The wrangling over jobs data has led to a bitter political slugfest, with Opposition throwing charges at the govt.
NEW DELHI-Employment generation has remained one of the biggest mysteries of Modi government’s five years — a debate that has led to more questions than answers. The protracted delay in the release of the National Sample Survey Organisation (NSSO) employment/unemployment data has not helped matters either.
In a fraught election season, the wrangling over jobs data has led to a bitter political slugfest, with the Opposition throwing all kinds of charges at the government, and the government going all out to defend its jobs record.
There was a big hue and cry over the issue when the Business Standard newspaper published a report on leaked NSSO data. The leaked data pertained to the first year of the two-year pilot periodic labour force survey (PLFS). The report said unemployment in India in 2017-18 was 6% — 7.8% urban and 5.3% rural joblessness — which makes it a 45-year jobs low for India.
The 12th Five-Year Plan (2012-17) included a proposal to conduct PLFS. The main proposed objective of this survey is to measure quarterly changes in various indicators in India’s urban labour market. Another objective of PLFS is making annual estimates of different labour force indicators both in rural and urban areas.
PLFS is based on quarterly changes in the labour force. In contrast, the earlier mechanism — employment or unemployment surveys (EUS) — is a five-year job survey. India had its last EUS in 2011-2012, after which the mechanism was shifted to the quarterly method that is generally considered to be more accurate.
Niti Aayog chief Amitabh Kant issued a vigorous rebuttal of the version of Modi govt’s jobs critics. He maintained that it would be unfair to compare PLFS findings with data from EUS. He pointed out discrepancies in population figures in the two surveys to refute claims of negative jobs growth.
Kant says that the 50% growth in real GDP since 2011-12 could not have happened if the workforce was shrinking in size. Besides, he also cites India’s rapid urbanisation and growing wages to drive home his line of argument. And last but not least, he points out what he says is faulty methodology — that the sample size taken in PLFS was too meagre and so can’t give the real picture.
Kant underlines the impact of MUDRA loans — given to small entrepreneurs that “may have generated plenty of jobs”. 15.56 crore MUDRA loans have been disbursed amounting to over Rs 7 lakh crore and over 4 crore first-time borrowers have started their business enterprises, the Niti chief says.
However, findings by several other sources seem to be strikingly at odds with claims made by Kant.
A critique of Kant
Centre for Monitoring Indian Economy (CMIE) data shows that the unemployment rate in India has increased to 7.2% in February 2019 vis-a-vis 5.9% in February 2018. As per these figures, there were 14 million unemployed people in India as of July 2017, which doubled to around 29 million in October 2018. As of February 2019, India had around 31.2 million people actively looking for jobs, data shows.
Azim Premji University’s “State of Working India 2018” report says that the relationship between growth and employment generation has become weaker over the last few years.
During the 1970s and 1980s, when India’s growth rate was around 3–4%, employment growth was relatively strong with the number hovering at around 2% per annum. Since 2004, even though the annual growth increased to more than 7%, the employment rate slowed down to less than 1%.
The raging debate
Meanwhile, the absence of official data has kept the debate over jobs alive and raging. It has strengthened the assumption that India is facing jobless growth — a phenomenon that started a decade back when India had clocked a meagre rise in employment to 463 million in 2009-10 from 458 million in 2004-05.
A study by IIT-Delhi’s Jayan Jose Thomas (Jobs and gloom) shows employment generation in industry and services during the period from 2004-05 to 2011-12 was inadequate. After taking into account the increase in working-age population and the number of workers who quit agriculture during 2004-12, the research estimated that the potential workforce in industry and services should have grown at the rate of 14.7 million a year.
However, the actual figure at which employment was generated by these two sectors during the above period was only 6.5 million a year. That would translate to less than half the potential figure.
Twin blow: Where did the jobs go?
Much of the blame for India’s current jobs problem can be attributed to the inherent nature of the country’s job economy. More than 75% of the working-age population is engaged in the informal/unorganised economy. Labour-intensive sectors like agriculture, construction and small enterprises account for most of these workers.
Various reports show how these sectors were left deeply unsettled in the wake of demonetisation when the economy was suddenly stripped of Rs 500 and Rs 1,000 notes. Small-scale industries, who conduct their daily transactions in cash, were the worst hit. With employers unable to deal with the sudden lack of cash, a great many workers had to be laid off, which greatly added to the entrenched problem of joblessness.
GST, which came a few months after demonetisation, added further fuel to the fire. It led to the closure of numerous small businesses and rendered lakhs of people jobless in the unorganised sector. The complexity of filing returns led to the shutdown of a huge number of small enterprises as small traders were unable to deal with the technicalities of monthly filings process.
The EPFO data muddle
The government’s seeks to refute this argument by citing the impressively rising number of Employees Provident Fund Organisation (EPFO) subscribers over the same period. Data shows that approximately eight million new subscribers were added to EPFO between September 2017 and September 2018. Based on this data, the government argues that India’s employment scenario has actually only improved after 2016.
There, however, seems to be a major problem with this reasoning. Firms come under the ambit of EPFO only if they employ 20 workers or more. Now, if a firm that already employed 19 workers adds one more, it will make for a fresh addition to the EPFO database. But the addition here will be of 20 new subscribers, and not just of the single employee that the firm hired freshly.
So, in this case, the number of EPFO subscriptions will increase by 20 — although new employment created here is just one. This is something that casts serious doubt on job generation claims based on EPFO numbers.
MUDRA numbers decoded
To back its jobs claim, the government has sought to use another tool at its disposal — MUDRA loan data. The plan is to use findings of the Labour Bureau’s survey on jobs created under the MUDRA scheme.
Using these numbers, the government wants to showcase the “gainful employment” created with the help of these loans. Data available so far, however, hardly point to a smooth-sailing.
MUDRA’s official site says a total of 4.1 crore loans worth Rs 2.1 lakh crore had been disbursed until end-February 2019, compared with 4.8 crore loans worth Rs 2.46 crore given in last FY. As per the latest figures available, as of March 2019, banks had a serious shortfall in their hands — they were faced with the daunting task of having to disburse at least Rs 35,000 crore worth of loans to improve on the FY18 tally and a minimum of Rs 80,000 crore worth of loans to meet its fiscal-year target.
Last heard, the government has now decided to hold back the MUDRA job generation data in view of the unfolding election season.
So, is there a way out? Experts seems to differ. Here’s collating the views of a number of who’s who — from Raghuram Rajan to Arvind Panagariya to IMB’s Ginny Rometty.
Rajan sees jobs data as an issue in these elections: “Even if the government thinks good jobs are plentiful, the electorate seems concerned. How will we create jobs? Undoubtedly, we have to elevate our pace of growth, especially in job creating sectors. And that requires a new generation of reforms since the old ones are running out of steam.”
Panagariya hold his old line: “You got to make your ends meet and you got to have two meals a day. So everybody works. In this sense, unemployment rate in India has always been low and that is the case but it is the under-employment. People are doing very low productivity jobs.”
IBM chief Ginny Rommetty recently kicked up a storm when she said jobs was never in short supply, it’s just that skills are lacking — not just in India but everywhere.
Government should step up their efforts to support skill and retraining activities to address the gaps between demand and supply of work skills and qualifications and to address long-term unemployment, says Ritu Mehrotra, VP Global HR and Talent Management, Bristlecone.
Many experts have cast doubts on the reliability of data being used by either camp — Modi govt and its detractors. Pronab Sen, former Chairperson of the NSC, points out that the official statistical agencies in India need greater strengthening in order to tackle the challenges thrown up by the growing size and complexity of the Indian economy.
Source: Economic Times