India’s employment data is fuzzy but one thing is certain – Modi has failed to deliver promised jobs

One of the many promises Narendra Modi made on the campaign trail in 2014 was that the Bharatiya Janata Party would generate employment. The party’s manifesto promised 25 crore new jobs over 10 years, or 2.5 crore a year.

Given India’s demographics – there were over 15 crore first-time voters in 2014 – this was a potent reason to vote for the BJP. In the 2019 election, some 13 crore young men and women will be eligible to vote for the first time. In all, there will be over 28 crore voters in the 18-25 age group, and a large proportion of them will be looking to earn a living. The working-age population is generally assumed to mean all people aged 15 to 65. But not everybody seeks, or finds, a job.

Nearly 1.3 crore Indians leave the workforce every year because they cross 65 years of age, or die. On the other hand, over 2.5 crore citizens celebrate their 15th birthdays every year. This means 1.2 crore people effectively join the workforce every year. The World Bank estimates the number is closer to 1.56 crore, or 13 lakh per month. This is India’s so-called demographic dividend.

Commonly, economic growth comes from higher per capita productivity, that is, the same workforce produces more, or a larger workforce, which ensures growth even with flat productivity. A bulge at the younger end of the working population guarantees strong growth for decades, subject, of course, to the workforce being productively employed. In India’s case, the economy needs to create employment for roughly 10 lakh people a month to cash in on the demographic dividend.

But anecdotal evidence and most of the available data indicates that, four years into the BJP’s term, unemployment remains a big concern. In 2017, the Organisation for Economic Cooperation and Development estimated that 30% of Indians aged 18 to 29 were unemployed and looking for work.

“Pakoda gate” is an implicit admission that Modi has not been able to deliver on the jobs front. In March 2018, 2.8 crore people applied for 90,000 jobs with the Indian Railways. That is a huge, huge number, any way you look at it. Joblessness seems to haunt even the highly qualified. In February, around 19 lakh candidates applied for a total of 9,500 posts of typists, stenographers and Village Administrative officers in Tamil Nadu. They included 992 PhDs and 23,000 MPhils.

Sketchy data

India’s employment data is sketchy, some is even contradictory. The country’s informal workforce far outnumbers the formal workforce, although formal employment is growing. A rough estimate based on data collected by the National Sample Survey Office shows 50-55 crore Indians are aged 15-65. Of them, around 22 crore are employed in agriculture and about 28 crore in non-agriculture sectors. Because the agriculture sector is underpaid and “overstaffed”, many of those employed in it are attempting to shift to non-agriculture work.

Of the non-agriculture jobs, only around 6 crore are formal. One reason is India’s complicated labour laws, which incentivise employers, including large corporations and the Railways, to deploy contract labour rather than offer formal employment.

Another problem is late compilation of employment data. The Labour Bureau’s quarterly reports are based on surveys and released six to nine months late. Moreover, the Quarterly Employment Surveys only cover units employing 10 persons or more, in sectors such as manufacturing, construction, trade, transport, hotels, information technology and business process outsourcing, education, and health. Around 2.11 crore people were employed in such units of these sectors on October 1, 2017, according to the latest quarterly surveys. The number was 2.05 crore on April 1, 2016. The surveys cover only about 5% of the workforce.

The net employment gain in the units covered by the quarterly surveys was around 6 lakh over 18 months from April 2016 to October 2017. If similar patterns hold across the economy, nearly a third of those who entered the workforce in that period would not have found employment.

In an effort to understand India’s labour conundrum, the Employees’ Provident Fund Organisation released data to the NITI Aayog, which passed it onto researchers Soumya Kanti Ghosh and Pulak Ghosh for a study published in April 2018. The data is not supposed to be made public, and there was a privacy scandal since the data contained sensitive personal information, including names and contribution amounts. There was also a ridiculous attempt to pass off Ghosh and Ghosh’s work as an independent study.

Such absurdities aside, the data suggested that about 70 lakh new Employee Provident Fund accounts were opened in 2017-18, about 40 lakh of those by persons under 25. But many of the new accounts may actually have been opened by people who were already employed but had now come under the formal umbrella. A new scheme allows employers to file declarations for unregistered employees with a nominal fine of Rs 1 per year. The Employees’ Provident Fund Organisation has added 1,01,31,453 subscribers under the new scheme.

Unemployment problem

The Centre for Monitoring Indian Economy, a private sector research unit, works with the Bombay Stock Exchange to gather employment data across a wider base – smaller units and more sectors – than the Quarterly Employment Surveys. The CMIE-BSE surveys found 40.5 crore people were employed as of March 2017, with the unemployment rate running at about 4.7%. By April 2018, the unemployment rate had risen above 6%.

Mahesh Vyas of the Centre for Monitoring Indian Economy explained that around 1.26 crore jobs were lost during the first two months after demonetisation, declared in November 2016. “The labour force shrunk by 19 million during this period,” he added. “This shrinking of the labour force is the shrinking of hopes of getting jobs. We still do not see a recovery in the labour force. Labour participation rate in January-March 2018 was 43.4% compared to 46.8% in January-March 2016.”

The labour participation rate is defined as the number of working-age people who are either employed or seeking employment.

Now, for the contradictions. India’s economy is supposedly growing at 6.7% of the Gross Domestic Product and it is often tom-tommed as the world’s fastest growing large economy. How does this gel with 2.8 crore people – 10% of the under-25 electorate – applying for a few relatively low-paid railway jobs? The other side of the equation: over 2.2 crore cars and two-wheelers were sold in India in 2017-18. Let’s say half of these were replacements. If unemployment has hit a nadir, who bought all the cars and bikes?

My unscientific guess: unemployment is a serious problem but it is hard to understand its real dimensions because of the large informal component of the Indian economy. This will be a major issue in the 2019 election. The fuzzy nature of the available data provides ample room for any and every politician to airily toss out promises about generating more employment. Whether such promises would be credible is another matter.