Labour data points to significant distress in the Indian economy

First, the broad estimates. Total workforce or the total persons employed in the economy is estimated at 542 million, 2 million higher than in 2020-21. The unemployment rate for the country is at 4.1%, marginally lower than the 4.2% in 2020-21. Even for the 15-29 age group population, broadly defined as youth, the unemployment rate has declined only marginally from 12.9% to 12.5%.

The data set indicates a recovery, but only marginal. Broadly, conditions are unchanged. But it is not the annual statistic that raises concern. Rather, the fact that the estimates reinforce some of the trends seen after 2018-19 that should worry policymakers. PLFS estimates between 2017-18 and 2020-21 clearly reflected distress in the economy—first on account of the economic slowdown after 2016-17 and then its accentuation by the pandemic. The 2021-22 estimates confirm these trends.

A strong piece of evidence of distress is a statistically observed workforce shift back to agriculture, thereby reversing the gains of a structural transformation in the economy between 2004-05 and 2017-18. The absolute number of workers in agriculture declined by 33 million between 2004-05 and 2011-12. Almost a matching decline was observed between 2011-12 and 2017-18. However, the slowdown and pandemic reversed this process. The agricultural sector witnessed a return of 36 million workers between 2017-18 and 2021-22. So pronounced was it that the absolute count of workers in agriculture stood higher in 2021-22 than in 2011-12, a decade ago. Besides a reversal of the structural transformation, the numbers also imply a declining per worker income in agriculture, thereby worsening the rural distress. Though the number of workers in agriculture is no longer increasing, the data suggests that those who found refuge in agriculture during the pandemic are yet to return to their original occupations. This indicates that the economy is yet to fully recover from the twin shocks of the slowdown and pandemic.

Further, income and consumption estimates from the PLFS confirm a high level of distress in the economy. The survey’s estimates also suggest that it is no longer only the rural economy that is seeing slow growth of incomes, but also the urban economy, for which real incomes have declined. Per capita income from all employment sources in urban areas was ₹5,186 per month for the pre-pandemic year of 2018-19. By 2021-22, in real terms at 2018-19 prices, this had marginally declined to ₹5,175 per month. For the country as a whole, per capita income increased by only 0.9% per annum between 2018-19 and 2021-22. Per capita consumption in urban areas is lower than its level in 2018-19, though this increased 1.4% per annum for the country. Declines in income and consumption are not surprising, as the PLFS data also shows that regular wages continue to decline in real terms, with urban regular wages declining at 1.4% per annum, faster than the 0.4% decline in rural regular wages.

Employment-unemployment estimates remain an important barometer of the health of the Indian economy. Participation in economic activity by workers is as much an indicator of the level of economic activity as the aggregate gross domestic product (GDP) data. PLFS reports confirm the extent of devastation caused by the pandemic and slowdown, which forced workers to return to agriculture. But the fact that a substantial number of them remain tied to agriculture also suggests that the non-agricultural economy has not fully recovered. This is particularly true in urban areas, where urban regular workers, who account for almost half of all workers, are facing declining wage incomes. While the agricultural sector may have provided refuge to millions displaced from the non-farm sectors, excess workers in agriculture is also depressing per worker incomes in the sector, thereby adding to the pressure on agricultural incomes.

For the Indian economy to revive, employment in non-agricultural sectors needs to increase along with a rise in income from such employment. This is also necessary for us to make the country’s economic growth more employment-intensive, which would be the best antidote to poverty and distress in the economy.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi