Demonetisation destroyed millions of jobs. This much is clear after a report in the Business Standard revealed that unemployment spiked to a 45-year high according to data from the National Sample Survey Office’s Periodic Labour Force Review for 2017-’18. This is the same survey that Prime Minister Narendra Modi’s government had been accused of burying earlier this week, when two members of the National Statistical Commission resigned after the government refused to release the data. It now seems evident why the government would want to suppress these numbers.
After promising to deliver millions of jobs to India’s youth in his election speeches in 2013 and 2014, Modi suddenly began arguing mid-way through his term – amid accusations of anemic job growth – that the problem was not lack of jobs, but lack of employment data. Modi and his government insisted that India did not have enough high quality information about jobs, leading to his infamous pakodanomics comment.
One of the devices that was supposed to fix this porblem was the National Sample Survey Office’s Periodic Labour Force Review. A NITI Aayog Task Force on Improving Employment Data said as much in 2017. Acknowledging that household surveys are the only way to generate economy-wide estimates of employment, the task force’s report said that the new annual labour force review would “go a long way towards fulfilling the current vacuum in the availability of information relating to India’s labour markets”.
The labour force review was launched by the Modi government in April 2017, and according to reports, only after prodding from the Prime Minister’s Office to the ministry to get it going. In its 2017 annual report, the Ministry of Statistics and Program Implementation acknowledged the utility of the labour force review and said that a new tech-based approach would “lead to higher accuracy and faster processing of data”.
The data was then collected, prepared and passed on to the National Statistical Commission for vetting. But even after it was cleared by the commission, the government did not release it, leading to resignations from the statistical commission. “The government not releasing the [jobs] report is one of the reasons,” said PC Mohanan, who was acting chair of the commission. “We have approved the report, but they have not released it, I don’t know why.”
The Business Standard report leaves no doubt about why the government had not put it out. According to the report, unemployment was at 45-year high following Modi’s demonetisation move, in which 86% of currency was withdrawn from the system with the aim of uncovering black money. Demonetisation did not achieve any of its stated goals. But the distress it caused to the rural economy, and the jobs lost as a result were apparent anecdotally. Now the data confirms this.
As per the report, rural unemployment among young men went from 5% in 2011-’12 to 17% in 2017-’18. The figures were even worse among urban youth, with unemployment among men going from 8.1% in 2011-’12 to 18.7%, and among urban women from 13.1% in 2011-’12 to 27.2% in 2017-’18. Overall, the report also shows that Labour Force Participation is down, meaning fewer people as a proportion of the overall population are working or looking for jobs. It said that the country’s overall unemployment rate was at 6.1%, a 45-year high, and a huge spike compared to the 2% in 2011-’12.
More than anything, this data is confirmation of how large the effect of demonetisation was on the Indian economy. Even former Chief Economic Adviser to Modi, Arvind Subramanian, called a “massive, draconian” shock. When coupled with the complete failure to achieve any of the note ban’s goals, and the fact that the move was done at a time of benign global economic conditions, it serves only as further proof of how one of Modi’s landmark moves taken with little consultation has turned out to be a gigantic boondoggle.
As of noon, the government has yet to respond to the report, although the Chief Statistician of India said that the results of the NSSO survey will not be available for at least another month. But some responses from those who are generally in favour of the government’s policies gave an indication of how the Bharatiya Janata Party would seek to spin this revelation.
This interpretation, seeking to find a “half positive” in high unemployment numbers prompted much reaction online.
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