The modern concept of development is based on the phenomenon of ‘Inclusive Growth’. Inclusive growth allows people to contribute to and benefit from economic growth. For rapid and sustained poverty reduction growth should be broad-based across sectors, and inclusive of the large part of the country’s labor force. It is important to capture the basis of structural transformation for economic diversification that lead to destruction of jobs and firms. 'Commission on Growth and Development 2008' notes that inclusiveness – a concept that encompasses equity, equality of opportunity, and protection in market and employment transitions – is an essential ingredient of any successful growth strategy. For converting the growth to be inclusive, productivity must be improved and new employment opportunities will be created. In short, inclusive growth is about raising the pace of growth and enlarging the size of the economy, while leveling the playing field for investment and increasing productive employment opportunities. According to estimates by the United Nation during the period 1996 to 2006, global gross domestic product had grown by 3.8percent per year, while the rate of unemployment had remained unchanged at around 6 percent during the same period. Thus a major section of the world population has been deprived from the fruits of the huge economic growth during the recent period. To ensure the employment for the unemployed youth and the vulnerable section of the population,each country should design macroeconomic policies at thenational level. Thus creation of employment opportunity should be one of the major concerns of India during the recent period when she embarked upon the path of liberalization for her development.

Several hypotheses have been proposed to explain the causes for low rate of employment in most of the developing countries in recent period after the enactment of policy of economic liberalization. As we alreadyknow, India embarked upon a ‘New Economic Policy’to revive the economy from its dismal state.  The main features of the so-called ‘New Economic Policy’ are (i) gradual process of easing out government control through industrial deregulation and (ii) opening up the channels for greater connectivity with the international market. The propagandists welcomed the ‘New Economic Policy’because they thought that this policy is expected to correct the deficiencies that were inherent in the earlier strategy of bureaucratic control. Due to increased competitiveness and the ongoing process of technological development, the industries will be more dependent on automation and cutting jobs. The net result could be a very slow expansion in employment opportunities in the organized sector, with a rise in unemployment rates,and growing frustration among youth.

It has been argued that there is a structural change in the economy in terms of shares of different sectors in total GDP, which in effect put an adverse impact on the growth of employment in India, particularly after liberalization. It is observed that during the period after liberalization (from 1990-91 to 2008-09) the share of Agriculture and related items has declined steadily from 31% to 17%. The share of Mining and quarrying remains almost in the same position (around 2%) during this period. The position of the manufacturing sector also remains almost the same during this period and it is around 15% of the total GDP. There is a significant increase of the shares of Tertiary Sector from 49% to 62% during the same period. Within this sector ‘Transport and Communication’ underwent a significant increase in percentage from 6% in 1990-91 to 12% in the year 2008-09. Thus it is found that there is a significant change in the structure of the Indian economy during the post-liberalization period. The primary sector is loosing its importance and the secondary sector remains almost in the same position. On the other hand, the tertiary sector gained importance during the same period. The marginal increase of the share of Manufacturing Sector during the latter phase indicates a process of reboundfrom the downfall. From the above analysis, it is clear that there was definite structural change in the Indian economy during the recent period.
 
Now the basic issue is to generate employment opportunitieswith corresponding GDP growth during the process of liberalization. The effect on the employment potential can be seen through the employment elasticity of output (GDP). It is expected that the process of liberalization generate higher elasticity compared to the post-liberalization period through gain in productivity. However this is not always true, particularly at the initial stage of reform basically due to slow adjustment process of the economy.

According to some recent reports of National Sample Survey Organization (NSSO), Government of India, the following points can be worth mentioning.
(i) Unemployment is generally higher in urban areas compared to rural areas.
(ii) Unemployment is increasing in rural areas recentlycompared to earlier periods.
(iii) Unemployment rates for females are higher than those for males, and it is much higher among urban-females vis-à-vis urban-males.
(iv) Unemployment rates according to the current daily status (cds) approach are higher than the rates obtained according to ‘usual status’approach and ‘weekly status’ approach, thereby indicating a high degree of intermittent unemployment. This is mainly due to the absence of regular employment for many workers.
(v) During the period 2004-05 and 2009-10, the unemployment rate in terms of the usual status remained almost the same for rural males and decreased by 1 percentage point for urban males. For rural females also it remained almost the same whereas for urban females it decreased by 1 percentage point.
 
It has been observed that the unemployment rate has increased in various sectors during the post reform period. From All India figures, it is found that the growth rate of employment is about 2% during the total period. Breaking the total period into two sub periods,we find the growth rate of total employment higher in the latter phase of liberalization. In almost all the sectors the growth rate for employment is higher than the rate for the initial part of the period. The manufacturing sector shows a high growth rate of about 5% during 1999-2000 to 2004-05, and for the whole period, the value is about 3% per annum. Though some of the tertiary sectors show high employment growth, the overall performance of the tertiary sector in generating employment is not promising compared to the manufacturing sector. However, the performances of ‘Transport & Communication’ and ‘Banking/Insurance’ give better result in terms of growth of employment during this period.  The compound annual growth rates of the tertiary sector are low compared to that of the manufacturing sector. Thus growth rates of the employment in general show that the position is better in the recent period compared to the earlier period and the manufacturing sector has done better compared to other sectors of the economy.

One of the major objectives of development planning in India is to provide employment opportunities not only to the huge existing unemployed population but also to new additions to the labor force. The policy of economic reform was taken with intentions of increasing competition and thus efficiency and productivity of the economy. However, at the same time, the government policies have beentaken in favor of fostering labor-intensive production. The employment intensity of economic growth can be understood by the value of output elasticity of employment. In other words the concept of output elasticity of employment in a particular sector of the economy helps in understanding the extent of labor absorption capacity of that sector in the economy. The responsiveness of employment to the changes in the macroeconomic situation in terms of gross domestic product after the introduction of economicreform needs to be empirically examined to understand the effect of different sectoral changes on employment opportunity.

It is found from the data on employment and output of different sectors of the economy over 1993-94 to 2004-05 that elasticity of employment for the economy in the latter period is about 0.46 which is much higher than that for the first phase of liberalization which is about 0.16. Employment elasticity is much higher in the manufacturing industry compared to that of in other sectors. The employment elasticity in the tertiary sector is not very high and it gains value only in the latter phase of liberalization. The employment elasticity in trade, hotel/restaurant and transport sectors are better and in both cases the value is lower in the last phase compared to the first phase of the study. Thus in general,the employment potential of the economy is better in the latter period compared to the initial phase.
 
Employment generation, particularly in industries, is considered as one of the ways to achieving inclusive growth. It is observed from NSSO survey that intermittent employment is on the rise compared to stable job. As a matter of fact the organized manufacturing sector, which could provide well-secured jobs are facing jobless growth in recent years. However, in recent years the employment scenario is improving in the sense that the labour absorption capacity of manufacturing sector is increasing compared to early phase of liberalization.