Government economists, especially in the last five years, have taken to leading the analysis of data, not letting the data lead the analysis.
The latest effort is to claim that on an average basis, an “unprecedented number” of jobs are being created under the Narendra Modi government, with the number touching 10 million (each year) over the last seven to eight years.
The cited government economist considers every type of ‘employment’, whether in agriculture or in the non-farm sector, as a job. No development economist who knows his stuff would make such an elementary error.
Illustration: Pariplab Chakraborty. Photo: Intifada P. Basheer and Azam Abbas
So in the last three years alone, the absolute number of workers in agriculture increased from 200 million to 260 million, mainly though not only because of reverse migration over 2020 to 2022, that is not productive employment; let us note that 200 million workers were generating 15% of India’s GDP (from agriculture), and 260 million are still doing the same.
Hence, an increase in ‘employment’ in agriculture is not jobs, rather it is ‘jobless growth’.
Worse still, a return to agriculture is reversing the structural change in employment in the economy (as we will show below). But he regards all these as ‘jobs’ (more on this later).
Economic development is defined as consisting of not just a rise in per capita income, but also by a structural change away from agriculture to industry and services in terms of both output and employment, which raises productivity and hence incomes in the economy as a whole.
It is notable that after 2004, for the first time in India’s history, the absolute number of workers in agriculture began to fall – which raised overall factor productivity. For over half a century till then, the share of agriculture in India’s employment had fallen, but never the absolute number of workers.
So when India’s GDP growth rate rose to 7.7% per annum over 2004-14, which was unprecedented in India’s post-independence history, it is not surprising that non-farm jobs grew at the rate of 7.5 million new jobs per annum between 2004-5 to 2012.
That rate fell sharply in 2019 to 2.9 million non farm jobs per year. This government economist is blissfully ignorant of this phenomenon (or perhaps his predisposition leads the data).
In fact, as fewer non-farm jobs were being created post 2013, yet more and more better-educated youth joined the labour force, the overall unemployment rate rose from 2.1% in 2012 to 6.1% (2017-18), the highest in 45 years. The youth unemployment rate tripled from 6% to 17.8% between 2012 and 2018 (PLFS).
More egregiously and callously, he goes on to state that much of youth unemployment is frictional, i.e., temporary, lasting mainly over the age group 15-29 years, and after 30 years the unemployment rate drops off to 1%, which he says is “not much of an unemployment rate at all”.
This observation is problematic from several viewpoints.
First, over ten years lost in a young educated person’s working life being unemployed, or severely underemployed, is a gross under-utilisation of human capital and destructive of dignity; quite apart from being destructive of potential GDP.
Second, even if employment is obtained after age 30, it is usually of the informal variety, and still underemployment.
Third, the recent fall in unemployment rate between 2017-18 and 2022-23 is itself misleading. It has been accompanied by an increase in the female workforce participation rate, from 24.5% in 2019 to 37.0% in 2023.
However, this increase (including that of males) is overwhelmingly in the agricultural sector, and of the own-account and unpaid family work kind.
What is not noted is that older women, who had been exiting agriculture as mechanisation set in (already by 2011-12), have now been forced to return to agriculture for lack of alternatives; and the younger, now much better educated than before, are not finding work; so women’s youth unemployment rates are high.
For the older and younger women, unpaid family work in agriculture (which had been falling sharply) increased from 28.3 million in 2017-18 to 58.2 million (rise of 30 million) in 2022-23; just as own-account work in agriculture shot up from 9.2 million to 29.2 million (rise of 20 million) over the same period.
This rise of 50 million in employment is distress-driven, not a matter of celebration.
This government economist made another laughable assertion, saying the maximum number of jobs were being created during the tenure of PMs Atal Bihari Vajpayee and Modi.
During 1999-2000 to 2000-04, millions of young joined the labour force (as school enrolment and education levels were still low) on turning 15 or more, on account of the huge baby boom that had occurred till the early 1980s; that was when India’s demographic dividend began.
There was indeed an increase in employment, as there is always in a developing country, as millions of poor people join the labour force, and must find any ‘job’ to survive, regardless of its wages or quality. That is the reason why unemployment rates in developing countries are always low.
