Is economic growth during the past five years the fastest since 1991 as cabinet minister Piyush Goyal claimed in his budget speech on 1 February? If so, why is it not reflected in employment numbers?
Officially, the economy is growing furiously – at an annual average of 7.6 percent over the past five years. Growth was apparently the highest during 2016-17, despite the shock of demonetisation in November 2016.
The Centre for Monitoring Indian Economy (CMIE), an independent, Mumbai-based private research organisation, says despondency has increased. The share of working-age population, aged above 15 years, searching for jobs, has declined to 42.9 percent in February 2019, from 43.8 percent in February 2018. In February 2016, it was 46.7 percent.
People are not seeking employment because they feel the chances of getting a job have diminished. The unemployment rate has also increased from 3.37 percent in July 2017 to 7.23 percent in February.
What the CMIE Survey Claims
Every day, over a period of four months, CMIE surveys 174,405 households. The cycle is repeated after that. Each household in the sample has 3-3.5 persons of working age. Each month, a fourth of the homes (containing more than one lakh persons of working age) are visited, and the responses are sent via smart hand-held devices to a database. Since CMIE has been doing this from 2016, it can measure change over time.
The sample, CMIE’s Managing Director and CEO Mahesh Vyas says, is representative of the country 240 million households.
Vyas says 23 million people are added to the labour force every year. If 43 percent of them are looking for jobs, about 0.8 million jobs should be added every month or about 10 million jobs created every year on a net basis, after accounting for attrition like retirement. But the number of persons employed has declined from 407.5 million in February 2017 to 406 million in February 2018 and 400 million in February 2019.
That is 7.5 million jobs less over a two-year period. (Because of seasonal factors, the availability of jobs can vary from month to month).
Rather than address the issue, the government has been trying to manage the headlines by sowing confusion. It used to measure employment-unemployment every five years with National Sample Surveys. It discontinued those for more frequent ones.
Unemployment Rate Highest in 45 Years: CMIE Report
In April 2017, it said the Periodic Labour Force Survey would be conducted annually. The sample size was about 140,000 households. A fifth of them would be replaced every year. This would keep it representative of a changing population (but would not allow comparison over time. CMIE adds 5 percent to its sample size every year).
The periodic survey was ready in December but was suppressed, and two non-official statisticians involved in the exercise resigned in protest. Business Standard got hold of it.
It reported that the unemployment rate in 2017-18 was 6.1 percent, the highest in 45 years. The share of working age people looking for jobs was 49.8 percent that year, from 55.9 percent in 2011-12 and 63.5 percent in 2004-05.
Separately, the Labour Bureau was conducting annual employment-unemployment surveys since 2010. But the findings of the sixth survey for 2016-17 have not been released. Amitabh Kant, the CEO of NITI Aayog, says the Labour Bureau surveys captures data only for organised enterprises, which account for a sliver of the total employment, that is jobs only in enterprises that use power and employ 10 or more persons, or those that do not use power but employ 20 or more persons. Most of the country’s jobs are created outside these enterprises.
The “Expectation” of 15 Million Jobs To Be Added Every Year
Meanwhile, the government gave privileged access to data from the Employees Provident Fund Organization (EPFO), the Employees State Insurance Corporation (ESIC), the National Pension Scheme (NPS) and General Provident Fund, to a professor of IIM-Bangalore, viz. Pulak Ghosh, and the economic adviser of the State Bank of India, viz. Soumya Kanti Ghosh. On the basis of subscriber data, Pulak Ghosh and Soumya Kanti Ghosh said in January 2018, that they “expect” 15 million jobs to be added every year of which 6.6 million are “possibly skilled manpower.”
The prime minister quoted their study while replying to a no-confidence motion in July 2018 in the Lok Sabha. “If we compile the numbers of EPF, NPS and the professional transport sector, more than a crore people got jobs in the past year alone. This is what an independent organisation says. I am only quoting it.”
Incidentally, the Opposition has been claiming that the Modi promised to create one crore jobs a year if elected, during his 2014 election campaign. A financial daily reported that he made the promise during a rally in Agra. But at the “Vijay Shanknad” rally in Agra in November 2013, Modi only asked the audience to reply “Yes or No” to his question that the Congress had promised one crore jobs in 2009, and whether it had kept the promise. He is not heard making the commitment, though he behaves as if he has.
Amitabh Kant’s Claims Vs CMIE Report
Enrollment in EPFO is a measure of formalisation. It does not necessarily mean a new job has been created. When a car driver working for an individual joins an organisation that offers provident fund benefits, his employment status remains unchanged.
For this reason, payroll data is not an adequate measure of employment and unemployment in India unlike in the developed countries, where almost all the jobs are formal and carry social security benefits.
Kant says a lot of jobs created by the digital economy are not captured by conventional surveys. The number of partner drivers registered with Ola, he says, increased from 37,000 in 2014 to over a million in March 2018.
Ola’s rival Uber has 1.2 million partner drivers, According to him, even discounting for overlaps, a large number of jobs have been added by these services and those delivering food from restaurants to homes, like Swiggy and Zomato.
But all those jobs will be captured by the CMIE survey, says CMIE CEO, Mahesh Vyas, because drivers registered with the taxi-hailing services, or delivery boys live in households and not on “trees.”
One of the four questions which CMIE surveyors ask is whether the respondent is employed or not at the time of the interview.
Is the Economy Really Doing Well?
Kant says it is not possible for an economy growing fast not to create jobs. It is true that high economic growth need not necessarily result in high job growth, if the boom is in capital intensive sectors like mining. But they will create downstream jobs.
Vyas, on the other hand, questions the high economic growth rates claimed by the government. They are derived estimates, he says, while CMIE’s jobs data is based on direct responses. If the economy is growing as fast as claimed, why has the investment rate not picked up, asks Pronab Sen, former Chief Statistician of India.
The share of national income invested in fixed assets (known as gross fixed capital formation) has declined from 34.3 percent in 2011-12 to 28.5 percent in 2016-17. Private companies and households have contributed most to this decline, while that of the government has held.
The labour intensive export sectors are not doing well. Apparel exports grew 12 percent in 2014-15. They have been flat since then. That of the leather and footwear has been weak or negative.
Banks have become wary of the scandal-ridden gems and jewellery sector which has been also been disrupted by demonetisation and the Goods and Services Tax. Engineering goods exports have grown well, but could be hit by the abolition of tariff concessions by the United States. The construction sector which absorbed large numbers from the agricultural sector in the last decade, has been laid low by government-created shocks.
If the economy were doing as well as claimed, the government would not need to bomb the people with advertising. They would feel the glow. Nor would it need to distract them with national security issues.
(Vivian Fernandes is a consultant to ICRIER and runs a website called Smart Indian Agriculture. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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