Which of the following is true?

Even at an annual growth rate of 7%, India can only generate about 8-9 million jobs a year, which is not enough. It needs to create at least 12 million jobs a year over the next decade.
In the 2023-24 fiscal, India added 46.7 million jobs. And between 2017 and 2022, the country generated more than 80 million employment opportunities—an average of 20 million jobs a year.

The answer is both, depending on which data source you’re looking at.

This week, two pieces of information about India’s unemployment numbers were published.

The first one, by economists at Citibank, paints a bleak picture of the country’s jobs situation, suggesting that the government may have to make greater efforts to boost employment. The second one, by the Reserve Bank of India, shows that India’s employment growth looks promising.

These revelations are no small matter. For one, unemployment has been a pain point for the current Narendra Modi-led Bharatiya Janata Party government, which won the recent elections, albeit with a lower-than-expected majority. In fact, in April, a pre-poll survey of 10,000 voters by the Centre for the Study of Developing Societies (CSDS) had shown a consensus among respondents that finding jobs had become harder over the past five years under the BJP-led government. All of this ties in with Citi’s report.

Regardless, the Ministry of Labour and Employment was quick to rebut the report, drawing attention instead to the official data to indicate that things are okay.

In the above context, it becomes all the more important to understand what the divergence in the two data sets signifies.

The missing piece: According to the RBI, employment growth rate was 6% in 2023-24 versus 3.2% in the year-ago period. Total employment stood at 643.3 million in FY24 against 596.7 million in FY23. This is the first provisional estimate for productivity for FY24; the central bank did not offer sector-wise details. All these numbers were released under the RBI’s KLEMS database. It covers five important inputs in production—capital (K), labour (L), energy (E), materials (M) and services (S).

Note that these numbers are provisional estimates extrapolated from the periodic labour force surveys (PLFS) and data from the Ministry of Labour.

But the quality of statistical surveys and data mostly relies on population figures. Most surveys on which this data is based are sample surveys. Simply put, they include a certain sample that is believed to be representative of the population at large. Right now, several projections, including growth, the impact of welfare schemes and even employment levels, are based on data from over a decade ago.

The mammoth, decennial census—which gives granular details on regional and sectoral employment, literacy levels and migration patterns—was due in 2021 but got delayed because of the COVID-19 pandemic. So far, there’s no clarity from the government on when it plans to conduct the survey. Census data is key to estimates about employment and consumer expenditure.

“The census is a unique exercise in the sense that it gives a complete enumeration with no sampling errors. The government does have mechanisms to collect data through surveys like the National Sample Surveys, Periodic Labour Force Surveys, or Health Management Information Systems surveys… but sample surveys pretty much rely on census data… Sample surveys and projects cannot replace the census,” P.B. Bhagat, former professor and departmental head of International Institute for Population Sciences, had told Frontline last year.

But could the source of Citi’s data be outdated too? Perhaps. But, as the labour ministry’s rebuttal shows, private surveys use a host of data apart from official numbers, including those from independent think tanks. One such think tank is the Centre for Monitoring Indian Economy, whose latest report had said that the jobless rate in June had risen sharply at 9.2%, from 7% in May, highest in eight months. Rural unemployment rose to 9.3% in June from 6.3% in May and urban unemployment climbed from 8.6% to 8.9%.

Besides, economists have repeatedly expressed concerns regarding the quality of “official” unemployment data. The labour ministry has discontinued many of its surveys, including the annual employment-unemployment surveys, which many experts relied on. In the past, the government has been accused of withholding survey data, which showed that unemployment was at a 45-year high in 2017.

Improvement in Employees’ Provident Fund Organisation data, which is among the positive sources that the ministry has mentioned in its rebuttal against Citi’s report, has also been criticized for representing only the registered organized sector, constituting a very marginal number of workers.

According to economist Amit Basole, who heads the Centre for Sustainable Employment at the Azim Premji University in Bengaluru, “it's not clear how much of the increase in EPFO comes from formalization of existing jobs that have just been brought into its net. So it shows that there are new subscribers but it may not necessarily mean that new jobs have been created”.

But then, what about the government’s data? Where exactly is the growth happening? Most likely in the informal sector, it seems.

The informal sector: The segment includes unpaid workers, farm workers, temporary hires and anyone else whose jobs are not equivalent to a formal position with regular wages.

And while the number of workers in the formal sector has nearly doubled in the past 15 years, “overall formalization in the labor market is still quite low at ~15% with an overdependence on agriculture,” said Citi’s February report titled “India: Formalisation’s Relentless March”.

It also says the surge in overall employment after the COVID-19 pandemic was “almost entirely through self-employed workers, suggesting scant improvement in formalization”.

But why is growth in the informal sector a concern?

"If the option is not to do anything, then it qualifies as work. The informal sector essentially acts as a reservoir of surplus labour. People who can't afford to remain unemployed or who don't have any other work or they've lost work or whatever, they fall back into this kind of employment,” says Basole, who has co-authored the State of Working India 2023 report.

He further explains: "If there's crowding into this sector and there isn't a corresponding increase in the demand for that sector's output, individual earnings will be hit." He then gives the example of a neighbourhood where one fruit seller joins another in the vicinity. While that may qualify as an increase in employment, "it's not like the number of people buying fruit has increased. But since there are two people now sharing that market, each person's earnings will be less than they used to be”, he says.

The confusion, he adds, emerges when you think of these jobs as full-time, productive, remunerative kind of employment, which it’s mostly not. “The increase in the workforce—at least until 2022-23, which is the last available PLFS round—is among unpaid helpers. The share of regular salaried workers has actually fallen in recent years," says Basole.

So, while India’s GDP may be growing at 7%, there’s clearly a lack of meaningful employment opportunities and surplus labor is having to somehow sustain themselves amid high costs of living.

Also Read: India’s consumption numbers point to strain, inequality

Cover illustration by Devyani M/ The Morning Context