In this edition of Digging Deeper, we try to make sense of what is really going on with the employment data in India.
India’s jobs data is a dicey subject to discuss of late. Like most Indian public policy debates these days, matters that were once discussed in Delhi by obscure policy wonks, have now been thrown open to the public by way of social media. All governmental policy is now subject to the kind of scrutiny that none of the previous administrations had to deal with – and that is certainly a good thing. Consequently, the government of the day has been found wanting when it comes to explanations and answers – and that is certainly a bad thing. Some thinktanks and media outlets have reported that the current administration is putting out unreliable data, if not outright lies, and a few on the other end of the spectrum demur that such dismissals are merely biased opinions devoid of objective analysis. The more the government denies that the data is fudged, the more strident the criticism from the media which has been relentless in pursuing this case, as is the prescribed role of any media organization which seeks to hold truth to power.
According to the Indian Express, the unreleased report ‘National Sample Survey Office’s periodic labour force survey 2017-18’ says there are 28.6 crore employed men – a decline from 30.4 crore in 2011-12, when the last NSSO survey was conducted. The downward trend is steeper in rural areas of the country than it is in urban, with a 6.4% decline in the number of employed men in rural areas against 4.7% in urban. For men and women combined, the national workforce shrunk by 4.7 crore. The newspaper quoted the NSSO data as saying, “While the employment loss in the rural segment hurt the women most (68 per cent), men suffered more (96 per cent) job losses in the urban areas.” The NSSO report puts the urban unemployment rate at 7.1% and the rural rate at 5.8%. Two expert members including the acting chairman quit the National Statistical Commission in protest after it was not released despite them having given their go-ahead for the release of the report. As we have already discussed previously, a report leaked to Business Standard showed that the NSSO found that unemployment in India was at a 45-year high in 2017-18. Those years are important to note, considering this was the first such survey after the government’s signature demonetization move.
The government’s decision not to release this report has already been a subject of great controversy and an election talking point. This, however, has not been the first jobs report whose release has been withheld by the government. In addition to the PLFS, the Mudra report about the number of jobs created under the Mudra scheme, and the Labour Bureau’s sixth annual employment-unemployment survey too, have not been released.
Into this confused, and confounding, mess is where we are headed in this podcast, as we try to make sense of what is really going on with the employment data in India. This edition of Digging Deeper is all about jobs. My name is Rakesh Sharma and you are listening to Moneycontrol.
So what’s all this about jobs?
Jobs… you know, the things that we do 40-50 hours per week to help pay the bills… no, not Youtube videos or Facebook, I’m talking about that other thing you go to your office for.
One Moneycontrol report from May 2018 noted that EPFO data showed 3.9 million jobs created between September 2017 and March 2018. Similarly, data for the National Pension Scheme for the same period showed that 4,65,000 new accounts were created. While this data could give a rough idea of the employment scenario in the country, this may not exactly translate to new jobs created. To reduce its rate of underemployment and unemployment, India will need to create 10 million jobs per annum until 2030. As per a research report by Motilal Oswal, this roughly translates to 8,30,000 jobs every month for the next 12 years.
The Narendra Modi government claims it has created, and helped create, lakhs of jobs every year since 2014, if not millions. According to many media reports, despite all the good vibes emanating from GDP and investment projections as well as infrastructure growth that the centre claims, India is actually in the grip of a jobs crisis. This has taken on larger proportions as the opposition tries to hammer the government on jobs data in the run up to the general elections in May. To separate the wheat from the chaff, let us look at the many confusing numbers being thrown about.
First, the government’s claims. In January, BusinessToday reported that “…payroll data released by the Employee Provident Fund Organisation for…January 2018 has shown a growth in total jobs created after four months of a downward trend. The data showed that 76.48 lakh new employees were added to the social security schemes of the Employees’ Provident Fund Organisation (EPFO) from September 2017 to January 2019. Meanwhile, the net employment generation in the formal sector reached 8.96 lakh during the month.”
What is the EPFO? Well, most of us already have a pretty good idea, but for purposes of clarity, here goes: The EPFO manages social security funds of workers in the organised/semi organised sector in India and has more than 6 crore active members, with at least one-month contribution during the year.
