The Hindu Editorial Analysis- 20th July 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

 Living in Denial About Unemployment 

Why in News?

Prime Minister Narendra Modi, referencing a Reserve Bank of India report, asserted substantial job creation in recent years, challenging the Opposition's claims of high unemployment. However, various sources, including the Centre for Monitoring Indian Economy, present conflicting reports, highlighting discrepancies in employment data, particularly between the organised and unorganised sectors.

Prime Minister’s Statement and Employment Data

• The Prime Minister of India cited a Reserve Bank of India (RBI) report, claiming the creation of 8 crore jobs in the past 3-4 years.
• This statement was made to counter the Opposition’s narrative of high unemployment.
• The Prime Minister addressed reports from financial institutions like Citigroup, which pointed to inadequate employment generation in India.
• He emphasised that upcoming infrastructure projects would create more jobs.

RBI ‘Data Manual’ and KLEMS Database

State Bank of India Report

• Following the Reserve Bank of India’s release, the State Bank of India published its own report to counter claims by financial institutions.
• The State Bank of India reported:
  • 8.9 crore jobs were created in manufacturing and services from FY14 to FY23 (excluding agriculture).
  • 6.6 crore jobs were created from FY04 to FY14.
• The report noted India’s total labour force is 59.7 crore, close to the 56.8 crore figure from the recently released Annual Survey of Unincorporated Sector Enterprises (ASUSE) survey.
• The State Bank of India highlighted significant differences between these figures and those from private employment surveys.

Centre for Monitoring Indian Economy Report

Ground-Level Reality and Public Confusion

• Ground reports indicate unemployment as a major issue, with a large number of applicants for limited job vacancies.
  • In February, around 47 lakh applicants competed for approximately 60,000 constable positions in Uttar Pradesh.
  • In 2022, 1.25 crore aspirants applied for the Railway Recruitment Board’s Non-Technical Popular Categories recruitment exam.
  • Protests erupted in Bihar, Uttar Pradesh, and other states when the Agnipath scheme was announced in 2022.
• The situation is particularly grim for educated youth, who are expected to lead the ‘demographic dividend.’

Differences in Data Sources

• Confusion over unemployment rates arises from differences in various databases.
• The KLEMS data measures productivity growth but does not independently estimate employment, relying on official data from sources like the National Sample Survey Office (NSSO) and the Periodic Labour Force Survey (PLFS).
• This reliance on pre-existing official data raises questions about the employment figures presented by government agencies.

Complex Structure of the Indian Economy

Organised and Unorganised Sectors

• India’s economy comprises both organised and unorganised sectors.
  • Reliable data is available for the organised sector through annual statutory publications.
  • However, data for the unorganised sector, which employs 94% of the labour force, is sparse.
    • This sector includes approximately 11 crore farms and 6.5 crore micro, small, and medium-sized enterprises (MSMEs), making annual surveys challenging.

Data Collection Challenges

• Data for the unorganised sector is collected periodically via the Census every ten years and the ASUSE survey every five years.
• The government aims to conduct the ASUSE survey annually, but this survey relies on outdated data from the Census and the Urban Frame Survey (UFS), covering the period from 2012-17.
• The use of pre-2016 data poses challenges due to significant economic shocks from demonetisation, the Goods and Services Tax introduction, the Non-Banking Financial Companies crisis, and the COVID-19 pandemic, making pre-2016 data unreliable for current sampling.

Differences in Labour Force Surveys

• The PLFS, an official data source, differs significantly from CMIE data due to differences in employment definitions.
  • CMIE adopts the International Labour Organization definition, counting only those who earn an income from work as employed.
  • In contrast, the PLFS includes those who work without income, such as unpaid family workers or those engaged in subsistence activities.
• This difference results in the PLFS reporting higher labour force participation rates (50%-55%) compared to CMIE (40%-45%), leading to a discrepancy of about 90 million people.
• The PLFS also counts the disguised unemployed and underemployed, making it appear that almost no one is unemployed.
• CMIE highlights those who have stopped looking for work, a form of unemployment not recognized in official data.

Conclusion

The real situation of unemployment is evident from frequent reports of youth struggling to find work and facing difficulties in competitive examinations. Despite this, the government often denies the severity of the problem, citing data with significant gaps and limitations.