Unemployment in India and the Ambiguity that Surrounds

Unemployment in India and the Ambiguity that Surrounds

Adarsh Swarnakar | Sep 28, 2020

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India has a population of 1.3 billion, and the unemployment numbers we host are certainly formidable, dismaying and soaring. Yet, over time, those who have real powers in their hands and responsibility on their shoulders have been highly reluctant to address this elephant in the room. From passing responsibilities to other governments to now framing the dilapidated condition of the country, suffering on all fronts, as an ‘Act of God’ and observing a futile ‘Unemployment Day’, all that the cunning politicians of our nation have done is changing the narratives, without taking any substantial step towards actual change.

Let’s analyse how unemployment is measured in India, and what the current stats say.

Conventionally, the unemployment statistics are collected, compiled and disseminated once in every five years by the Ministry of Labour and Employment (MLE), primarily basing it on the sample studies conducted by the National Sample Survey Office (NSSO). But till 2017, India had never taken the effort of a monthly, quarterly or even yearly study of such an imperative issue of Indian economy. In the year 2016, Centre for Monitoring Indian Economy (CMIE) – a non-government entity based in Mumbai - started sampling and publishing monthly unemployment in India statistics, bring out the actual realities of the apprehensive conditions, which continue to haunt the nation right from the time of Independence of the nation.

According to a 2013 report, the Indian labour force has been officially classified by the Indian government into three categories, and is used for the estimation of the rates of unemployment:

  1. Rural sector, which includes the farm labour
  2. The urban formal sector, which includes factory and service industry labour with periodic salaries and coverage per Indian labour laws
  3. The urban informal sector, which includes self-employment and casual wage workers.

 

In the 2010 World Bank report, it was stated, “low-paying, relatively unproductive, informal sector jobs continue to dominate the [Indian] labour market."

"The informal sector dominates India's labour markets and will continue to do so in the medium term", brings out the World Bank, "even if the definition of the formal sector is stretched to include all regular and salaried workers, some 335 million workers were employed in the informal sector in 2004–05".

NSSO Surveys:

The National Sample Survey Office (NSSO) has been the nodal governmental agency in India at the national and state levels to study employment, unemployment and unemployment rates through sample surveys, once in five years. The last three surveys were completed and published were in the years 2004–2005, 2009–2010, and 2011–2012. But these NSSO survey reports have been quite ambiguous, inconsistent and thus unreliable.

In 2011-2012, the survey was initiated by the Congress-led Manmohan Singh's government as it was felt that the higher unemployment numbers reported in the 2009-2010 report might have been due to that year's poor monsoons and an early survey might yield more accurate and better data. Plus there was no NSSO survey between 2012 and 2017, and a further study was initiated in 2017–2018. This report has never been made public by the BJP-led Narendra Modi's government, but the result was leaked to the media.

According to Business Today, this report is the "first comprehensive survey on employment conducted by a government agency after Prime Minister Narendra Modi announced the demonetisation move in November 2016". The report revealed the unemployment percentage in India to be 6.1, a four-decade high, supposedly a result of the demonetisation aimed to curb the informal untaxed economy.

The report states that male youth had an unemployment rate of 17.4 per cent and 18.7 per cent in rural and urban areas, while women youth had rates of 13.6 per cent and 27.2 per cent respectively in 2017-18. The Indian labour force is estimated to be growing by 8 million per annum, but the Indian economy is currently not producing new full-time jobs at this rate.

However, the think tank of Government of India, NITI Aayog says that these are not official and the data is not yet verified. The BJP-led Indian government has claimed that the NSSO report was not final.

According to the International Labour Organization (ILO) - a United Nations body, the NSSO surveys are the most comprehensive studies as they cover the rural and remote parts of the nation too. But most of the experts have termed it absurd and non-reliable due to its unconventional and India-specific terminology. It estimates the activity status of a person by different approaches such as "usual status" unemployment and "current status" unemployment. It yields numerous forms of unemployment numbers, according to an ILO report, and the totals vary based on, factors such as whether a person has, for pay or no pay, "worked at least for 30 days during the reference period of 365", "worked for at least 1 hour on any day during the seven days preceding the date of the survey", and an estimate for "person-hours worked in the reference week" according to its statistical methods".

Thus the NSSO reports, though appreciated for its scope and efforts, are criticised for its "absurd" results and inconsistencies.

In 2017, The Economic Times reported that the government announced that the "employment data collection in India would soon undergo a major revamp" after a high-level expert panel recommended an end to the five-year employment surveys by National Sample Survey Organisation (NSSO). The committee led by Niti Aayog vice-chairman Arvind Panagariya recommended that it be replaced with an annual or more frequent and reliable data collection and reports. According to this panel, the NSSO methodology and practices have yielded misleading and biased data that "do not include the self-employed and farmworkers, and are marred by low or irregular frequency and long-time lags". But till now, no improvements in the direction have been made, and the conundrum continues to persist.

Labour Bureau Reports:

In addition to the NSSO surveys, Labour Bureau comes up with informal stats on the unemployment rates of the country, compiled annually, deriving information from sources like the Annual Survey of Industries (ASI), Occupational Wage Surveys, and Working-Class Family Income and Expenditure Surveys and other regular and ad-hoc field surveys and studies on India published by third parties.

