Unemployment central to debates in every election
There have been raging debates about the unemployment situation in India for many years now. It has played a role in the 2024 Lok Sabha (LS) election debates. And these debates still continue in increasing decibels, as this subject will play an important role in all the future state elections, leading up to the 2029 LS elections.
The opposition parties claim that numerous well-paying jobs have been lost over the last decade, in both the organized and unorganized sectors, with fewer, mostly low-paying jobs being created in the unorganized sector. Many economists, particularly those left of center, support this claim. Recently, Citigroup joined this bandwagon with a research report.
The Modi government, however, counters these claims, asserting that more than 8 crore jobs were generated from 2017-18 to 2021-22, despite COVID-19. It cites the official Periodic Labour Force Survey (PLFS) and RBI’s inferences based on the KLEMS (Capital, Labour, Energy, Materials, and Services) database to support its stance.
The government argues that the Citigroup report has several shortcomings, including non-standard definitions of employment, non-robust sampling methodologies, and selective use of data.[1]
Before demonetization and GST, tax evasion was widespread. Regardless of whether these measures benefited the economy or not, most agree that tax evasion has significantly decreased post these measures.
Some businesses used to make hay by tax evasion, while others survived solely by tax evasion.
For those paying taxes diligently, demonetization created a more level playing field. GST reduced overall taxes, expanding business volume due to demand elasticity.
Consequently, many unorganized sector jobs moved to the organized sector, though some jobs disappeared as previously viable companies could no longer sustain themselves after paying taxes.
Was this good or bad? The reader can judge whether a level playing field and curbing tax evasion, even at the cost of some job losses, is good or bad.
In sectors with widespread job losses due to business non-viability, such as in Tirupur’s garment sector, the government could have probably implemented sector-specific solutions, avoiding large-scale loss of jobs.
The government cites EPFO and FPS data, which include jobs converted from the informal to the formal sector. However, to a certain extent, this could be misleading if informal sector jobs becoming formal are treated as new jobs.
Since the Modi government, was early in its tenure, it tried to address economic fault lines, such as fake currency and black money, through significant reforms like demonetization and GST.
Unbiased academicians should conduct a comprehensive assessment of whether demonetization and GST were justified under these circumstances. I had written one such article reviewing demonetization earlier.[2]
The government claims that, as of 26.01.2024, 46.16 crore Pradhan Mantri Mudra Yojana (PMMY) loans were given. Other schemes like the Aatmanirbhar Bharat Rojgar Yojana (ABRY) and the Prime Minister Street Vendor’s AtmaNirbharNidhi (PM SVANidhi Scheme) account for over a crore of loans. The government argues these loans have created crores of jobs every year.
Women’s Self-Help Groups (SHGs) (through which these loans were given), act as indirect collateral, as these groups won’t easily allow any members to falter in repayment, out of their own long-term self-interest. NPAs from this sector are not expected to be high, but we need data to back this assumption.
Some poor women joined the SHGs and took Mudra loans for family cash flow and contingencies. Though this was not the intended purpose of these loans in such cases, these loans benefitted many families in dire situations.
A consequence of Mudra loans to such poor is that they receive hands-on training in banking, loans, financial management, and entrepreneurship.
If the government provides adequate training to the people at the bottom of the pyramid, these loans could anchor large-scale job creation for this demographic. Some may even advance to become middle and higher-level businesses.
In sum, employment opportunities appear to be expanding on a large scale, though well-paying jobs remain scarce.
Well-paying government and formal sector jobs are always welcome, but people at the bottom of the pyramid would be content with informal sector jobs offering even very low income (Rs.15,000 pm or even as low as Rs.5,000 pm), to start with.[3]
After 77 years of independence, India has yet to achieve even this low level of income for its poor. This is a legacy problem that cannot be solved in a hurry.
Reference: –
[1] https://economictimes.indiatimes.com/news/economy/policy/indias-job-crisis-labour-ministry-refutes-citi-groups-report-says-fails-to-consider-data-from-official-sources/articleshow/111576512.cms
[2] https://www.pgurus.com/demonetisation-360-degree-assessment-post-rbi-annual-report/
[3] https://www.pgurus.com/how-to-focus-on-jobs-at-the-bottom-of-the-pyramid/
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