The findings of the recently leaked periodic labour force survey (PLFS) of the National Sample Survey Office (NSSO) puts the unemployment rate in India at a 45-year high. Comparing the current unemployment figures with those from the past, the survey finds that the unemployment rates are now higher for both females and males.
Overall, the unemployment rate is 6.1% in 2017-18 compared to 2.2% in 2011-12. Worryingly, youth unemployment is much higher than the average. For example, rural youth unemployment for males is at 17.4% in 2017-18, over three times higher than it was in 2011-12. Their female counterparts were unemployed at a rate of 13.6%. Urban youth unemployment was higher – 18.7% for males and 27.2% for females.
The findings of the NSSO survey find resonance in other recent reports such as those put out by the Centre for Monitoring the Indian Economy (CMIE) or Azim Premji University. Clearly, unemployment is the defining challenge of our times. Or, is it?
The NSSO data would shake any reasonable policymaker to the core. However, our government has spent considerable energy on dismissing the survey report as a “draft” although it was cleared by the official statisticians in charge of the process.
The government has also put out alternative facts or argued that if things were that bad, there would be riots in the country. The recent budget announcement had little to say about jobs even as the government announced a slew of populist measures to help those in distress.
While the government claimed that the Budget laid out a vision for 2030, it appears jobs are not really part of this vision. By putting out various arguments that imply all is well on the jobs front, the Modi government is doing great disservice to the country, especially our youth. It can also lead to a potentially dangerous situation in which dissatisfaction among aspirational youth could lead to disruptions of our social fabric in the years to come. So, what exactly is the government crowing about if the NSSO report is so grim?
According to PM Modi, “lies are being spread” about jobless growth in India. As evidence the government regularly refers to a report by Pulak Ghosh (Indian Institute of Management-Bangalore) and Saumya Kant Ghosh (State Bank of India), which is based on Employees’ Provident Fund Organisation’s (EPFO) data to show that 36.8 lakh new members in the age group of 18-25 years registered for PF.
EPFO tracks employment in the formal sector through registration of provident fund accounts, and thus the authors assumed this number of 36.8 lakh (as of November 2017) to be the number of new jobs created in the formal sector. This logic was then extended to the whole year and therein came the PM’s claim that “Seven million new EPF accounts, doesn't this show new employment?”
It’s democracy that has prevented rioting on the street
The Ghosh and Ghosh report was debunked by several commentators. Praveen Chakravarty and Jairam Ramesh argued persuasively that “New 18- to 25-year-old EPFO members do not automatically mean new net jobs in the economy; an informal job that turns formal with an EPFO registration does not mean it is a new job; cherry-picking an EPFO data point and post-demonetisation/Goods and Services Tax (GST) time frames lead to these grossly misleading conclusions.”
Economist Vivek Dehejia reflected the same sentiment while agreeing with Chakravarty and Ramesh and said “the debate has been twisted by the authors’ untenable and implausible claim that new EPFO registrations, in particular of younger workers, largely represent net new additions to employment.”
The government has also used the numbers from the Mudra scheme to defend its record on jobs. During a ‘No Confidence Motion’ brought by the Opposition, the PM said “we gave loans to 13 crore youngsters through the Mudra scheme.”
The basic premise here is that since the Mudra scheme was rolled out to push entrepreneurial spirit in the youth, the amount of loan or the number of loans given out would be directly proportional to the number of self-employed youth in the country.
Modi asserted that “the initiative has helped multiply jobs.” So, are Mudra loans creating crores of jobs? The short answer is ‘No’. Mudra loans are of three varieties (Shishu up to ₹50,000, Kishore – above ₹50,000 and up to ₹5 lakh) and Tarun – above ₹5 lakh and up to ₹10 lakh).
In 2017-18, almost 90% of the loans were Shishu loans and their average size was less than ₹25,000. Economists are not willing to concede that you can create a decent job by spending ₹25,000. An India Today analysis based on an RTI query led economist Ajit Ranade to comment that “(such micro loans) are only useful for small businesses like single cattle dairy farmers or some 'thela wala' but it will not be sufficient to create substantial employment.”
But, why aren’t there riots or social unrest? Isn’t the government’s self employment push through Mudra keeping people satisfied? You only have to look at agitations by youth belonging to Jat, Patidar, and Maratha communities or farmers’ marches or the distress in rural communities to know that things are not exactly peachy.
Our democracy is giving people opportunities to vent, as they did recently in state elections by voting out the BJP in key states. Moreover, self employment has been prevalent in India for quite a while. However, if young people were so enamoured by Mudra-powered opportunities, why would almost 25 million youth apply for about 65,000 jobs advertised by Railways last year? Let’s face it: we have a problem.
The NSSO survey results shouldn’t be surprising at all. In fact, long before the NSSO survey, Mahesh Vyas of the CMIE wrote about this employment ‘stagnation’ which saw a fall in total employment in 2017-18 to 41.45% from 2016-17’s 42.59%.
Vyas also spoke of the “large number of unemployed persons who stopped looking for jobs” and fell out of the labour market, shrinking the labour force, thus lending some buoyancy to the employment figure. By the way, a declining labour force participation rate is also reported by the NSSO survey.
The fact is that there are multiple reports which point to the grim state of unemployment and jobless growth in the country and the government is simply running out of arguments to defend its failures.
After declining to publish the NSSO survey results, even after it was cleared by experts, the National Statistical Commission was left without a non-government member. Both of its last remaining non-government members, including the interim chief, quit citing government interference in their work.
This wasn’t the first instance where the government chose to withhold information. The Quarterly Employment Survey (QES), which is an important source of information for the number of jobs created in eight important sectors, was also shelved last year.
These episodes damage not just the institutions that have long upheld the integrity of India’s national statistics, but also cloud the true challenges that we face.
India could benefit from a demographic dividend, producing the kind of decent job opportunities that Indian youth seek. We could end extreme poverty, reduce inequality and achieve upper-middle-income country status. However, challenges to employment generation may as well turn this opportunity into a demographic curse.
India needs to invest in its people, and build human capital to make full use of our potential demographic dividend. Doing nothing is not an option. Certainly, denying what is painfully obvious is criminal negligence. By choosing rhetoric over reality, PM Modi has squandered a unique opportunity to help improve the lives of India’s masses, particularly our young people.
The author, formerly with the World Bank, is a member of the Indian National Congress. His forthcoming book on the economy under the Modi government is being published by Penguin Random House.
Views expressed are personal. @salmansoz;firstname.lastname@example.org