Prime Minister Narendra Modi recently accused the Opposition of spreading false narratives about unemployment, citing a Reserve Bank of India (RBI) report that claims 8 crore jobs have been created in the last 3-4 years. This statement was seen as a counter to a growing narrative of high unemployment, which has been a concern for the ruling party, and also a response to reports from financial institutions like Citigroup that pointed to insufficient job creation in India.
The Prime Minister referenced the RBI’s ‘India KLEMS Database,’ a manual released in July, which details methodologies for constructing an economic database. This data, however, does not directly estimate employment but uses existing official data, including the Employment and Unemployment Surveys (EUS) conducted by the National Sample Survey Office (NSSO) between 1983 and 2011-12, and the Periodic Labour Force Survey (PLFS).
Following the RBI’s release, the State Bank of India (SBI) also presented its own report, arguing that even excluding agriculture, a significant number of jobs were created in manufacturing and services between FY14-FY23 and FY04-FY14. The SBI highlighted the discrepancy between private employment surveys and the overall labour force data from the Annual Survey of Unincorporated Sector Enterprises (ASUSE), indicating a possible difference in methodology.
However, the Centre for Monitoring Indian Economy (CMIE), a private data agency, reported in July that the unemployment rate in June 2024 had risen to a high of 9.2%, a significant jump from the previous month’s 7%. This stark contrast to the government’s narrative of substantial job creation highlights the conflicting information circulating about the employment situation in India.
Ground reports from across the country paint a picture of widespread unemployment, particularly among youth. The massive number of applicants for various government jobs, such as constables in Uttar Pradesh and the Railway Recruitment Board’s Non-Technical Popular Categories exam, is a testament to the struggle faced by young Indians seeking employment. The protests that erupted in response to the Agnipath scheme in 2022 further underscore the frustration and anxiety among this demographic.
The public confusion surrounding the extent of unemployment stems from the differences in the data sources used and their underlying methodologies. The KLEMS data, while comprehensive in its approach to measuring productivity, relies on existing official data and doesn’t independently estimate employment. This raises questions about the validity of presenting KLEMS data as an independent source of employment information, particularly when it draws upon official data from PLFS, ASUSE, and other government surveys.
The discrepancies between various data sources arise from the complex structure of the Indian economy and the lack of reliable data for the unorganised sector, which constitutes a vast majority (94%) of the workforce. The unorganised sector, encompassing a vast network of farms and small and medium enterprises (MSMEs), presents significant challenges for accurate data collection. The annual ASUSE survey, intended to provide data for this sector, relies on information from the Census and Urban Frame Survey (UFS), both of which are outdated, creating further complications.
The period between 2016 and 2024 witnessed a series of economic shocks, including demonetization, the introduction of GST, the Non-Banking Financial Companies crisis, and the COVID-19 pandemic. These shocks heavily impacted the unorganised sector, leading to business closures, migration, and changes in the size of towns and villages. Utilizing pre-shock data for sampling in this context presents significant challenges, as it fails to account for the structural changes that occurred during this period.
The ASUSE 2024 report acknowledges the impact of these shocks and the possibility of an upward bias in its estimations due to the reliance on older data. This potential bias needs to be considered when interpreting the data.
Further complicating the picture are differences between the PLFS and CMIE data. The CMIE adopts the International Labour Organization definition of employment, counting only those who receive an income from work as employed. PLFS, on the other hand, includes individuals who work without receiving an income, such as unpaid family workers or those who are present in the field but have no work. This divergence in definitions leads to significant variations in the labour force participation rate, with PLFS showing a considerably higher rate than CMIE.
The PLFS also includes the disguised unemployed and underemployed, effectively suggesting a scenario where almost everyone is employed. The CMIE data, however, highlights the reality of discouraged workers who have given up searching for work, a category not recognized by official data.
The ground-level situation of unemployment is evident from the numerous reports of young people struggling to find work and facing difficulties in examinations. Despite this reality, the government continues to deny the existence of a widespread unemployment problem, citing data that is incomplete or based on flawed methodologies.
The government’s refusal to acknowledge the problem and take action could lead to growing frustration among young people, who are the future of the nation. It’s imperative for the government to address the challenges of unemployment head-on, rather than relying on questionable data and perpetuating a narrative of denial. The future of the Indian economy, and the wellbeing of its citizens, depends on it.
