Employment grew by 2 mn or0.5 per cent in ‘17
It will take a week more to finalise all estimates for the sixth complete survey (a Wave) on unemployment and consumer sentiments. Field operations concluded on December 31 and preliminary monthly results till December 2017 were available on the very next day, that is, on January 1. However, the preliminary monthly estimates for the four months from September through December will be revised to account for non-responses and for delayed responses.
While we will analyse those final estimates in the coming weeks, we can get some insights of what happened on the employment and unemployment front during 2017 compared to 2016 by using the final monthly estimates available till August 2017 and preliminary estimates available for the last four months that were executed during the sixth Wave.
All discussion on employment and unemployment is, by convention, limited to persons of 15 years of age or more. An estimated 24.6 million persons were added to the stock of persons of 15 years or more during 2017. However, the number of persons who offered their services in the labour force shrunk by 15 million. The labour participation rate fell from 46.6 per cent to 43.9 per cent. Over 11 million (about 45 per cent of the 24.6 million) should have joined the labour force but instead 15 million walked out of it. This is possibly a reflection of the stress on the jobs front. People have low hopes on finding jobs.
India’s labour participation rate (LPR) is low by international standards. The global average is 63 per cent and China has an LPR of 71 per cent. In comparison, we have a low and falling LPR. The CMIE-BSE effort has documented its fall from over 47 per cent in January 2016 to less than 44 per cent in December 2017.
The low and falling LPR has been documented by three independent surveys — by the National Sample Survey Organisation (NSSO), which is the official statistical agency, by the Labour Ministry’s Labour Bureau and by the private effort of CMIE along with BSE. According to the NSSO, the LPR (current daily status) fell from 54.6 per cent in 2009-10 to 53.1 per cent in 2011-12. According to the Labour Bureau, the LPR (primary status, which is a lot more lenient in classifying a person as part of the labour force) was lower at 52.9 per cent in 2011-12, and fell further to 50.3 per cent by 2015-16. According to the CMIE-BSE surveys, the LPR (daily status) fell from 46.6 per cent in 2016 to 43.9 per cent in 2017. While there are small definitional differences in the estimates of the three organisations, all three point to a low and falling LPR. In all cases, India’s LPR is much lower than global standards.
Employment increased from 405.3 million in 2016 to 407.4 million (preliminary estimates) in 2017. This implies an increase of 2 million jobs during the year. This is very low compared to the estimated 11.5 million who should have come into the labour force during the year.
The 2 million increase in jobs in 2017 translates into a mere 0.5 per cent growth. Urban employment grew by 2 per cent while rural employment shrunk by 0.3 per cent. Urban employment needs to grow much faster to absorb the growing population of young potentially employable people. There was a fall in the labour force (which is largely because unemployed people have stopped saying that they are willing to work or are looking for jobs) and 20 million continued to look for jobs in 2017. Of these, 8 million were in urban India. While urban India accounts for 34 per cent of the potential labour force, it accounts for 41 per of the unemployed.
The very tepid growth in employment in 2017 ties in with CMIE’s CapEx data that shows very low traction on investments. New investment proposals dropped to ~8 trillion during the year compared to ~15 trillion in the preceding two years. The completion of new capacities dropped to ~4.6 trillion in 2017 compared to ~6.8 trillion in 2016. Low investment growth corresponds to low employment growth. If this is true, then 2018 does not look very promising for employment growth because it is very unlikely that investments will pick up in the year.
2018 began on a weak note. During the first week, the unemployment rate was 5.7 per cent. This is higher than its level during most of the preceding 12 monthly estimates. Unemployment rate in urban areas shot up to 7.8 per cent during the first week of 2018. Urban labour participation was also very low at just 40.4 per cent. Hopefully, this will recover in the coming weeks. For now this remains a hope and little else.
The author is managing director and CEO, Centre for Monitoring Indian Economy P Ltd