Resilient economic growth in Q3 reflected in improvement in employment indicators: Finmin report

Defends PLFS methodology, one hour criterion based on international norms

economic growth
“The inclusiveness of resilient economic growth in the third quarter is also reflected in the improvement in employment indicators,” said the Monthly Economic Review of the finance ministry. (Representational image)

Expressing optimism about improvement in the country’s labour market on the back of higher growth in the third quarter of the fiscal, the finance ministry has defended the periodic labour force survey (PLFS) and said the current weekly status (CWS) to assess employment is in line with international norms. Variations in methodologies and questionnaires lead to differences in estimates between different agencies, it further said.

“The inclusiveness of resilient economic growth in the third quarter is also reflected in the improvement in employment indicators,” said the Monthly Economic Review of the finance ministry, adding that high-frequency indicators such as the payroll data of the EPFO, the PMI indices for manufacturing and services and demand for work under the MGNREGS scheme further reflect an improvement in the overall employment situation across sectors.

It also highlighted that as per the PLFS, the overall urban unemployment rate for people aged 15 years and above declined to 7.2% in the December 2022 quarter from 8.7% a year ago.

“The PLFS data further indicates that employment indicators in the quarter ending December 2022 have gone beyond pre-pandemic levels, indicating that the labour markets have recovered well from the impact of the Covid-19 pandemic,” it said, noting that recently there has been debate on the accuracy of PLFS estimates compared to estimates produced by various other agencies.

The PLFS survey conducted by the National Sample Survey Organisation present results on unemployment calculated based on the usual status and the current weekly status. One of the contentious issues is seen as the CWS, which categorises a person as employed if he or she has pursued an economic activity for at least one hour during the seven days preceding the date of the survey.

“CWS is the internationally accepted standard and can capture temporary loss in employment more sensitively than usual status,” the report stressed, adding that the one hour criterion to measure unemployment is internationally accepted and even used by the ILO.

“The 13th ICLS (ILO’s International Conference of Labour Statisticians) Resolution stipulates that, for operational purposes, the notion of ‘some work’ should be interpreted as work for at least one hour during a short reference period,” it said, adding that this means that engagement in economic activity for as little as one hour is sufficient for a person to be classified as employed based on the labour force framework.

The ministry further stressed that the estimates derived from official NSSO surveys are much more consistent with ILO norms compared to other non-official surveys. “The statistical and operational aspects of the survey are overseen by a Standing Committee consisting of reputed survey statisticians and other experts,” it said.

The CMIE Unemployment Rate considers a person to be employed only when the person is employed for the better part of a day. This is one of the reasons seen for the difference in the CMIE unemployment data and that of the PLFS.

The ministry also noted that a wide range of methodologies is used to estimate unemployment/employment across different surveys conducted by some private entities and the government, which often leads to variation in the estimates. “These revolve around sampling design, definitions, and questionnaires fielded to the respondents. Each of these needs to be examined before drawing inferences about the country’s employment situation as a whole,” it said, adding that inclusion and exclusion of activities to be considered for measuring employment and unemployment also results in variation in estimates of the unemployment rate and LFPR across surveys.

Experts have however, questioned official data on employment noting that job creation continues to be impacted despite the economic recovery.

Santosh Mehrotra, labour economist and retired JNU professor said, “Economic growth had started slowing down from 2017. For the three year period from 2019-20, the actual growth rate was about 2.5% to 3% taking into the year when growth went into contraction. In such a scenario, how can jobs be created?”

He also said the PLFS is in contravention of the 19th ICLS under which it was decided that unpaid family labour should not be considered as employment. India is the only country using unpaid family labour as employment.

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First published on: 22-03-2023 at 07:22 IST
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