Jobless growth under UPA to Jobloss growth under Modi

February 25, 2019
Aniyan PV

The Indian economy in the 70s and 80s were marked with moderate growth rates of 3 to 4% and registered up to 2% growth in employment . But markedly the post reform period of the 90s and 2000s clocked less than even 1% of growth in employment corresponding to an economic growth of 7-8%.  This was also a period of a structural transformation with a reduced workforce in agriculture with even the absolute number falling since 2004. Increasingly people were on the look out for non-farm employment with construction and NREGS supplementing it. In fact, the potential work force in industry and services grew at 14.7 million a year during 2004-12 but the corresponding employment provided within those sectors was hardly 6.5 million a year . This was widely characterised as a period of jobless growth and that is why a major chunk of the unemployed, especially the youth, bought Modi's campaign in 2014 Lok Sabha elections of providing 1 to 2.5 crore jobs per year .

1. The record of the Modi government

The employment-unemployment data released by Labour bureau (EUS 2015) has put the rate of unemployment at 5%. Independent estimates also suggested that 2013-15 period saw the total employment shrinking by 70 lakhs heralding a new job loss growth under Modi. The most recent BSE-CMIE data suggested that the rate of unemployment stood at 5.7% in June 2018 and the December data puts it at 7.02%. The GDP estimates also recorded a significant deceleration from 7.5% in July-September 2017 to 5.7% in April-June 2018. The Niti Ayog Vice Chairperson Rajiv Kumar's rejection of the job data was grounded on his optimism from the high growth rates. But all the window dressing got exposed after the resignation of the acting Chairperson and another member of the National Statistical Commission (NSC) opposing the government decision to delay the findings of the NSSO EUS which was finalised and ready for publishing way back in December 2018. This data that leaked out subsequently in the public domain showed alarmingly higher levels of unemployment. According to this, the country's unemployment rate stood at over a four-decade high of 6.1%  during 2017-18, compared to 2.2% in 2011-12 (see table 1.1) by the usual status approach. The labour force participation rate (the share of population working or willing to work) was 55.9% in 2011-12, dropped to 49.8% which means half of India's working age population (15 years and above) is not contributing to any economic activity. These numbers along with the high rate of unemployment are certainly a cause of worry in a country where the rural majority doesn't have a choice to remain unemployed in order to feed themselves. The low female labour participation rates in a scenario of shrinking agricultural sector and women not finding enough non-farm employment are fresh concerns.

Table 1.1
Key Labour Indicators 2011-18 (various agencies)

Year Labour Force Participation Rate (%)

Rate of Unemployment (%)

National Sample Survey
2011-12 (NSS0) 55.9 2.2
2017-18*(NSSO) 49.8 6.1
Labour Bureau (EUS)
2011 (LB-EUS) 52.9 3.8
2012 (LB-EUS) 50.9 4.7
2013 (LB-EUS) 52.5 4.9
2015 (LB-EUS) 50.3 5
Centre for Monitoring Indian Economy
2018 June (CMIE) 42.7 5.7
2018 Dec (CMIE)   7.02
2019 Jan *(CMIE)   7.05
2019 Feb *(CMIE)   7.10

* Unpublished / Provisional

1.1 Demonetisation and its effect on Employment

The deceleration in the economy post demonetisation is a fact noted by the low growth rates since then. The employment data from CMIE, a month after demonetisation showed 12.7 million job losses. The implementation of GST in July 2017 pushed it even further as the rate of unemployment reached 7.02% by December 2018, with rural India accounting for 84% of the job losses out of a total of 11 million* in 2018 alone. The picture from the leaked out NSSO data also doesn't look otherwise, as according to the current weekly status approach which appears to capture the impact of demonetisation and GST better, the unemployment rate stands at 8.9%.

1.2 Unemployment among Educated Youth

The State of Working India report notes that the rate of open unemployment among the youth and higher educated has reached an all time high of 16%. The 2015 Labour bureau EUS data also suggested that additionally, 13.8% of graduates and 12.6% of postgraduates (or higher) were unemployed, which means three to four times the overall unemployment rate of 3.7% estimated then. The unemployment rates for graduates and above shows the SC/ST/OBC categories way above the general category. The data approved by the NSC shows that the unemployment rate among educated people (the NSSO survey defines a person to be educated if he/she has completed school studies till at least the secondary level) rose sharply in 2017-18. This was after registering a decline in all categories in 2011-12 compared to 2004-05 (See table 1.2).

