FILE PHOTO: Job seekers line up for interviews at a job fair in Chinchwad, India. Image used for representative purpose only.
| Photo Credit: REUTERS

The Union Labour Ministry questioned the findings of a report prepared by the United States-based banking giant Citigroup and said the group failed to account for the “comprehensive and positive employment data” available from official sources such as the Periodic Labour Force Survey (PLFS) and the Reserve Bank of India’s capital, labour, energy, material and services (KLEMS) data.

In a statement on Monday, the Ministry said it strongly “rebuts” reports which do not analyse all official data sources available in the public domain. The Citigroup’s report had said that India will struggle to create sufficient employment opportunities even with a 7% growth rate and had asked the Centre to fill one million vacancies in various government posts. The Congress had supported the findings of the report and blamed the Centre’s policies for the decrease in employment opportunities.

The Ministry, quoting PLFS and KLEMS data, said India has generated more than eight crore employment opportunities from 2017-18 to 2021-22. “This translates to an average of over two crore employment per year, despite of the fact that the world economy was hit by COVID-19 pandemic during 2020-21 which contradicts Citigroup’s assertion of India’s inability to generate sufficient employment. This significant employment creation demonstrates the effectiveness of various government initiatives aimed at boosting employment across sectors,” the Centre said.

Citing PLFS data, it added that during the last five years, more employment opportunities have been generated compared to the number of people joining the labour force, resulting in a consistent reduction in the unemployment rate. “This is a clear indicator of the positive impact of government policies on employment. Contrary to the report, which suggests a dire employment scenario, the official data reveals a more optimistic picture of the Indian job market,” it said.

“The Ministry of Labour and Employment emphasises the credibility and comprehensiveness of official data, cautioning against the selective use of private data sources that can lead to misleading conclusions about India’s employment scenario,” it added.

Job seekers at attend Aspire 2024 jointly organised by District Employment office and Vocational Higher Secondary Department at SRV Government Vocational Higher Secondary School in the city on Saturday.
| Photo Credit: THULASI KAKKAT

United States-headquartered multinational banking group Citi has said India’s unemployment challenge is multi-faceted one and even 7% GDP growth might not be able to fulfil the jobs required in the country over the next decade. In a report, titled “India Economics – Nuances of Addressing the Employment Challenge,” Citi has suggested efforts could be made to fill one million Central government job vacancies to address the situation. The banking group has also recommended operationalisation of the four labour codes and said labour reform could be a significant step towards ease of doing business. The Opposition Congress, commenting on the report, said demonetisation, a hastily rushed through Goods and Services Tax (GST), and rising imports from China are the main reasons for the decimation of Micro Small and Medium Enterprises (MSMEs) that provided employment for a huge number of people.

Depending on employment data from the Centre’ Periodic Labour Forced Surveys and the Centre for Monitoring Indian Economy, a private company, the Citi’s report said a “holistic employment generation strategy” will be a combination of deploying scarce fiscal resources to support labour-intensive manufacturing for export purposes, bridging the skill gaps through more formal vocational training, improving availability of credit through credit guarantees to promote self-employment, a large-scale social housing project to boost construction jobs and operationalising the labour reforms to infuse formalisation and flexibility in labour markets.

Quality of jobs

The report said while official unemployment rate is just 3.2%, details reflect serious issues around quality of jobs and possible underemployment. It said agriculture accounts for 46% of all employment but its contribution to the Gross Domestic Product (GDP) is less than 20%. “Both manufacturing and services sectors absorb lesser share of labour than their share in GDP. Share of formal sector in non-agriculture jobs is still only 25%,” the report said. It added that only 21% of the labour force has a “salaried” job, lower than 24% in the pre-pandemic scenario. “Share of employment in rural areas has remained at 67% between 2018 and 2023, indicating that the rural to urban migration process has practically stalled,” it said.

It said India has created 7.4 million jobs per year in this century. “Job addition has been marginally better after 2012 [8.8 million per year] but with a pronounced shift towards self-employment. Under the assumption of Labour Force Participation Rate increasing to 47% [from 42.4% now], 11.8 million jobs must be created every year for the next 10 years, assuming no significant change in the unemployment rate. Even if employment elasticity remains at current levels and real GDP grows by 7%, India can generate eight to nine million jobs per year, over the next decade,” the report said. “Wherever possible, efforts could be made to fill one million Central government job vacancies,” it said.

Social security benefits

It added that the implementation of four labour codes will extend some social security benefits to the gig economy workers. “There has been no nationwide rollout of the four labour codes that were passed by the Parliament in the previous term,” it said and added that once rolled out, labour reforms could be a significant step towards ease of doing business as the companies would be spared of submitting multiple returns under different labour laws prevailing earlier.

Reacting to the report, Congress general secretary and MP Jairam Ramesh said he had been sounding the alarm on the country’s unemployment crisis for the past five years at least. “The crisis has been accentuated with the decimation of job-creating MSMEs through the ‘Tughlakian demonetisation’, a hastily rushed through GST, and rising imports from China,” Mr. Ramesh said. “With his economic policies that favour only large conglomerates, the non-biological Prime Minister has created India’s highest unemployment rate in 45 years, with the unemployment rate for graduate youth at 42%,” he added.

