India's employment: The challenges

In the concluding part of the series, the author says India's next challenge is to meet the aspirations of people who are employed but want higher incomes

So what is the true picture of employment in India? We now have extensive data available on people contributing to social security benefits are provided through the Employee Provident Fund Organisation (EPFO), the Employee State Insurance Corporation (ESIC) and the National Pension Fund (NPS). Between September 2017 and November 2018, a total of 73,50,786 new subscribers were added to the EPFO, an average of 490,000 subscribers each month. ESIC tells a similar story. On an average, between September 2017 and November 2018, approximately 1-1.1 million subscribers were added each month. Even if we consider a 50 per cent overlap with EPFO data, it yields about 1 million workers being added to the formal workforce per month, or 12 million annually. An analysis of NPS shows that we are adding close to 600,000-plus jobs in central and all state governments.
 
Another complementary measure of employment can be based on the transport sector. Consider the sale of commercial vehicles. The net of exports, approximately 750,000 vehicles were sold in FY18 in India. Considering a replacement rate of 25 per cent, this still translates to 560,000 new commercial vehicles added to the transport sector. Assuming a capacity of employment for each commercial vehicle at two, we can infer that 1.1 million jobs are annually added in this sector alone. To this if one added the sales of cars, three-wheelers and tractors, around 30-plus lakh jobs are created in this sector alone yearly.
 

Self-employment is also a critical source of employment generation in India. Job creation among professional service providers such as chartered accountants, lawyers and doctors is also robust, as per data from their respective regulatory bodies. Income Tax (IT) data provides an indication on the number of new self-employed professionals. As per data available, an average of 150,000 tax paying professionals were added annually between assessment year (AY) 2014-15 and AY 2017-18. One can further assume that most of these professional tax payers hire support staff, likely to be below the threshold of 20 employees which then makes social security registration mandatory. Assuming each professional hires a support staff of five, this indicates an average of 750,000 jobs being created annually. Under MUDRA Yojana, 155.6 million loans have been disbursed amounting to over Rs 7 trillion. Over 40 million first time borrowers have started their business enterprises. Such a huge magnitude of loans being given to small entrepreneurs  has created gainful employment.

 
A study by McKinsey Global Institute titled “India’s Labour Market — A New Emphasis on Gainful Employment” has highlighted that increased government spending, rise of independent work and entrepreneurship have boosted incremental job for 20-26 million people during 2014-17. According to an analysis by the Ministry of Tourism, the tourism sector alone has created 14.62 million job opportunities in the country during last four years.
 
While the above statistics do not present the full extent of employment generation, they do lend irrefutable and concrete evidence of the extent of employment being generated across the country. There is certainly enough evidence to doubt and even contradict the narrative of joblessness with shrinking workforce and rise in unemployment.
 
Does this mean that India has no challenges related to employment? That’s also not true. Over the last few years, India’s next challenge is to meet the aspirations of people who are employed but want higher incomes. This requires creation of enough well-paying jobs for existing industrial workforce and for those who want to move out of agriculture. This requires policies that encourage productivity growth in the country, which necessitate concerted efforts towards formalisation, urbanisation and industrialisation of Indian economy. Regarding the PLFS, I feel that the experience of the pilot should be used to improve the survey through use of technology, accessing real-time data, and increasing the sample size. The draft estimates just do not add up. The above are issues I would have raised if I had been presented a copy beforehand as member of the Commission or if the full Commission had met to discuss the draft report. (Concluded)
The author is CEO of NITI Aayog. Views expressed are personal.