Presentation of data on the Indian economy which is outside the purview of the Reserve Bank of India (RBI) has become quite opaque of late especially with the back series of the gross domestic report (GDP) with 2011-12 base. Employment is even more controversial as the data is amorphous as information outside the Annual Reports of companies is at best a proxy for the real world.
The Centre for Monitoring Indian Economy (CMIE)-Employees' Provident Fund Organisation (EPFO) debate has become contentious as it has taken a political angle. Jobs are created when the economy grows and if there is a slowdown, it is but natural that the rate of growth in job creation will slow down. However, it becomes a political ego-scoring point to always contend that jobs growth is steady. Therefore, the EPFO data is being touted as being the right way forward.
However, the increase in registrations comes along with the laws which have been changed wherein the Goods and Services Tax (GST)-compliant enterprises which have entered into the organised stream have to follow rules and enroll their employees. Therefore, people shifting from private EPFOs to the state EPFOs or getting in for the first time are not new employees but existing workers who now have cover.
The National Sample Survey Office (NSSO) data, which is probably the more authentic source based on sample surveys, has become controversial (and not made public) because the results were not acceptable which has caused some resignations from the National Statistical Commission. This being the case, the results which have been procured by Business Standard and quoted are significant. It does reveal that the unemployment rate was at an all-time high of 6.1 percent in 2017-18.
The Business Standard report has focused on the unemployment rates among men and women youth in both urban and rural areas, which does require an explanation as it is quite deep-rooted and scary. The report says that male youth had unemployment rate of 17.4 percent and 18.7 percent in rural and urban areas, while women youth had rates of 13.6 percent and 27.2 percent respectively in 2017-18. These numbers cause considerable discomfort. This is more so as we talk a lot of the demographic dividend in the country which is taken as an asset for the future.
The contrary view was that if jobs are not created, then there is high probability of this becoming a demographic liability where the unemployed become a social issue. These numbers suggest the same.
The rise in unemployment rate can be traced to various factors. First, farming has become very unattractive given the vicissitudes of the monsoon and government policy. A bad monsoon means lower crop output and income leading to farmer indebtedness and at the extreme, suicides. A good crop leads to prices coming down and with an ineffective minimum support price (MSP), farmers’ income tend to come down again leading to the same set of problems. Therefore, the children of farmers would rather not do farming and move over to the urban areas or look for jobs in the non-agricultural space. In a way, the disguised unemployment which was earlier there with excess hands working on a piece of land has officially become unemployed.
Second, with GST coming in, there has been an upheaval in the small and medium-sized enterprises (SME) space which was a major absorber of labour all through the years especially in rural areas. With forced recognition and opaqueness of processes, there has been unsettling of several self-employed leading to distress. Considering that this came on the back of demonetisation, it was but natural that this class got affected the most as business went down.
Third, migration to urban areas has resulted in more jobs in the real estate construction sector which takes in unskilled labour. This has been the trend in the past. Now, 2017-18 was a year when Real Estate (Regulation and Development) Act, 2016 (RERA) was enforced post-demonetisation and there was a perceptible slowdown in the real estate sector, especially commercial and non-affordable housing projects. The stock of inventory tended to increase which slowed down the pace of new projects. This, combined with slow pace of growth in private infrastructure, meant that these jobs also became scarce. Therefore, the intake of labour was restricted.
Fourth, the youth of today also has aspiration and often are unwilling to take on low-skill jobs once they have a recognised degree. However, given that the economy is not growing at the desired pace of 8 percent-plus in the last three years; demand for labour has been restricted to the higher-end—engineers, management graduates and other professionally qualified personnel. This makes a basic degree irrelevant for employment and while local laws ensure there is employment in super markets and e-commerce businesses, migratory labour is not within the perimeter.
It is, hence, not surprising that data has been put out at various points of time of qualified students applying for unskilled labour in the Railways or for state jobs. There are just not enough openings available when the economy has slowed down. Also, the rather stringent labour laws have ensured that companies have moved towards technology which will always be a challenge in a labour surplus economy. Rather than get into issues of not being able to lower staff strength when the business slows down, technology substitution helps such companies tide over difficult times.
Further, the quality of education needs to be addressed. While we do take a lot of credit in attaining numbers of school enrolment or even higher education, the quality of education in the public space is inadequate which puts students at a disadvantage. Further, those students from a vernacular background will find openings only in the self-employed or government spaces. The latter is also economising on head count which makes future absorption a challenge.
Therefore, the problem of unemployment is very serious and the only way to go ahead is to make the economy grow which happens gradually over time. It will be a constant struggle until such time the youth is able to get absorbed in the system. This is the real situation and needs to be accepted.
(The writer is Chief Economist, Care Ratings)
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Updated Date: Jan 31, 2019 23:01:19 IST