However, what is forgotten is that of the 60 million increase in the workforce over 1999-2004, as much as 22 million was again in agriculture. It is true that non-farm jobs did grow over that period, at a robust rate of 7.4 million per annum.
What is more bizarre is the claim that under the UPA (2004-14), the lowest ever employment was created. This is laughable for several reasons.
First, the workforce participation rate fell (2004-12) sharply for very laudable and robust reasons: both children aged six to 14 as well as over 15 in the working age, started going to school and remaining in school. That has created a far better educated workforce as these young now enter the labour force looking for work.
Second, the UPA years were actually the first ever in India’s history when, because the younger were in school or university, older workers in agriculture were pulled out by new non-farm jobs being created at a rate of 7.5 million per year, as the economy achieved an unprecedented 7.7% per annum growth rate on average.
Third, this was also the period that saw structural change in employment occurring on an unprecedented scale. The share of manufacturing in employment grew from 10.5% to 12.8% between 2004-5 and 2011-12, and would have been sustained, if under the Modi regime manufacturing growth was maintained – which it was not.
In fact, manufacturing’s share of gross value added (GVA) fell, as did manufacturing employment in total (see below).
In fact, during the last 10 years, GDP growth has slowed to 5.85% pa, and naturally, the number of non-farm job growth fell sharply.
If anything, the structural change occurring earlier was reversed.
Worse, what this government economist fails to tell you is that structural transformation was actually first stalled, before the COVID-19 pandemic. Manufacturing employment actually fell in absolute terms from 60 million in 2011-12 to 55 million by 2017-18, the year India saw its highest open unemployment rate in 45 years of the history of labour market surveys in India.
Never before had manufacturing employment actually fallen in post-independence India; it fell in the most labour-intensive sectors. It has only recovered to its 2012 level a full decade later by 2021-2, and slightly more by 2022-23.
Similarly, manufacturing’s contribution to GVA used to be around 17% for 25 years since the economic reforms, but fell from 2016 onwards to reach 13% of GVA in 2021-22, before recovering.
Even worse, the COVID-19 pandemic sent 60 million back to agriculture between 2020 and 2023 (PLFS), increasing the workers in agriculture to 260 million – reversing a process of structural transformation, with both agriculture and manufacturing trending in directions the opposite of what is warranted in a developing country.
Nor does the government economist note what the consequences of falling non-farm job growth has been on wages.
Real wages were stagnating even between 2012 and 2017-18 – hardly surprising given that was also the year of India’s highest unemployment rate ever. But it does not stop there.
Our estimates show that agricultural, construction, manufacturing and services real wages/earnings stagnated for all types of workers (casual and regular wage, self employed).
Even this government economist in his recent book (using a different deflator than ours) finds that earnings of 80% of India’s workers, i.e., the regular and self-employed, have stagnated between 2017-18 and 2022-23, and only for casual workers with intermittent work (who are only 20% of workers) did they rise slightly.
Three groups are in desperate need for jobs in this fifth-largest economy of the world, supposedly also the globe’s fastest growing large economy.
First, the six million-odd young (including girls) who enter the labour force each year; second, the growing stock of unemployed (plus those in unpaid family work); and third, the 260 million in agriculture, or 45% of the workforce who contribute barely 15% to the GDP.
The government has obviously forgotten about them, and unlike in the 2019 elections (when the government concealed the PLFS’s damaging data about the worst ever unemployment rate in India’s history in 2017-18), in the 2024 elections, the employment crisis is upper-most in the minds of voters, especially the young, who (the CSDS surveys had told us in 2014 and more so in the 2019 elections) voted for the BJP in large numbers.
The latest CSDS survey (in 2024) has told us that 62% of voters believe it is now harder to find a job than five years ago, and in urban areas 65% have said it is harder to find jobs.
The young voter is unlikely to be fooled by past promises of two crore new jobs per year – that never materialised!
Santosh Mehrotra is visiting professor, Centre for Development Studies, University of Bath, UK. He is also professorial senior fellow, Prime Ministers’ Museum & Library, New Delhi.
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