Table 1.2
Educated Unemployment (in %)

Categories 2004-05 2011-12 2017-18
Rural Male 4.4 3.6 10.5
Rural Female 15.2 9.7 17.3
Urban Male 5.1 4.0 9.2
Urban Female 15.6 10.3 19.8

Courtesy : Somesh Jha (17th Feb, 2019, Business Standard)

2. What led to the Employment Crisis?

2.1 Agrarian Crisis and Industrial Slowdown

In India, traditionally agriculture has been the mainstay as far as employment is concerned. Compared to the 2000s which showed an uptick in rural wages due to a host of reasons such as construction boom, much better implementation of the NREGA and even more regular monsoons, the next decade from 2011-12 onwards all these factors started turning negative. The construction sector and small industries in the informal sector had to bear the brunt of demonetisation (Nov-2016) and GST implementation (July-2017) respectively. In fact, these factors have added to the decelerating rural wage growth since November 2014 marking an acute rural distress during this period with real wages turning negative following an increase in inflation. This is at a time when the NDA government was talking about doubling the farm income by 2022. Needless to say, doubling requires 10-15% consistent growth in the sector for atleast 5 years.

Industrial growth has been poor throughout this decade and the NDA government couldn't do anything to reverse this trend. The Index of Industrial Production (IIP), which measures industrial output growth, has been fluctuating up and down, dipping to 2.6% in 2015 then inching up to 5.2% in 2016, again dropping to 3.5% in 2017 and inching up to 5.2% in 2018. In fact, total factory employment (ASI) increased by just 7.61 lakhs in the first two years taken together (2014-16) of the current government, compared to an increase of 7.36 lakhs in a single year in 2011-12. This period was also marked with a declining wage share in organised as well as unorganised manufacturing. The evidences from states shows that workers were forced to take up multiple informal jobs and work upto 12 hours, much higher than the 8 hour working norm for meagre monthly income of even less than Rs. 5000.

2.2 Lower allocations to MGNREGS

The MGNREGS as of now suffers from rationing of jobs as the proportion of applicants who could not get a job has risen to 40% , thus clipping the wings of a demand driven scheme. The budget amount for 2018-19 was already lower than the 2009-10 amount in real terms.  Added to that, the allocation for 2019-20 has been reduced by another 1000 crores than the previous year. Moreover, the wages are no longer linked to the minimum wages act and is now lower than stautory minimum wage in many states. The low allocation is reflected in the average person days per household under MGNREGS under the Modi regime, with the year 2016 registering the lowest ever figure of 15.3 days, compared with a maximum of 54 days in 2009 . Inordinate delays in payment of wages on account of the paltry compensation have also been sited in many recent studies.

The government Schemes like Skill India (Pradhan Mantri Kaushal Vikas Yojana) failed miserably, as out of the 41.3 lakh people trained in three years under the programme, just 6.15 lakhs got placements. The much touted Mudra loans also could disburse only an average of Rs. 45,000 which obviously means employment opportunities confining within the loan seekers.

2.3 Downsizing of the Government

The record of the Modi government in creating jobs under government and public sector was also on the negative for the last four years. The total number of employees in the central government dipped to 32.53 lakhs in 2017 from 33.28 lakhs in 2014, a loss of 75,000 jobs. In over 330 Central Public Sector Enterprises (PSEs) which employed 16.91 lakh persons in 2014 (mainly in mining, steel, oil, heavy and medium engineering and fertilizer sectors), the 2017 figure is 15.24 lakhs, a loss of 1 lakh 67 thousand jobs in three years. The jobs in the public sector banking sector also came down from 9.47 lakhs in 2015 to 9.12 lakhs in 2017, a loss of 35,000 jobs.

The latest data  revealed through answers to queries in Parliament and reports from various programmes and bodies reveal a staggering 60 lakh vacancies in government posts. These include posts for over 10 lakh elementary and secondary school teachers, nearly two lakh teachers in colleges, universities and IITs/IIMs, over 2.2 lakh doctors and healthcare staff, over 5.38 lakh state policepersons and over 5,000 judges in lower courts across the country. Thus the central government along with the many BJP state governments which were kowtowing this line was on a conscious path of downsizing while applications for government jobs in the central/state sector were heavily over-subscribed. The Indian Railways which advertised vacancies to fill 1 lakh jobs received 2.5 crore applications. 

3. Left Alternatives

In Kerala an income support scheme is on for workers in traditional industries in the co-operative sector since 2008. Wage subsidies from the government have increasingly been tried out in Odisha (2016) and other states (2017) in apparel industry for large private units.

There need to be further building on the MGNREGS to address the unemployment among educated youth. This section could be employed in a universal public provisioning of health, education and public distribution system. The demand of the trade unions for a minimum wage of Rs. 18,000 per month, as implemented by the seventh pay commission for central government employees must be enacted nation wide.