CMIE Reports:

In current time, Centre for Monitoring Indian Economy Private Limited is the most reliable and accurate source for statistics and numbers on unemployment. Starting its studies from 2016, it publishes reports on a monthly basis (first time in Indian history), with data collection methodology and reports differing from those posted by the NSSO.

As per the latest report published by CMIE, India's unemployment rate fell to 7 per cent in September 2020 from a record high of 23.52 per cent in April, as many businesses resumed operations following weeks of closures due to the coronavirus pandemic. The jobless rate in urban areas dropped to 7.2 per cent from 9.83 per cent last month, while that in a rural area was down to 6.3 per cent from 7.65 per cent.

The unemployment rate by CMIE is estimated by directly interviewing a large sample of randomly selected households. Centre for Monitoring Indian Economy Consumer Pyramids panel of households includes over 174,405 households including over 522,000 members who are over 15 years old.

ILO Reports:

The UN International Labour Organisation (ILO), publishes reports on unemployment rates of various countries around the world, along with India. In 2017, ILO methodologies were updated its methodologies to make the labour force, employment and unemployment trends measurement more accurate and more consistent across nations.

As per the ILO's 2018 World Employment of Social Outlook report, it adopted revisions and measures for all countries to "encompass the inclusion of additional data points (e.g. new or updated data for countries), removal of inconsistent data entries and revisions stemming from the application of the internationally agreed criteria in the computation of unemployment rates in countries where nation-specific, relaxed definitions of unemployment were previously reported. These changes account for 85 per cent of the downward revision to global unemployment figures". The ILO uses a sophisticated and diverse set of population demographics, sample surveys and economic activity indicators to derive its estimates, thus making it most sought-after.

According to the ILO, the unemployment rate in India has been estimated in the 3.4% to 3.6% range over the Indian-government led 2009–2014 and the government led 2014–2019 periods.

The Stark Reality

It is indeed true that our economy had taken the downward slope even before the onset of the global pandemic, which further blemished the country’s GDP. India had a very strict 40-days lockdown, which had no impact on the COVID-19 cases, and that is apparent now. The numbers didn’t grow then but are growing now. The ramifications it had was only on people’s lives and livelihood. The gravity of the economic inactivity in terms of the job now provides a glaring picture for everyone.

As per CMIE reports, salaried jobs grew by a meagre 1.6%in 2017-18, which registered negligible growth of 0.1% in 2018-19. It has only gone downhill since then. The numbers of salaried jobs contracted by 1.8% in 2019-20. So even before COVID-19 kicked in, India was struggling severely in this front.

So far, during April- August 2020, we have lost a humongous 2.1 crore salaried jobs, and there seems no going back.

Current unemployment stats by CMIE

But why exactly is our economy failing to create the required numbers of jobs?

Firstly, the Gross Fixed Capital Formation (as % of GDP) for India, that in layman terms indicates net investment had been on a constant decline between 2014-19 (except 2018), falling from 30.1% to 27.4%. This is an indication that companies have not been adding capacities for the last few years, leading to low demand for workforce due to variety of reasons.

Secondly, our economic growth has witnessed a downturn for the last four years, which indicates a slow demand.

Thirdly, India’s reliance on employment in the agricultural sector is still very high. The agriculture sector of our nation employs nearly 50% of India’s working population while contributing to just 17% of India’s net GDP. It is not an unknown fact that a country can grow in the economic front when it has more and more of its population inclined towards the manufacturing and services sector. But in a way, India’s historical and cultural significance of the Agri sector keeps the people attached to it and poses the problem.

Way Forward    

Now that we have these gloomy skies over us, how can we actually make a way out of it? How can we make the enormous population of the country, its true assets, and show it to the world?

Right now, the motive of the government should be to create demand and incentivise production. When demand picks up, the industrial activity will pick up, which in turn would lead to more jobs. Though the government came up with this 20 lakh crore Atmanirbhar Bharat scheme, many analysts have proclaimed it to be not very promising and future-ready. The package of Rs 20 lakh crore comprises both fiscal and monetary measures, the latter being like credit guarantees and liquidity infusions into banks and other financial sector institutions rather than the economy per se. This stimulus package to looks more of a slogan, and less of substance. More holistic programs are the need of the hour.  

Right now, India’s forex reserves are at an all-time high. Using it strategically can take the country to newer heights and trickle down the impact of the economic slowdown we are facing.

Infrastructure spending by the Centre urgently needs to go up. As compared to the Rs 9.47 lakh crore expenditure by the Centre between April and July 2019, this year it has only increased to Rs 10.54 lakh, that too mostly towards salaries and other regular expenses. This shouldn’t work this way. The lackadaisical attitude with which the Centre is actually working has to be countered.

An innovative and a rather revolutionary way to increase the jobs can be to introduce an urban counterpart of MNREGA and can immensely help towards making a difference for the labourers getting exploited in the hands of the money-mongering contractors.

The time to bring a change is now, or else the country will be in deep pits. India, with its so high a population, has to be resilient in the economic front. The potential that India has needs to be channelised in the very right direction. India does need jobs and government does need to wake up and bring sturdy measures that actually has some substance, rather than just giving us yet another of those fancy slogans.

References:

  1. https://unemploymentinindia.cmie.com/
  2. https://en.wikipedia.org/wiki/Unemployment_in_India
  3. https://indianexpress.com/article/explained/why-unemployment-could-become-a-bigger-headache-for-government-explainspeaking-6593923/

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