While India’s large young workforce is a demographic dividend, an ILO report noted that they don’t appear to have the skills to succeed. File
| Photo Credit: The Hindu

India’s youth account for almost 83% of the unemployed workforce and the share of youngsters with secondary or higher education in the total unemployed youth has almost doubled from 35.2% in 2000 to 65.7% in 2022, as per the India Employment Report 2024 released by the International Labour Organisation (ILO) and the Institute of Human Development (IHD) here on Tuesday. The youth employment and underemployment increased between 2000 and 2019 but declined during the pandemic years, the study, released by Chief Economic Adviser V. Anantha Nageswaran, said, adding that educated youths have experienced much higher levels of unemployment in the country during the period.

Also read | India’s economic prospects good in the short term, says Chief Economic Advisor Anantha Nageswaran

The Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR) and the Unemployment Rate (UR) showed a long-term deterioration between 2000 and 2018, the study said but witnessed an improvement after 2019. The study added that the improvement coincides with periods of economic distress, both pre and post-COVID-19 with the exception of two peak COVID-19 quarters. “This improvement needs to be interpreted cautiously as jobs generated in the slowdown period raise questions about the drivers of these changes,” the authors of the report said during the release.

Paradoxical improvements

The report said India’s job story over the past two decades had seen some paradoxical improvements in labour market indicators, while the basic long-term feature of the employment situation in the country continued to be insufficient growth of the non-farm sectors and the ability of these sectors to absorb workers from agriculture. “This is notwithstanding the fact that non-farm employment grew at a higher rate than farm employment over the different periods prior to 2018,” the report said. Labour from agriculture was mainly absorbed by the construction and services sectors.

Also read: India’s suboptimal use of its labour power

Also, almost 90% of workers remain engaged in informal work, while the share of regular work, which steadily increased after 2000, declined after 2018. There are widespread livelihood insecurities, the report added, with only a small percentage being covered with social protection measures, precisely in the non-agriculture, organised sector. “Worse, there has been a rise in contractualisation, with only a small percentage of regular workers covered by long-term contracts,” the report said. While India’s large young workforce is a demographic dividend, the report noted that they don’t appear to have the skills to deliver — with 75% of youth unable to send emails with attachments, 60% unable to copy and paste files, and 90% unable to put a mathematical formula into a spreadsheet.

Widening gender gap

The lack of quality employment opportunities is reflected in the high level of joblessness among young people, especially among those who have achieved higher education, the report noted. “Many highly educated young people are unwilling to take on low-paying, insecure jobs that are currently available and would rather wait in the hopes of securing better employment in the future,” the study said. The country is also facing the challenge of a substantial gender gap in the labour market, with low rates of female labour force participation. “The unemployment challenge among young women, especially those who are highly educated, is enormous,” the report said.

Also read: How big is the gender gap in earnings?

Throwing light on the growing social inequalities, the report said despite affirmative action and targeted policies, the Scheduled Castes and Scheduled Tribes still lag in terms of access to better jobs. “Scheduled Castes and Scheduled Tribes have greater participation in work due to economic necessity but engaged more in low-paid temporary casual wage work and informal employment,” it said. “Despite improvement in educational attainment among all groups, the hierarchy within social groups persists,” the report added.

The share of workers with regular wage increased since 2004, with the country creating three million regular jobs annually till 2017 and five million jobs between 2017 and 2019, according to “State of Working India 2023: Social Identities and Labour Market Outcomes”, a report prepared by a group of economists and researchers with the Azim Premji University.

The report, released here on Wednesday, however, added that since 2019, the pace of regular wage jobs creation decreased due to economic slowdown and the pandemic. The researchers said only 6% of these jobs provided any kind of social security — including a health insurance or an accidental care insurance. The report was based on the data sourced from National Statistical Organisation’s surveys, census reports and periodic labour force surveys and such government sources.

The number of men working in such regular jobs, where salaries are provided on a fixed date in a month or in one or two weeks, has increased from 18% to 25% over the years and from 10% to 25% in the case of women.

Caste-based segregation

The report said in 2004, over 80% of sons of casual wage workers were themselves in casual employment. “This was the case for both SC/ST workers and other castes. For non-SC/ST castes, this fell from 83% to 53% by 2018 and incidence of better-quality work such as regular salaried jobs increased. It fell for SC/ST castes as well, but to a lesser extent [86% to 76%],” the study said, pointing out towards a decrease in caste-based segregation. “In waste management and sewerage, over-representation of SCs decreased to 1.6 times in 2011 before increasing slightly again,” it pointed out.

The report said gender-based earnings disparities have also reduced in the last 20 years. “In 2004, salaried women workers earned 70% of what men earned. By 2017, the gap had reduced, and women earned 76% of what men did. Since then, the gap has remained constant till 2021-22,” the researchers said.

Post-COVID, the report said the unemployment rate was lower than it was pre-COVID, for all education levels. “But it remains above 15% for graduates and more worryingly it touches a huge 42% for graduates under 25 years,” it said, adding that the rate of women unemployment was rising due to a “distress-led increase in self-employment”. “Before COVID, 50% of women were self-employed. After COVID this rose to 60%. As a result, earnings from self-employment declined in real terms over this period. Even two years after the 2020 lockdown, self-employment earnings were only 85% of what they were in the April-June 2019 quarter,” the report added.