Fewer Indians are engaged in formal employment than a year ago. The number of Indians in the workforce has marginally shrunk from 406.7 million in FY2017 to 406.2 million in FY2018, according to data collected by the Centre for Monitoring Indian Economy (CMIE).
In a report published on July 17, the think tank found the section of formally employed Indians in the workforce has reduced by 0.1 percent from the previous year. The government’s annual Economic Survey document defines ‘formal employment’ as when employees are part of the tax net, and also when they are provided social security by employers. The CMIE report was prepared by polling over 500,000 respondents every month.
However, taking into consideration the sample size of the people surveyed by CMIE, it can be said that the Indian economy did not add new workers over the past one year. This acquires greater importance in the penultimate year of the NDA government that swept to power with the promise of adding 10 million jobs every year.
In FY2017-18, real gross value added (GVA) growth cooled to 6.5 percent from 7.1 percent in the previous financial year. It was also the worst year for economic growth since 2013-14, the year before the NDA came to power.
The dismal outlook for employment should be seen in correlation with investment in infrastructure projects, and foreign direct investment (FDI). According to CMIE’s CapEx database, new investment projects declined by 38.4 percent while completion of extant projects slowed by 26.8 percent in 2017-18 over the year-ago period. The think tank also estimates that FDI was down 15 percent year-on-year in the financial year ended March 2018.
Flat job growth reflects the number of people joining the workforce balances out those who withdrew due to retirement, layoffs, or personal reasons.
On the basis of payroll data, the government claimed that 3.11 million jobs were added in the six months between September 2017 and February 2018. However, data collected by the Mumbai-based think tank suggests that only 1.8 million jobs were added in 2017. Even the inflated projection advertised by the government falls well short of its pre-poll promise of generating 10 million jobs every year.
A stagnation in the employment rate is cause for worry in a country with expanding population. The employment rate is the number of people in the working-age group who are employed, compared to the total working-age population.
The employment rate declined to 40.4 percent in the quarter ended June 2018, from 41.9 percent in the year-ago period. This trend does not represent an aberration if one takes into consideration historical data. The CMIE database shows the employment data dropped to 41.45 percent in 2017-18, from 42.59 in 2016-17.
Business may have tided over the twin shocks of demonetisation and the implementation of the goods and services tax (GST) but the same cannot be said about the working class. The overall size of the labour force contracted to 426.1 million in 2017-18 from 439.7 million in the previous fiscal.
The CMIE report says many employees may have been let go, as businesses scrambled to comply with the GST while dealing with the cash crunch forcibly enforced by the devaluation of high-value currency notes. A contraction in the labour participation rate reflects badly on the Indian economy as 41 percent of the country’s 1.3 billion-strong population is below the age of 20.
Prospects for job seekers continue to look bleak. Low investment indicates poor supply demand. Inflation remains muted. Capacity utilisation at manufacturing units continues to be low.
The negative outlook seems to have extended to the first quarter of the present financial year. The labour participation rate and employment rate are both down as compared to the same period in the previous fiscal. The unemployment rate has increased by 1.5 percentage points to 5.5 percentage in the first quarter of 2018-19.
Source: moneycontrol.com