Why The Modi Govt's Claims About Job Creation Are Wrong

While all the evidence available in the public domain points towards a worsening job situation in the country, the NDA-II government has adopted worrying strategies to deal with the problem, which are essentially two-fold. The first approach has been a denial of the existence of the unemployment problem in the economy. The prime minister has said that more than a lack of jobs , the issue is a lack of data on jobs. While the recommendations of the Task Force on Improving Employment Data are yet to be implemented, the government started a major media campaign, claiming an increase in job creation based on various administrative and government schemes data, which are not yet universally accepted as reliable sources for employment data.

For example, the government and some economists have used the Employees Provident Fund Organisation (EPFO) database to argue that there has been an increase in employment. They use the number of new registrations under EPFO to count the number of employed. This is, however, an incorrect way of estimating employment because, first, EPFO registration of workers is mandatory for establishments having at least 20 workers. Take an example of an establishment with 19 workers, none of whom were registered in the EPFO. But when an additional worker is employed, the number of workers becomes 20. This then makes registration of all workers in the EPFO compulsory. If one now looks at the EPFO data, there will be 20 new registered workers, when the increase in employment is only one. Second, the government has incentivised enrolment under the EPFO through the Pradhan Mantri Rozgar Protsahan Yojana (PMPRY). The implementation of this scheme has resulted in an increase in enrolment under the EPFO. But all such new enrolments cannot be regarded as jobs created. Further, contractual workers are also being provided EPF subscriptions, thereby increasing the number of registrations.

There is no way to judge whether the new registrations under the EPFO pertain to new employment or a simple reclassification of the already employed. The basic problem with analysing EPFO data for employment is that the methodology of the dataset is not clear. The question is, when a person changes jobs, does the EPFO merge the two policies or delete one? If it is the former, it will show up as an increase in the number of subscribers, but if it is the latter, there will be no change in the number of subscribers.21 Also, the data released by the government does not demarcate between people who regularly make contributions to their provident fund (PF) accounts and those who do not. Thus, there is no way of knowing whether the number of workers being circulated are actively engaged in work or if these are merely dormant PF accounts.

Therefore, to claim higher job creation on the basis of EPFO data is problematic. An analysis of EPFO data for the period September 2017 to September 2018 shows that the number of new subscribers during this period was 1.57 crore. However, in the same period, one crore workers ceased to contribute while 24 lakh rejoined the scheme. The notification in this regard from the Ministry of Statistics and Programme Implementation (MoSPI) argues that: ‘More analysis is required to look at the cohort of EPF subscribers before firm conclusions can be drawn on the changing pattern of employment across sectors and regions as also by gender’.

The other data source being repeatedly quoted by the government is the loans provided under the Mudra scheme. In 2017–18, 4.81 crore loan accounts were in existence, with a sanctioned  loan amount of Rs 2.54 lakh crore. Government officials and economists claim that such a massive infusion of credit in the economy is bound to give rise to more employment. But the real question is: How many new jobs did this scheme generate? There are no estimates available on the employment generated through Mudra. What is known is that 88.65 per cent of the accounts and 42 per cent of the sanctioned loans fall under the Shishu category,25 where the loan ceiling is only Rs 50,000. With such a small loan, it is doubtful if employment can be created by an entrepreneur.

The prime minister’s other claim has been that even those frying pakodas and earning Rs 200 a day should be considered as employed. This is a strange claim for at least three reasons. First, as unemployment allowances do not exist in India, it is practically impossible for anybody to live without work for long. What people generally do is to join the ranks of informal workers and try to eke out a living by low-productive jobs like selling pakodas or peanuts. This is what is called underemployment, or disguised unemployment. To claim such jobs as ‘employment’ is not accurate. Second, if a person decides to sell pakodas for a living, this is not the result of a government initiative. Lastly, informal and unorganised labour comprises an overwhelming proportion of the Indian workforce, most of whom lack basic social security benefits. To celebrate such low-paid, low-productive jobs as gainful employment is incorrect.

Ever since economic reforms were introduced in 1991, India has been following a path of jobless growth. Most of the working people, in the absence of gainful employment opportunities, join the ranks of the informal workers to eke out a living. Narendra Modi , in the run-up to the 2014 Lok Sabha elections, promised to end this situation with a new government that would generate jobs for the people. The available data suggests that the NDA-II government has failed to keep this promise. Rather, it seems that the employment generating potential of the economy has been further eroded by policies like demonetisation.

The debate on employment in India is currently being conducted in a situation in which the government has almost stopped publishing official statistics on employment in the country, and is yet to come up with a new measure which is accepted by economists and policymakers. In this data vacuum, the government machinery is putting out various claims about job creation in the economy based on defective statistical data. However, none of this can change the basic facts about joblessness in the Indian economy. The common people continue to struggle for a living and wait for the day when the government will begin to provide them with gainful employment.

Excerpted with permission of Orient Blackswan from ‘A Quantum Leap in the Wrong Direction?’ Paperback, Rs. 495.