The great informal trap: farm workers fled the field, landed in jobs that produce nothing

NEW DELHI: Twenty-five years of India's celebrated growth story have a number the cheerleaders rarely quote. The farm workers who left the field did not reach the factory. They reached the food counter, the building site and the truck depot — informal, insecure jobs that add little to the economy that employs them. A new study based on the Reserve Bank of India's KLEMS database — the central bank's detailed accounting of capital, labour, energy, materials and services across industries — finds that over the past quarter-century, rural agricultural workers who migrated to the cities mostly landed in non-productive, informal urban jobs: in restaurants, construction and transport. The finding punctures the oldest promise of development economics. The classic path runs from the farm to the factory: surplus farm labour moves into manufacturing, productivity rises, wages follow. India skipped the middle step. Its workers moved from low-productivity agriculture into low-productivity services and construction — from one precarious living to another, with a change of scenery. Economists have warned about this pattern for years. Earlier analysis of the same KLEMS data showed that India's much-touted job creation was concentrated in low-productivity areas: in 2022-23, the average labour product in agriculture was about Rs 90,000 a year, against roughly Rs 1,75,000 in construction, Rs 2,48,000 in trade and Rs 2,65,000 in transport — while refining generated Rs 56 lakh per worker and finance Rs 13.5 lakh. Jobs were being created, yes; but the spending power they generated was too thin to lift demand, which is why consumer companies kept reporting weak rural and urban sales even as GDP grew. Informality is the sharper wound. A restaurant helper, a daily-wage construction worker, a truck loader: no written contract, no social security, no union, no paid leave. When a site shuts or an eatery downsizes, there is no notice period — only the bus back to the village. Women, Dalits and Adivasis, overrepresented among landless agricultural labour, carry the heaviest end of this bargain. The study also quietly indicts the manufacturing story India tells itself. China absorbed its farm migrants into factories; India's factories never showed up in sufficient numbers, and construction — the great sponge of Indian employment — became the destination instead. What the data calls "structural transformation" was, for the worker, a transfer from rural precarity to urban precarity. Governments of every colour have celebrated headline employment numbers built on this base. The new research suggests the celebration is misplaced: an economy that moves its poorest workers from the field to the food counter has not transformed them — it has only relocated their poverty.