India: Understanding India’s big crisis in a fraught poll season

  • 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.
  • 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 Employment or Unemployment Surveys (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.
  • 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.
  • 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 INR500 and INR1,000 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.
  • 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 Sep 17 and Sep 18. 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. This is something that casts serious doubt on job generation claims based on EPFO numbers.
  • 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.

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