Net employment generation in the formal sector touched a 17-month high of 8.96 lakh in January. The addition in January was 131 percent higher as compared to 3.87 lakh EPFO subscribers added in the year-ago month. EPFO payroll data is treated as the official benchmark for gauging job creation in the country. The EPFO has been releasing payroll data from April 2018, covering the period starting September 2017. 275,609 jobs were created in September 2017. As the months advanced, cumulative job creation progressively declined between September 2018 and January 2019. BusinessToday claimed that central ministers who had cited EPFO data openly to indicate job creation by the Modi government had been “left red-faced after aggregate jobs declined over the past four months.”
The Economic Times quoted Information Technology Minister Ravi Shankar Prasad last week as saying that the IT sector had created 8.73 lakh new jobs in the last five years. Citing data from the National Association of Software and Services Companies or Nasscom, he said the IT sector currently provides employment to 41.40 lakh persons directly and 1.2 crore persons indirectly. He said, “I am not using my data, I am giving Nasscom data.” The minister claimed that Nasscom data showed that the IT and BPO sector had created 2.18 lakh jobs in 2014-15, 2.03 lakh jobs in 2015-16, 1.75 lakh jobs in 2016-17, 1.05 lakh jobs in 2017-18, and 1.72 lakh jobs in the last financial year. He said in the past five years, about 6.7 lakh jobs, both direct and indirect, had been created in electronics manufacturing, and 12 lakh jobs in common service centres, which is the government’s rural outreach programme offering a spate of services through digital platform. He also said the programme on business process outsourcing, or BPO, in small towns had created 23,000 job opportunities.
Finance Minister Arun Jaitley defended the government saying, “If our average real GDP growth is 7.5 percent and inflation is 4.5 percent, which at the moment is 2.19 percent, then our nominal growth adding the two is about 11.5 to 12 percent. If the economy is growing at 12 percent nominal growth for the last five years, it would be an economic absurdity to say that such a large economic growth, the highest in the world, doesn’t lead to the creation of jobs.” He added, “If no job creation takes place then there is social unrest. This has been a peace period where no major social agitation has been witnessed in the last five years.”
Other ministers were less articulate. For example, Minister of State for Labour and Employment Santosh Gangwar asked reporters to visit his constituency to see the kind of employment the Modi government has generated. In a seemingly combative mood, the minister said earlier this month about CMIE’s data, “Anyone can say anything it doesn’t mean anything. In this country, unemployment is going down and people are getting jobs. Self employment is also increasing.” On being asked about where these jobs were, Gangwar said, “Come with me to my constituency. I will show you where people are employed.”
The counter argument
Jaitley and Prasad were responding to consistent criticism that has emanated from opposition parties and, more importantly, thinktanks and media houses of renown, and in some cases even respectable, ostensibly non-partisan, institutes. For instance, the National Sample Survey Organisation (or NSSO) job survey of 2017-18 recorded a surge in the unemployment rate to over 6 per cent, a 45-year high.
Now, the government generally releases official data for the joblessness rate but that usually has tended to be out-of-date. However, it recently withheld a batch of data because officials said they needed to check its veracity. That raised many eyebrows. One Livemint piece noted: a leaked copy of the NSSO report revealed that India’s unemployment rate spiked to a 45-year high of 6.1% in 2017-18. That leak saw government officials scramble to contain the fallout of its damaging content. The findings of the report are all the more crucial because Narendra Modi and the BJP swept to power in 2014 with promises that included the creation of 10 million jobs annually. The expose by Business Standard also provided fodder to opposition parties, just months ahead of the general elections in May.
Finance minister Jaitley, as mentioned earlier, was dismissive of these findings. The government responded to the storm that followed by terming the report a draft and, in the tradition of one Donald Trump, a fake. However, last month, PC Mohanan resigned as acting chairman of the National Statistical Commission in protest against the government allegedly suppressing the release of the unemployment survey by the NSSO. Mohanan stood his ground that report was not a draft. He told Livemint, “When we approve a report, I am not going to give a figure which is not comparable with the other ones. Second, the concept of employment and unemployment are universally accepted. International Labour Organization prescribes the standards, we all follow it.”
