There was a net addition of 960,000 subscribers to the Employees' Provident Fund (EPF) in April, 770,000 in May and 1.28 million in June in the current financial year. The addition, called the net payroll, was higher in each of these months than the average monthly figure of the previous year. However, many may point out that 2020-21 is not the right year to compare with, as it was a washout due to Covid. One may also note that the net payroll data in each of these months was higher than the average monthly figure since the data began to be compiled from November 2017 (for September 2017).
This may perplex many, since the economy is yet to recover from Covid-19 lockdowns, which were more localised in nature in the current financial year, unlike the previous financial year.
If data on subscriptions to the new pension system (NPS) is also added to net payroll data, India created 3.07 million net payrolls in the first quarter of 2021-22, according to the calculations of State Bank of India chief economic advisor Soumya Kanti Ghosh.
Of this, 1.63 million were first jobs, data which was culled from EPF and NPS. As many as 1.18 million were second jobs or existing payroll and 260,000 were formalised accounts, he said.
"If the new payrolls increase at this rate, then the new payroll may cross the five-million mark in FY22 against 4.4 million in FY21," Ghosh said.
He pointed out that the ratio of new payrolls to total payroll was 50 per cent in the first quarter of 2021-22, which is an improvement from 47 per cent in FY21.
"We expect labour market activity to remain better in the current fiscal as companies will continue with their hiring plans to get ahead of the pandemic," he said.
Net EPF payroll rose to 1.28 million in July, far greater than average monthly figures of the previous years.
Madan Sabnavis, chief economist at CARE Ratings, said this was the time when lockdown was relaxed, so units were employing more people.
He also attributed this to the government scheme that paid part of the contribution to EPF. "This would provide incentive to formalise," he said.
The scheme, under the Atmanirbhar Bharat Rojgar Yojana (ABRY), was further extended from June 30 this year to March 31, 2022 by finance minister Nirmala Sitharaman.
Under the scheme, an employee drawing monthly wage of less than Rs 15,000, who was not working in any establishment registered with the Employees’ Provident Fund Organisation (EPFO) before October 1, 2020 and did not have a Universal Account Number or EPF Member account number prior to October 1, 2020, will be eligible for benefit.
In establishments employing up to 1,000 employees, the government will pay both 12 per cent employees’ contribution and 12 per cent employers’ contribution, or 24 per cent of wages towards EPF for two years.
In establishments employing more than 1,000 employees, the government will pay only employees’ share of EPF contribution or 12 per cent of wages for two years.
D K Joshi, chief economist at Crisil, said formalisation is indeed happening as formal and large sectors have gained during the pandemic at the cost of the small sector.
"Probably this is getting reflected in higher GST collections," he added.
GST collections remained above the Rs 1.1 trillion mark for July and August. The July collections at Rs 1.16 trillion was, however, higher than Rs 1.12 trillion in August. The collections in July basically reflected transactions in June.
In April this year, the collection was at a record high of Rs 1.41 trillion. The mop-up had slipped to Rs 1.02 trillion in May and fell below the Rs 1-trillion mark in June for the first time in eight months, as the country faced a brutal second wave of Covid, forcing lockdowns by state governments.
However, Ranen Banerjee, leader-economic advisory services, PwC India, felt the new enrolments would likely start dipping as the normalisation continues.
Mahesh Vyas, managing director and CEO of the Centre for Monitoring Indian Economy (CMIE), said all other data points such as CMIE's own reports and periodic labour force surveys (PLFS) point towards the formalisation of businesses in the past few years. He found it difficult to reach the conclusions of formalisation of the economy from EPF data.
PLFS surveys came with a lag. The latest PLFS report shows a sharp increase in employment in agriculture from 42.5 per cent of the total employment in 2018-19 to 45.6 per cent in 2019-20.
In a commentary on the report, Vyas had earlier said such a large shift of labour towards agriculture cannot be voluntary. It is a sign of distress in the labour market, where non-farm sectors are unable to provide jobs and labour is forced to shift to agriculture.
According to the Consumer Pyramids Household Survey (CPHS) by CMIE, the share of agriculture in total employment rose from 35.3 per cent in 2017-18 to 36.1 per cent in 2018-19 and then to 38 per cent in 2019-20.
Table: A three-year high in net payroll additions
The additions in June were higher than the average monthly figure in the previous three years (figures in mn)
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New subscribers |
FY20
FY21
Monthly average
April
May
Source: EPFO
