Rural–Urban Linkages in Bihar

The growth of the manufacturing sector is important for employing a growing labour force and much is also dependent on their skill level. Enterprise surveys in six sample towns of Bihar, a state characterised by slow industrialisation and urbanisation, find evidence of fairly strong rural–urban linkages for manufacturing enterprises. Although the linkages indicate that the manufacturing sector has the maximum potential to create employment by absorbing the surplus labour in the rural areas, it was found that this sector has been languishing in the sample towns. The findings also flag the challenges and areas of growth for industries.

The paper has been written on the basis of a study prepared under the guidance of Alakh N Sharma at the Institute for Human Development, New Delhi, and the authors gratefully acknowledge his guidance and contribution. The authors acknowledge the contribution of Vikas Dubey, who provided assistance with data, and Subodh Kumar and B K N Singh, who assisted with the fieldwork. The study has been sponsored by the International Growth Centre, a research centre based at the London School of Economics. The authors gratefully acknowledge the comments provided by an anonymous referee.

The demographic dividend in India has largely been viewed as a promise for the country (Bloom 2011; Aiyar and Mody 2011). The magnitude of the issue can be gauged from the estimate that about a quarter of the projected increase in the global population aged 15–64 years between 2010 and 2040 is estimated to occur in India (Aiyar and Mody 2011). The increase in working age ratio would imply the addition of just over 30 crore working age adults. Another estimate projects the youth population (15–29 years) in India to reach around 38.4 crore by 2026 (Krishnamurty 2015). The dependency ratio is slated to decline from 59.6% in 2012 to 50.8% by 2026.¹

This dividend, however, can be realised only if working age people are productively employed. It has been felt that India is likely to benefit from a fairly broad window of opportunity with the lowest dependency ratio of 46 per 100 working age persons occurring around 2040 (Joe et al 2015). But, there are certain prerequisites for countries to leverage its demographic dividend, such as health, education, and skills of children, adolescents and youth, as well as general productivity of the youth (Majumder 2013). Jobless growth and even decline in employment in the country is a major concern (Azim Premji University 2018). Overall, as things stand, India has an oversupply of unskilled/low-skilled workers and a shortage of skilled workers. Skill development efforts and recent government initiatives such as “Make in India” aim at productively absorbing the available labour force.