Mohanan has an interesting take on what he terms as growing unemployment. He said, “…I think it is a story of rural transformation. Take for example, education. Instead of dropping out at a very early age, the percentage of women in the education system is very high until the age of 23-24. Earlier, it used to be only up to 17 years. So, there is a five-year shift; these people are no more in the labour force because they are still in the colleges. So that will reduce the labour force to some extent because they are out of the labour force. And earlier, the unemployment used to start (age) 20 onwards, now basically it is 24 onwards…so 20-24 they are in colleges and all that. So there’s a shift in the employment pattern from the report.”
Responding to the observation that GDP numbers continue to look good even as there is growing alarmism in some quarters regarding spiralling unemployment, Mohanan explained, “… one might wonder…when fewer people are working, how is the GDP going up. But you must understand that somehow in India, the relationship between employment and GDP has been not that strong. The reduction of the jobs are mostly taking place in the small and micro enterprises and I think their contribution to the GDP is not that much, when compared to big corporates.”
While the “somehow” in that response might seem curious, it didn’t stop Mohanan from launching a broadside against the centre, especially what he claims is a crafted narrative. He said, “The general feeling is that there is a carefully crafted narrative, with respect to GDP numbers, unemployment and so on. So if you find something that is not compatible with it, you are suppressing it. The NSSO is not a government product at all. The credibility of our numbers will not be affected even after this controversy because we have an established system to arrive at them…it was started in (the) 1950s when no country had even thought of such a sample survey…Nobel laureates like Angus Deaton have been some of its biggest admirers and also beneficiaries. So everybody knows the worth of this data…Doubts should not come into people’s minds as the government is publishing only what is favourable to them.”
Whose ‘numbers’ is it anyway?
R Jagganathan wrote in an opinion piece in Livemint, “…we now have numbers being flung at us from all directions. We have household survey data from the Centre for Monitoring Indian Economy (CMIE); we have the Azim Premji University’s State Of Working India 2018 report; we have monthly data on subscriber additions to the EPFO, and we have more enterprise data coming from the Confederation of Indian Industry or CII. We also have “leaked” data from the National Sample Survey Office (NSSO) for 2017-18. In the long run, perhaps all the jobs data will converge to give us meaningful results, but right now, it is only adding to the confusion as all the studies have serious drawbacks. It’s a case of the blind men and the elephant.”
He broke it down like this: “CMIE computes the current unemployment rate at 6.68%, which is not significantly different from the leaked NSSO report, which put it at 6.1%. The 2015-16 Labour Bureau’s Employment Unemployment Survey put the unemployment rate at 5%. The Azim Premji University’s State of Working India 2018 simply says that unemployment is now over 5%, with youth unemployment more than three times the overall rate.”
The confusion isn’t new. Last year, a UBS Securities report said there were two sets of data with conflicting outputs. It noted that “…a study based on employee provident fund data suggests a likely 7 million formal jobs created in FY18. This number is a positive surprise to us and markets. The BSE-CMIE index, which is household survey-based, suggests that not many jobs have been created in this same period and unemployment levels (formal + informal) may have started to go back up.”
In 2016, BSE and CMIE collaborated to launch regular data on unemployment and consumer sentiments. The effort was to produce a 30-day moving average measure of unemployment rate in India, including daily and monthly unemployment rate at the end of each month. This data did not measure how many jobs were created or added every month, but was a representation of the general joblessness in the country in a given period.
Earlier this month, CMIE data showed that the unemployment rate in India rose to 7.2% in February 2019, the highest since September 2016, up from 5.9% in February 2018. That meant the number of employed persons in India was estimated at 400 million in February this year compared with 406 million a year ago. A BusinessToday article claimed the labour force is down 25.7 million since September 2016, and the number of employed persons has declined by 18.3 million in the same period. CMIE managing director Mahesh Vyas said, “The economy is showing a jobless growth. The right kind of jobs is not available so people who are seeking employment are not eager to take up jobs…I even suspect if we are growing at 7 percent.”The Livemint article quoting the Mumbai thinktank’s report claimed that its figures are regarded by many economists as more credible than the joblessness data produced by the government. CMIE has even more dire data. A CMIE report released in January claimed that nearly 11 million people had lost jobs in 2018 after the demonetisation of high value notes in late 2016, and the chaotic launch of a new GST in 2017 hit millions of small businesses. The government, however, told Parliament that it did not have data on the impact of demonetisation on jobs in small businesses. Prime Minister Modi had also pointed out the increase in EPFO numbers to back his claim. But Vyas claims, “This is a very unscientific way of measuring employment. Because it is not necessary that all those who have enrolled in EPFO are new job takers only. It could be old ones too. Whereas our and NSSO surveys take into account organised as well as unorganised sector because we survey households.” He added that though there is a reduced rush to the labour market, there can’t be a reduced rush for finding jobs. He said, “A reduced rush is being welcomed by a higher unemployment rate. This is worst of both worlds.” The CMIE report sums up the scenario like this: “At the core of the problem is very low job opportunities.”
