By Santosh Mehrotra
The periodic labour Force Survey (PLFS) 2023-24 data was released recently. The clear picture emerging over the last decade has only been confirmed. India’s employment crisis, already deep, shows no signs of letting up.
The uncalled-for national lockdown Covid began had resulted in India’s economy contracting by nearly twice as much as the world economy (5.8% versus 3.1%, compared to the previous year). That short-notice lockdown of national scope (China had no national lockdown) sent millions back from the cities to their rural abodes. That decision and its adverse impact on an already slowing economy resulted in 60 million workers being added to agriculture in the next three years alone. PLFS 2023-24 shows that more workers have been added to farming in the last year again. Shockingly, it shows the share of agriculture has gone up from 45.8% (2022-23) to 46.1% (2023-24).
Agriculture had seen a sharp decline of workers since 2004 for the first time in India’s post-independence history. This was because non-farm work grew sharply till 2012, at 7.5 million new non-farm jobs per annum. As a result, real wages in agriculture and all non-farm work rose from 2004 to 2012. This fall in farm workers continued even after 2014 as construction work sustained, although at a slower rate till 2019 (when agriculture accounted for 42% of India’s workforce).
However, not only has agriculture’s share gone up to 45% or higher over 2020-23, but 2023-24 has seen a further increase in workers in agriculture, to 46.1% of India’s workforce. This continuing trend has confirmed and reinforced a reversal of the structural transformation that India’s economy was undergoing until 2014. The last four years have reinforced that reversal.
This trend is confirmed by another piece of data in PLFS 2023-24: manufacturing share of employment compared to last year has stagnated at 11.4%, which was lower than in 2021-22 (11.6%), and 2012 (12.8%). The continuing stagnation in manufacturing is merely sustaining a trend that the Bharatiya Janata Party-led government injected with policy-induced shocks. First, it began with demonetisation, which led to manufacturing contribution to gross value added falling for five years, from 17% (which prevailed from 1992 to 2015-16) down to 13% in 2021 — a phenomenon not seen in post-independence India.
Second, this was followed by another policy shock — a poorly designed and hurriedly implemented national goods and services tax — that caused another decline of micro, small and medium enterprise output and employment, especially in manufacturing. The decline gathered momentum. Third, the national lockdown continued the process, so labour-intensive manufacturing, which accounts for 50% of all manufacturing jobs, suffered the most, resulting in an absolute fall in jobs in the labour-intensive sectors: garments, textiles, leather/footwear, food processing, and wooden furniture.
Government economists have recently gloated over the trend of rising female labour force participation (for decades among the lowest in the world). Why? PLFS 2023-24 shows that the share of regular salaried employment (the best type of employment, even if without social security) has fallen for both urban and rural women in the last few years as well. Animal husbandry has seen some rise, but that is still agriculture.
Worse, there has been an accentuation of the trend of the last three years that the worst form of employment — self-employment — has increased in share, from 53% of India’s workforce to 57.3% in 2022-23, and 58.4% in 2023-24. Of that there is an increase, again in 2023-24, like in 2022-23, of unpaid family labour (UFL). The International Labour Organization does not consider this category as employment, but the National Statistical Office (NSO) continues to do so. No wonder the labour force and the worker participation rates in India have risen after Covid, and continue to rise. And the government, and its economists, continue to gloat over the resulting fall in unemployment rate.
Similarly, they keep pointing out that accordingly, youth unemployment rates that had risen to 17.8% in 2017-18 (from barely 6% in 2012) have fallen to 10.2% in 23-24. The point is that a significant share of these youth are also in agriculture, and also in UFL. Education levels of youth are rising constantly, as PLFS itself shows, and the educated young have no desire to work in agriculture, let alone as UFL.
Yet in August, the Reserve Bank of India’s KLEMS analysis put out a claim that eight crore (80 million) new jobs were created in the last four years (including 2024). The latest PLFS puts that number also to shame, as we had demonstrated elsewhere. That exaggerated claim, trumpeted by the Prime Minister and government/party spokespersons, itself was arrived at on a methodologically flawed basis: by multiplying the ratios emerging from PLFS by projected Indian population growth rates, which bear no relationship to reality. The so-called researchers, hired by the RBI, were oblivious of the fact that India’s total fertility rate has been falling sharply since the last Census of 2011, and in 2021 stood at below the replacement rate (2.1 children per woman) for India (actual is 2.0).
Meanwhile, India is supposedly the “fastest-growing” large economy in the world. However, those numbers don’t quite find resonance in the employment created. So what could be the reasons? First, we know that since the policy shocks to the economy, the recovery was rapid, as is unsurprising, given the steep fall in FY21 was worse than the global fall. The recovery has been K-shaped, now generally accepted. Unorganised sectors were already struggling for the last eight years, as proven by the data for 2021-22 and 2022-23 of NSO’s unorganised enterprises survey (for non-farm units); they are still struggling.
Recent research showed that the organised segment of almost every sector gained at the expense of the unorganised for the 85% of GDP accounted for outside agriculture. Given that organised segment sectoral growth is used to project unorganised segment growth, the GDP calculation overestimates it for the unorganised segment. Second, private consumption has grown at only half the rate of this inflated GDP growth, which has historically not been the case but it has for the last few years. There are other reasons (for example, around the GDP deflator) why GDP is likely to be overestimated, which for reasons of space we ignore. Thus, the job crisis is clearly reflecting deeper structural issues in the real economy.
The writer taught economics in JNU and was with the Planning Commission.
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