India’s Jobs Crisis Is Far Worse Than What Unemployment Rate Shows

CMIE MD Mahesh Vyas speaks about the Modi government’s handling of the economy & official data on what’s happening.

Centre for Monitoring Indian Economy chief Mahesh Vyas hits out at the Modi government’s handling of the economy and official data pertaining to it.

(Photo: Meghnad Bose/The Quint)

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In a freewheeling interview with Meghnad Bose of The Quint, Centre for Monitoring Indian Economy chief Mahesh Vyas hits out at the Modi government’s handling of the economy and official data pertaining to it.

He calls the government’s decision not to release the National Statistical Office (NSO) report on consumer expenditure “extremely unfortunate”, explains why the jobs crisis is far worse than what the unemployment rate shows, and warns that living in denial about the economic slowdown will only ensure that corrective action is taken too late.

Economic Double Whammy: Fewer Job Seekers, Higher Unemployment Rate

How bad is the current level of unemployment in the country, and does the unemployment rate accurately represent the magnitude of the jobs crisis we are in?

Mahesh Vyas: India is used to having unemployment rates close to 2-3% historically. Currently, we are seeing unemployment rates close to 8% and even higher than that. This is nearly a four-fold increase in the unemployment rate and it is rising and getting worse every day.

Unemployment rate across India.(Data courtesy: CMIE)

The unemployment rate is a ratio of the people who are seeking jobs and not getting them, compared to all the people who are seeking jobs. So, the unemployment rate is actually an indicator of the failure of society to provide jobs to people who are seeking them. Now, this rate has risen to 8-8.5%.

But there’s another number that we need to look at, which is how many people are seeking jobs in the first place.

What if the number of people seeking jobs is declining? That's even worse! We ain't rich enough a country yet that people can stop looking for jobs. We are seeing a decline in the labour participation rate, that means fewer people are seeking jobs and yet, a higher proportion of them are not finding jobs. So, this is a double whammy. Low labour participation rate and high unemployment rate, this is really bad.

Falling labour participation rate and rising unemployment rate: the double whammy on jobs.(Graph courtesy: CMIE)

Does Modi Govt Have a Problem With Uncomfortable Data?

Does the Modi government have a problem when it comes to accepting and publishing uncomfortable data? For example, the government announced that it will not release the consumer expenditure report by the National Statistical Office (NSO) shortly after it was reported that the NSO data shows that consumer spending has fallen for the first time in over four decades!

Mahesh Vyas: It is extremely unfortunate that the government decided to junk the NSO's survey on consumption expenditure. The survey was conducted like the NSSO has always conducted surveys in the past.

There was nothing which was apparently different from all the surveys that NSSO has conducted over several decades. What was it that was so different in the execution or design of the survey that led to its rejection?

If the rejection is merely on the basis of the results, then it is even more damaging because the results of a survey need to be accepted.

It can only be rejected on the basis of a fault in design or execution. But if the execution was through the usual methods that the NSSO adopts and has always been accepted and if the survey design is the same, then there is no reason for the government to reject this only on the basis of the findings.

It would be useful if the government took these measurements seriously and took necessary action to help the country overcome its current slowdown.

The Flip-Flop on NSSO Jobs Data

Unemployment in 2017-2018 among the labour force was 6.1%, the highest level in India after 1972-1973.(Photo: Arnica Kala/The Quint)

And then there was the flip-flop on official data on jobs as well. Before the Lok Sabha elections, the government trashed and refused to release the NSSO report that showed unemployment to have reached a historic 45-year peak, but after the polls, the government acknowledged and published the same report.

Mahesh Vyas: Well, it was a bit of a problem for the government because they were arguing that employment was growing and that there was no real problem in employment. And then the government's own survey came out and showed that there was real stress on the labour front, on employment. This was also broadly in line with the surveys conducted by private bodies like CMIE, which have told us that employment is under stress.

It’s better that we recognise these stress points early enough so that we can take corrective action. If we stay in denial, we don’t take corrective action early enough.

‘Decline in Women’s Participation in Workforce Is India’s Most Important Problem’

How worrying is it for the economy that women’s participation in the labour force has been declining?

Mahesh Vyas: The largest source of gaining that demographic dividend that we are looking for is in women joining the labour force and getting employment. Only when this happens will we actually see a big increase in our per capita income.

So, if women do not join the labour force, or their labour force participation rate declines, as it is happening currently, then we just fail to get that demographic dividend that we should be getting. This is the most important problem facing India.

In spite of substantial improvement in women's enrollment into education and getting educated as well, women are extremely reticent in joining the labour force. And this is true even with educated, urban women.

The Way Forward

What are the areas in which the government should focus on urgently in order to combat the current economic slowdown?

Mahesh Vyas: The best thing that we can do regarding this situation is to increase investments. It's only when investments increase that will we be able to come out of this problem. In the short term, we need to increase the investment rate, and have people invest a lot more aggressively.

The second thing is to overcome the structural problems, to bring women into the labour force more aggressively. They face lots of problems on the labour front, in the workspaces, in the infrastructure that takes them to work and gets them back home safely. So, we need to work on these structural issues to ensure that more women come into the labour force.