With facts and figures, Kriti Kalra explains how Modi’s third term plans to negotiate challenges and embrace opportunities for a strong future. Through policy impact that addresses employment and growth rate challenges head-on, it reiterates its commitment to creating a robust and inclusive job market, ensuring that economic growth translates into tangible employment opportunities for its citizens. It also warns against use of selective data as portrayed by Citigroup.
India has always been a country with immense potential and resources, but it has also faced its share of challenges. With its third term under the NDA, the country has a new set of challenges and opportunities that the present regime will have to tackle deftly for a stronger future.
One of the most important issues has been that of employment and growth rate. The Indian government has strongly rebutted a recent report by Citigroup that claimed India will struggle to create sufficient employment opportunities even with a seven per cent growth rate.
According to the government, data from official sources such as the Periodic Labour Force Survey (PLFS) and the Reserve Bank of India’s KLEMS data show that India has generated an average number of jobs of over 20 million per year through generation of over 80 million employment opportunities from 2017-18 to 2021-22. This contradicts Citigroup’s assertion of India’s inability to generate sufficient employment.
The government cited significant improvements in key labour market indicators based on PLFS data. The Worker Population Ratio (WPR) increased from 46.8 per cent in 2017-18 to 56 per cent in 2022-23, indicating a larger proportion of the working-age population is now employed. The Labour Force Participation Rate (LFPR) rose from 49.8 per cent to 57.9 per cent over the same period, reflecting more people actively participating in the labour market. Additionally, the Unemployment Rate declined significantly from 6.0 per cent to 3.2 per cent, showing a substantial reduction in joblessness.
Policy impact
These statistics, according to the government, demonstrate the positive impact of its policies on employment, painting a more optimistic picture of the Indian job market compared to Citigroup’s dire assessment. Furthermore, the government highlighted growth in formal sector employment, with over 62 million net new subscribers joining the Employees’ Provident Fund Organisation (EPFO) in the last 6.5 years. Additionally, there was a 30 per cent increase in new subscribers to the National Pension System (NPS) in 2023-24 compared to the previous year, indicating growing formal employment and social security coverage.
The government also pointed to the projected expansion of the gig economy and Global Capability Centers as indicators of India’s robust employment prospects. The gig economy, with its flexible work opportunities, and the rise of Global Capability Centers, which serve as critical operational hubs for multinational companies, are expected to further bolster job creation in India.
Emphasising the credibility and comprehensiveness of official data sources, the government cautioned against the selective use of private data, such as Citigroup’s report, which can lead to misleading conclusions about India’s employment scenario. It reiterated its commitment to creating a robust and inclusive job market, ensuring that economic growth translates into tangible employment opportunities for its citizens.
Workforce and external shocks
The latest Annual Survey of Unincorporated Enterprises (ASUSE) for 2021-22 and 2022-23, published by the Ministry of Statistics and Programme Implementation (MoSPI), Government of India, reveals a decrease in the number of workers employed in the informal sector. The workforce in this sector fell by 16.45 lakh, or roughly 1.5 per cent, to 10.96 crore in 2022-23 from 11.13 crore in 2015-16.
This data, available for the first time since 2015-16, offers insights into the impacts of significant external shocks such as demonetisation in November 2016, the implementation of the Goods and Services Tax (GST) in July 2017, and the Covid-19 pandemic starting in March 2020 on the growth of unincorporated enterprises and their employment levels.
The number of unincorporated enterprises increased by 16.56 lakh, rising to 6.50 crore in 2022-23 from 6.33 crore in 2015-16, as per the data generated by the ASUSE for 2021-22 and 2022-23. The informal sector bore much of the burden from the sudden withdrawal of cash during demonetisation, the regulatory compliances and tax net inclusion due to GST, and the national lockdown imposed in response to the Covid-19 pandemic.
The informal sector
Among the top ten states that account for nearly three-quarters of India’s informal sector workers, five states—Maharashtra, Bihar, Gujarat, Madhya Pradesh, and Odisha—saw an increase in informal employment between 2015-16 and 2022-23. Conversely, Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka, and Andhra Pradesh experienced a decline in the number of informal sector workers during the same period, with these five states accounting for 42 per cent of all informal workers.
The survey showed that 16 states and union territories (out of 34, excluding Jammu & Kashmir and Ladakh due to lack of comparable data) recorded a decline in informal sector workers in 2022-23 compared to the 2015-16 data from the National Sample Survey’s 73rd round on Unincorporated Enterprises.
However, the share of informal sector workers increased in most states immediately after the pandemic, indicating economic distress and a potential shift from the formal to the informal sector.
Uttar Pradesh saw a decrease in informal sector workers to 1.57 crore in 2022-23 from 1.65 crore in 2015-16, though there was an increase from 1.30 crore in 2021-22. West Bengal experienced a decline to 1.05 crore in 2022-23 from 1.35 crore in 2015-16, with a slight rise from 1.02 crore in 2021-22.
Maharashtra, on the other hand, saw a consistent increase in informal sector workers over the seven-year period, reaching 1.15 crore in 2022-23 from 91.23 lakh in 2015-16 and 98.81 lakh in 2021-22. Other states such as Madhya Pradesh, Gujarat, and Odisha also recorded an increase in workers in 2022-23 compared to 2015-16.
Bihar, a major source of migrant workers, stood out by initially recording a decline in informal sector workers from 53.07 lakh in 2015-16 to 43.22 lakh in 2021-22, only to reverse the trend with a sharp increase to 58.95 lakh in 2022-23, surpassing pre-pandemic levels.
In terms of informal sector output in value-added terms of Gross Value Added (GVA), India Ratings noted that the real GVA of unincorporated sector enterprises (USE) grew by 6.9 per cent in 2022-23, which was still below pre-pandemic levels. The real GVA of USE in 2022-23 was 1.6 per cent lower than in 2015-16. While the real GVA of USE grew at a compounded annual growth rate (CAGR) of 7.4 per cent between 2010-11 and 2015-16, it contracted by 0.2 per cent between 2015-16 and 2022-23, highlighting the long-term negative impact of the shocks on the sector.
Smaller enterprises
Regarding the number of unincorporated enterprises, Uttar Pradesh, West Bengal, and Maharashtra accounted for the highest share in both rural and urban areas in 2022-23. The State Bank of India, in its research report, noted that the employment numbers from the Reserve Bank of India’s KLEMS data and the ASUSE broadly match, showing around 8.9 crore employment in industry and services over the nine-year period from FY14 to FY23.
The unorganised sector, which contributes over 44 per cent to the country’s GVA and employs nearly 75 per cent of the workforce in non-agricultural enterprises, is a crucial jobs indicator. The Ministry’s release of this data after a long gap provides essential insights into the employment generation capacity of the informal sector, especially during formal sector slowdowns.