Context:
Recently released data by the Reserve Bank of India (RBI) revealed that the country experienced nearly 6% growth in employment during the fiscal year 2023-24.
More on the news
- The RBI released its data shortly after a Citigroup India research report, which suggested that the country might face challenges in generating adequate employment opportunities even with a 7% growth rate.
- Later on, the data given by Citigroup was countered by the Ministry of Labour and Employment.
Highlights of the RBI Data
- According to the RBI’s Measuring Productivity at the Industry Level – The India KLEMS [Capital (K), Labour (L), Energy (E), Material (M) and Services (S)] database released recently, employment growth in India doubled to 6% (provisional) in FY2024, compared to a 3.2% rise in FY2023.
- The total number of jobs increased by about 4.67 crore to 64.33 crore in FY2024, up from 59.67 crore in FY2023.
- Since FY2021, India has added 7.8 crore jobs.
- The rate of employment growth in FY2021 was 5.1%, whereas in FY2022, it was 3.3%.
The KLEMS database covers 27 industries across the entire Indian economy and provides estimates for agriculture, manufacturing, and services sectors, as well as national-level data on the following economic indicators: –
- Gross Value Added (GVA), Gross Value of Output (GVO),
- Labour Employment (L), Labour Quality (LQ),
- Capital Stock (K), Capital Composition (KQ),
- the consumptions of Energy (E), Material (M), and Services (S) inputs,
- Labour Productivity (LP) and Total Factor Productivity (TFP).
Key Highlights of the Citigroup report
- The Citigroup report highlighted serious concerns about job quality and potential underemployment in India.
- Despite a low official unemployment rate of 3.2% (16% among youth), the report pointed out that a significant portion of jobs, especially in agriculture, do not contribute proportionately to GDP (46% of the labour force contributing less than 20% of GDP).
- Both manufacturing and services sectors employ less labour relative to their economic contribution to GDP.
- It emphasised that only 25% of non-agricultural jobs are in the formal sector, and just 21% of the workforce has salaried employment, a decline from pre-Covid levels (24%).
- The report also noted that share of employment in rural areas has remained high at around 67% between 2018 and 2023, suggesting limited rural-to-urban migration despite economic growth.
Labour Ministry’s response to the Citigroup report
- The Ministry of Labour and Employment strongly refuted the Citigroup report, asserting that it overlooks positive employment data from reliable sources like the Periodic Labour Force Survey (PLFS) and RBI’s KLEMS data.
- According to the Ministry, RBI’s KLEMS data shows over 8 crore employment opportunities were created from 2017-18 to 2021-22, averaging over 20 crore jobs annually.
- Additionally, more than 6.2 crore net subscribers joined EPFO from September 2017 to March 2024.
What does the Periodic Labour Force Survey (PLFS) report say?
- According to the May 2024 quarterly bulletin of the PLFS, the urban unemployment rate for individuals (aged 15 years and above) decreased slightly from 6.8% in January-March 2023 to 6.7% in January-March 2024.
- The Labour Force Participation Rate (LFPR) in urban areas increased from 48.5% to 50.2% from January-March 2023 to January-March 2024 for individuals aged 15 years and above.
- Similarly, the Worker Population Ratio (WPR) for this age group rose from 45.2% to 46.9%, indicating more people were employed relative to the total population.
About PLFS:
- This survey is released by the National Sample Survey Office (NSSO) under the Ministry of Statistics and Programme Implementation (MoSPI),
About LFPR:
- It indicates the percentage of working-age people (15-64 years) who are employed or are actively seeking work.
- It is calculated as the labor force divided by the total working-age population.
Worker Population ratio:
- Worker Population Ratio (WPR) is defined as the percentage of employed persons in the population.
Current challenges in employment generation in India:
- Slow Employment Generation: Despite high growth, productive employment opportunities haven’t expanded proportionately due to services-led growth, resulting in a slow structural transformation in India.
- Labour Market Inequalities and Technology: Technological advancements have increased capital intensity and high-skill jobs, while low-skill jobs declined, exacerbating inequalities across regions, social groups, genders, and occupations.
- Regional Disparities: Regional demographic changes highlight significant employment disparities. Underdeveloped states in eastern and central India with low per capita income and high youth unemployment need targeted policies for balanced opportunities.
- Education and Skills Mismatch: The rise in higher education among unemployed youths indicates a mismatch between education and job skills, suggesting a crisis of employability. Education levels do not accurately represent skill levels, given the coexistence of educated unemployed and underqualified workforce.
- Automation Threat: The deployment of automation and AI could displace labour across various sectors of the economy, although the impact is likely to vary.
- Unskilled Workforce: India has a surplus of low-skilled labour, with nearly 80% of its working-age population lacking education beyond the secondary level.
Government Initiatives to Generate Employment
- Aatmanirbhar Bharat Rojgar Yojana (ABRY): Launched in 2020 to encourage new job creation and restore jobs lost during the pandemic. This scheme being implemented through the Employees’ Provident Fund Organisation (EPFO), seeks to reduce the financial burden of the employers and encourages them to hire more workers.
- Pradhan Mantri Mudra Yojana (PMMY): Provides collateral-free loans up to ₹10 lakh for micro/small enterprises and individuals. By March 2022, 34.08 crore loans were sanctioned.
- Garib Kalyan Rojgar Abhiyaan (GKRA): Launched in 2020, to boost employment for migrant workers and rural youth. Generated 50.78 crore person-days of employment with ₹39,293 crore expenditure.
- PM GatiShakti: Focuses on economic growth through Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. Aims to create significant job opportunities powered by Clean Energy and Sabka Prayas.
- Infrastructure and PLI Schemes: Budget 2021-22 launched PLI schemes with ₹1.97 lakh crore outlay over five years to generate jobs and boost output.
- Employment Generation Schemes: The government also supports job creation through schemes like Prime Minister’s Employment Generation Programme (PMEGP), Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) & Pt. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) and Deen Dayal Antodaya Yojana-National Urban Livelihoods Mission (DAY-NULM).
Way forward
- Promote Skill Development: Implement industry-aligned skill development programs and update curricula for emerging technologies and vocational training.
- Stimulate Organized Sector Growth: Develop policies to boost organized manufacturing and services sectors for stable and productive jobs.
- Support Entrepreneurship: Improve access to finance and mentorship for entrepreneurs to encourage job creation and innovation in SMEs.
- Invest in Agriculture: Modernize agriculture with public and cooperative investments to increase productivity and rural employment.
- Address Automation Concerns: Manage automation impacts with reskilling and upskilling initiatives for evolving job roles.
- Education Reform: Focus on quality education and early vocational training to equip the workforce with essential skills and reduce unskilled labour.