A BloombergQuint report observed that the data showed this comes at a time of decline in labour participation. Labour participation rate—the proportion of working age population that is either employed or is unemployed but actively looking for a job—dropped from 43.2 percent in January 2019 to 42.7 percent in February. It stood at 43.8 percent in February 2018.
Further, the politicisation of the employment issue, while perhaps inevitable, has led to a point where interpretation of all the data put out depends on where you rest on the political spectrum. Which means that the information that spreads is usually skewed, if not outright wrong. As a Moneycontrol report explains, “…with more than half of India’s population under 25 years of age, critics say the votes of jobless youth could hurt Modi’s chances of securing a second term in the upcoming general election to be held in April-May. The increasing use of automation in industry, the massive number of young Indians coming onto the job market, and the regulatory hurdles that companies still face if they want to set up shop in India, are all big issues for those without work.”
Recently, 108 economists and social scientists expressed concerns over “political interference” in India’s statistical data and called for restoration of “institutional independence” and integrity of statistical organisations. The appeal by the economists comes against the backdrop of controversy over revision of GDP data and withholding of employment data by the NSSO.
In response to this, Livemint reported that as many as 131 chartered accountants stressed that India is poised to move on a higher growth trajectory and countered the concerns expressed by the 108 economists and social scientists that economic statistics in the country are in shambles. The 131 CAs termed the concerns raised by the 108 economists as “baseless allegations with political motivations”. Economists vs CAs – that’s where we are at right now.
While some are sounding the alarm, Subhash Chandra Garg, the economic affairs secretary in the finance ministry, told Bloomberg, “It might not appear to be meeting people’s expectations, for some. But the revision is based on real data.” He also pointed to the downward revision of GDP data, saying, “The results are there for everyone to see. It’s not that any revision that has been done has positive messages all over.”
Adi Godrej, chairman of Godrej Group, said India needs better measurement of income and employment. He explained, “I think our measurement of income and employment is still not very good. It is not good at all. So, I don’t think anybody who needs work is not able to get one. So, it is a question of not being able to get what you want. In fact, there is shortage of people. All sorts of people—doctors, nurses, teachers. To my mind, this is a wrong perception. Generally, it is a political perception created by the opposition. Otherwise, you would not be the fastest growing economy in the world.”
Bibek Debroy, head of the Prime Minister’s economic advisory panel and a member of the unpopular NITI Aayog, told Livemint in February, “We don’t have very good data on economy and jobs because India is majorly an informal economy. So, therefore, we don’t have a very good data whether it is employment, labour or other things, quite unlike the so-called developed countries…There is a large degree of self-employment, there is a large degree of informalisation in contracts. So, the only way I can get satisfactory data is through employment surveys of the kind that the NSS undertakes.”
The Economic Times reported a few days ago that the centre plans to put in place a mechanism to track people who change jobs to get a comprehensive picture of formal employment in the country and the net employment generated. An official told ET on condition of anonymity, “The mechanism to count those returning and rejoining is not very strong at present… once in place, it should give more robust figures. Soon, net employment numbers will also be provided.” He added, “The survey and establishment approach need to be reconciled to provide a more robust data…The surveys give one picture of employment and management information systems give another picture. Both should ideally converge at some point of time.”It is, of course, a tragedy that the numbers indicative of growth, or lack thereof, in a country gets reduced to a case of he-said-she-said. But then, what do we expect in an election year. In the quest to win the battle of perception, there is no arrow that won’t be deployed from quivers full of tricks and truths. Who wins? We’ll find out soon enough.