With rising unemployment rate in India, is the policy makers statement “India is on the growth path” be justified?

Rising unemployment 1 With rising unemployment rate in India, is the policy makers statement India is on the growth path be justified?

The big question that is being asked around is whether the unemployment levels in India have really shot up in the last few years. The government has held back the latest employment data to be issued by NSSO. While the government has held it back for reviewing the data; that is normally not the practice. In fact, this decision also led to a senior statistical officer resigning on the same grounds. What exactly is the truth about the jobs scenario in India?

Let us first look at what the CMIE says about jobs

According to the CMIE (Centre for Monitoring Indian Economy), the unemployment rate was recorded at its highest in 27 months at 7.38% as of December 2018. Just to give you an idea, the US has an unemployment rate of just about 3.8% and 5% is normally considered to be a sign of full employment. Thus 7.38% is a worrying number in absolute terms but also considering the fact that this is the worst figure in more than 2 years. In fact, job creation in the latest year fell by 10.9 million for the year 2018.

The actual picture painted by the CMIE is slightly more grim. It is estimated that 83% of job losses were seen in the rural region which accounts for two-third of India’s population. This is all the more serious as rural distress continues to be a major theme of this election and the government had actually promised to double farm incomes by 2022. This only puts that theme back. What is worse is that the share of women in the total jobs lost in 2018 was 6.5 million in rural India and 2.3 million from urban areas. According to the report, 11 million salaried employees in the country lost their jobs in 2018. This is considered to be largely a lag effect of demonetization and GST combined as well as a general slowdown in the global trade which has crimped the growth in export oriented companies. These are largely based in the SME sector, which has the biggest employment creation potential.

What do we infer from the data?

The CMIE report underscores that nearly 396.9 million working-age Indians were employed as of December 2018, compared to 407.8 million in December 2017. The unemployment rate was 8.46% in September 2016. That can also mean that had the government not done the demonetization in November 2016, the situation could have actually improved instead of continuing to deteriorate. The Indian states of Tripura and Haryana had the highest unemployment rate at 28.8% and 24.4%, respectively, said the report. The worst hit was rural India, particularly rate of women employed. Nearly 83% of job loss happened in the rural region that account for two-third of India’s population.

Unfortunately, the jobs data appears to be skewed against women in the work force. In fact, women have been most affected by unemployment rise with their share in the total jobs lost in 2018 at 6.5 million in rural India and 2.3 million from urban India. Actually, the number of men’s jobs increased by 5 lakhs during the period; so even in terms of gender equality, the jobs have been extremely unfair to women. Indian government had made an electoral promise of adding 20 million jobs a year.

Let us play devil’s advocate

While the jobs data may sound intimidating, there are certain data points that the jobs data does not capture.

      • The focus is still on the creation of jobs by organized institutions and the number of self-created jobs is totally ignored. That has been expanding rapidly in the last few years.
      • While growth in GDP may be lower than what it was in the period of 2003 to 2010, the rate of 7.3% GDP growth is still a good number considering that India operates on a fairly large GDP base of nearly $2.6 trillion. That is a sign of job creation, which may not be really captured by the current methodology.

      • Lastly, automation and the use of artificial intelligence and robotics have been key reasons for the loss of jobs. The focus should be on re-skilling and not so much debate on jobs that have gone away.

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