher growth in demand for work under MGNREGS than the national average. Post Covid-19, the entire country saw a spike in demand for MGNREGS work. This continued in Uttarakhand until April-June 2021, when demand dipped below 2017 levels for the first time. While demand for MGNREGS work is reverting to normal levels, it remains high in Uttarakhand.
Additionally, Uttarakhand is challenged to service full MGNREGS demand. Till 2020, it was able to provide work to 90% of people demanding work under MGNREGS. However, that has since dipped to below 80%, going as low as 70% in the July-September 2021 quarter. With the Central government further reducing allocation to MGNREGS in 2022-23, a situation of persistent high demand will pressure the state.
In the October to December 2021 quarter, 7 of Uttarakhand’s 13 districts saw higher MGNREGS demand than the corresponding quarter of 2020. Further, a measure of consumption, two-wheeler registrations, points to a decline in spending. India registered 24% fewer two-wheelers in 2021 than in 2017. For Uttarakhand, that drop was 30%. In the two years of the pandemic, November and December 2020, coinciding with the festive season, were the only months when the state registered more two-wheelers than in January 2017.
Four large districts in Uttarakhand—Haridwar, Udham Singh Nagar, Dehradun and Nainital—account for 89% of two-wheeler and four-wheeler registrations in the state. For the period October to December 2021, these showed only a 2% decline in two-wheeler registrations over the year-ago period. The remaining 9 districts, all rural ones, averaged a drop of about 20% in two-wheelers registered. It’s another measure of inequality that despite two years of the pandemic, the number of four-wheelers registered in Uttarakhand 2021 was only 0.8% lower than in 2017.
The four large districts also account for about 85% of the total credit disbursed in the state by scheduled commercial banks. In the last three years, the total credit to Uttarakhand has increased by 10% to ₹56,911 crore. Of the 70 assembly constituencies, 36 fall in these districts. In 2017, the BJP won 29 of these 36 seats. Of the 6 seats won by the Congress in Uttarakhand, four were from Haridwar.
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