Where are the jobs?
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The Central Statistical Office (CSO) has released the full-year growth estimates for 2016-17. These had been much awaited given the uncertainty over the impact of demonetization. These were on expected lines, with fourth quarter growth in gross value added (GVA) in 2016-17 declining to 5.6% from 8.7% in the year-ago period. The overall growth rate of GVA declined from 7.9% in 2015-16 to 6.6% in 2016-17. But the numbers also suggest that the slowdown was only partly a result of demonetization, with deceleration in the growth rate setting in much earlier. In fact, the growth rate of GVA is the lowest after the Narendra Modi government took over in May 2014.
The growth rates of GVA appear better because of the better than average rate of growth of public administration (11.3%), largely due to the increased spending by government including on Pay Commission awards. It was also helped by the better than average performance of agriculture, which grew 4.9%, the highest in four years. Excluding these, the performance of the economy would have been less than 6%. The growth rate also decelerated sharply for manufacturing and retail trade, transport and communications, sectors which employ a large workforce. A worrying signal came from construction, which decelerated to its slowest pace in recent history at 1.7%. The sectoral estimates are important not just to gauge the state of the economy but also to assess the employment situation.
The growth has been driven by better performance from sectors such as agriculture and public administration, both of which have been shedding jobs in the recent past. Agriculture, which continues to remain the largest employer, had lost 35 million workers between 2004-05 and 2011-12. On the other hand, the sectors which have seen sharpest deceleration are also the sectors which are the largest employers in the non-farm sector. Construction, manufacturing, retail trade, transportation and communication have not only been among the largest employers, but also have contributed more than two-thirds of all new employment generated after 2004-05. The sectoral trends clearly point towards a worrying situation as far as jobs are concerned.
The government has so far avoided admitting a job crisis, citing lack of data, despite availability of multiple data confirming the slow pace of job creation. The government’s own quarterly estimates of employment in selected sectors has confirmed that job creation since the government took over has been less than half a million. The revised series, which tracked data based on organized sector establishments also confirmed that the net addition to employment in the selected eight sectors in the October-December 2016 quarter was only 122,000.
It also confirmed a net decline in employment in the construction sector during the same period. Admittedly, these are only for selected sectors and do not represent the full economy but these are also sectors which employ almost a third of all workers in the economy and are therefore good indicators of the trends in employment.
A better understanding of the employment situation will only be available after the National Sample Survey Office (NSSO) releases the employment and unemployment survey, which are soon to begin. NITI Aayog has also proposed annual surveys on employment to get a better idea of changes in employment. While these are unlikely to be available until the latter half of next year, there are other comparable sources which suggest that the performance of the economy as far as job creation is concerned has only worsened compared to the United Progressive Alliance (UPA) years. These estimates, which are based on the annual survey on employment and unemployment by the labour bureau for 2013-14 and 2015-16, are comparable and are also representative of the country. Both these surveys have a sample size which is considerably larger than the NSSO surveys. Based on these surveys, the total number of workers by usual status (principal and subsidiary status taken together) was 460 million as on 1 March 2014. This declined sharply to 444 million by 1 July 2015. This means that in the first year of the government itself, the extent of job losses was almost 16 million. Even on the principal status criteria, employment fell from 433 million in 2014 to 426 million in 2015. The surveys also point out the decline in employment in the agricultural sector, a trend which has continued since 2004-05. Between 1 March 2014 and 1 July 2015, 12 million workers left the farm sector. But the non-farm sector, which was creating jobs for those displaced from the farm sector along with additional employment, has also lost 4 million workers.
The government, which came to power on the promise of creating 20 million jobs per year, has not yet recognized the gravity of the situation. While the decline in jobs is clearly evident from the government’s own surveys and data, these are now getting confirmed by other sources as well. As has been reported recently, the information technology sector may lose more than a 100,000 jobs this year alone. The situation in the informal sector is no better and if the trends reported by the national accounts are any indication, the possibility of an absolute decline in employment may be a reality that the government will have to deal with sooner or later.
With population growth and shift of workers away from agriculture, the need to create employment is not just a political slogan but a reality which has a bearing on future economic growth. What will add to the problem is that the delay in doing so only adds to the pool of unemployed every year. A first step towards dealing with the problem is recognizing the problem. So far, the response has either been to deny the problem or blame the data. For the government, which has completed three years, the challenge is not just arresting the deceleration in economic growth but also to create jobs for the young.
Himanshu is an associate professor at Jawaharlal Nehru University and visiting fellow at Centre de Sciences Humaines, New Delhi.