Confirming the troubling figures of the “buried” Periodic Labour Force Survey (PLFS), the statistics ministry on Friday, May 31, confirmed that India’s unemployment rate did indeed rise to 6.1% in the FY2017-18, the highest in 45 years.
A day after Prime Minister Narendra Modi was sworn in for his second term, the National Sample Survey Office (NSSO) released the controversial report, with figures matching that of the leaked PLFS—India’s first-ever comprehensive annual household survey after demonetisation.
Crumbling facade of economic growth
This arrives on the heels of the US revoking its preferential trade status to India, who has also lost its tag as the world’s fastest growing economy. It also follows another set of data released on Friday that shows the economy grew at 5.8% in the January-March period, its slowest pace in 17 quarters, falling behind China’s for the first time in nearly two years.
The government’s response to the jobs data, however, has been calling it unfair and saying the numbers look bad “depending on how you look at it”.
Chief statistician Pravin Srivastava said the present survey emphasised on education levels unlike earlier surveys, which were based on monthly per capita expenditure, adding that the unemployment rate for 2017-18 was not comparable with previous surveys.
The PLFS saga
Business Standard broke the survey’s contents first in January, after attempts by the Centre to withhold it despite the National Statistical Commission’s approval for publication.
The report’s alleged suppression triggered raucous controversy after two members of the apex statistical body resigned in protest over the government constantly undermining the body’s role.
Critics suspected that the report contains damning evidence that Modi’s note ban exercise of 2016 may have adversely affected the job market in subsequent months.
The report is scary
The NSSO report, formally released now the elections are done and dusted, corroborates that instead of creating 25 crore jobs as promised in 2014, Modi’s note ban caused jobs to go missing. It showed that the unemployment rate in the country in 2017-18 was 5.3% in rural areas and 7.8% in urban areas.
Between July 2017 and June 2018, joblessness was at its highest since 1972-73, which is the period since when jobs data was comparable. Comparatively, unemployment stood at 2.2% under the UPA government in 2011-12.
The report further shows that joblessness was higher in urban areas (18.7% for men and 27.2% for women) than in the rural parts, with more people withdrawing from the workforce. This is consistent with RBI’s monthly Consumer Confidence Survey to capture trends in urban employment in six metropolitan cities. The surveys, which cover about 5,000 respondents, show rising pessimism about urban employment.
The labour force participation rate, which has been declining since 2004-05, was also considerably lower than the previous years, experiencing a sharp fall from 39.5% in 2011-12 to 36.9% in 2017-18.
The rate of unemployment among men in rural areas between the ages of 15 and 29 years jumped to 17.4% in 2017-18 compared to 5% in 2011-12. The unemployment rate among women in rural areas stood at 13.6% in 2017-18 compared to 4.8% in 2011-12, according to the survey.
Another alarming figure showed that more among the educated were jobless in 2017-18 than they were in 2004-05. For educated women in rural areas, unemployment was at 17.3% in 2017-18 compared to 9.7%-15.2% from 2004-05 to 2011-12. For educated men in rural areas, unemployment rose to 10.5% in 2017-18 compared to 3.5% to 4.4% from 2004-05 to 2011-12.
Meanwhile, joblessness continues to worsen dramatically with an estimated 4.17 crore people unemployed, according to another recent report of the CMIE (Centre for Monitoring Indian Economy).
In August 2018, Modi claimed that, in the previous financial year, “more than 70 lakh jobs were created in the formal sector alone”, but that has been refuted by a lot of independent studies, notably by the CMIE whose report shows about 1.1 crore people lost their jobs in 2018, while the unemployment rate rose to 7.4% in December 2018, the highest in 15 months.
The CMIE estimates unemployment at 9.35% in 2019.
At the root of the problem
In terms of availability of work and trends in wages, the government’s policies have left daily-wage earners worse off than before.
Studies show that the number of days labourers spend working is significantly less than earlier, and even though daily wages have marginally increased, the decline in the number of working days negates the boost.
Most workers claim that work dried up in 2016 after Modi banned 86% of the legal tender in November, and the labour market was utterly paralysed by mid-2017. With new notes taking long to enter the system, the liquidity crunch stymied economic activity, hitting the construction sector the hardest, which is India’s largest employer of workers after agriculture.
The badly implemented Goods and Services Tax in July 2017 is also another factor responsible for this abysmal 45-year high unemployment rate. The comprehensive tax was intended to replace all indirect taxes to simplify taxation and boost inter-state trade. However, the implementation of GST has been marked by confusion, complicated slabs, arbitrary changes, and delayed refunds, which hurt small- and medium-scale businesses considerably.
Identifying problem areas and working to solving them
The current rate of jobs creation is not commensurate to the rising number of people entering the workforce every year. Economists believe that to absorb new workers, high-value jobs have to be created for skilled and semi-skilled labourers alike.
Under Pradhan Mantri Rozgar Protsahan Yojana, the central government gives new employees (earning below Rs 15,000/month) the entire 12% of employers’ contribution towards the Employees’ Provident Fund (EPF), for a period of three years.
But at least 40% of the eligible employees in the country are still outside its purview, while existing employees are being enrolled to the scheme, and employers who had been violating the EPF are being incentivised.
The widely publicised ‘Make in India’ programme, to “transform India into a global design and manufacturing hub”, also failed to address manufacturing bottlenecks and lack of employment in that sector, owing to saturation of Indian exports.
The Pradhan Mantri Mudra Scheme promised to allocate loans of up to Rs 10 lakh to target micro, small and medium enterprises, but most of them have only added to the Non-Performing Assets crisis. Some of its benefactors have claimed that PMMS credit-driven businesses are unsustainable because the average amount of loans disbursed is Rs 30,000.
Most of Modi’s policies bank on self-employment, skill development and incentivising employers to create more jobs. Despite his claims that the high unemployment numbers are because “traditional matrix of measuring jobs is simply not good enough to measure new jobs in the new economy of New India,” the fact is that all his schemes are far behind target; they are also anti-people and pro-corporate, and have incited 10 central trade unions to call for a nationwide strike in December 2018.
Gaping unemployment, coupled with a concern for job protection and minimum wages, remains the chief problem plaguing the country’s economy and its people. The report only puts the picture into digits.
Pitched as one of the major issues by the Opposition during the 2019 Lok Sabha election campaign, joblessness has further spurred deeper socio-economic problems. Yet, the Congress, which had proposed to introduce the Universal Basic Income “Nyay” scheme, faced a crushing defeat in the elections, winning just 52 seats in the 545-member Lok Sabha.
That simply means the Modi 2.0 government with a brand new Finance Ministry now faces an uphill battle to retain the confidence of those who voted for the BJP strongman to bring more jobs.
Prarthana Mitra is a Staff Writer at Qrius.