Mentor comment: Conflicting reports on unemployment in India highlight significant issues. While the Reserve Bank of India reported the creation of 8 crore jobs over the past few years, the Centre for Monitoring Indian Economy noted a rise in the unemployment rate to 9.2%. The disparity arises from reliance on outdated data, particularly from the unorganised sector, which employs 94% of the workforce. Additionally, economic shocks like demonetisation and the COVID-19 pandemic have altered employment dynamics, complicating accurate assessments and leading to public confusion over the true state of employment.

Let’s learn!

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Why in the news? 

Recently, Prime Minister Modi cited an RBI report claiming 8 crore jobs created in the last 3-4 years, accusing the Opposition of spreading false unemployment narratives.

Conflicting reports and statements related to employment

• KLEMS Database
  • According to the RBI, India added 4.7 crore jobs in FY24, raising total employment to 64.33 crore. This represents a 6% growth in employment compared to the previous year, which was significantly higher than the 3.2% growth reported for FY23.
  • The period from 2016 to 2024 was marked by several economic shocks, including demonetization, the introduction of the Goods and Services Tax, the Non-Banking Financial Companies crisis, and the COVID-19 pandemic.  

• SBI’s Counter Report
  • The State Bank of India (SBI) released a report stating that even when excluding agriculture, 8.9 crore jobs were created in manufacturing and services from FY14 to FY23, and 6.6 crore jobs from FY04 to FY14. 
  • It emphasized that the total labour force in India is approximately 59.7 crore, closely aligning with the 56.8 crore reported in the recent Annual Survey of Unincorporated Sector Enterprises (ASUSE) survey.
• CMIE’s Unemployment Data
  • The Centre for Monitoring the Indian Economy (CMIE) reported a rise in the unemployment rate to 9.2% in June 2024, marking an increase from 7% the previous month. 
  • This contrasts sharply with the optimistic employment figures presented by the RBI and SBI, suggesting a disconnect between reported job creation and actual employment conditions.
• Public Sentiment and Ground Reports
  • Ground reports and public sentiment indicate that unemployment remains a significant issue, particularly for educated youth. High competition for limited job openings is evident, as seen in the 47 lakh applicants for 60,000 constable positions in Uttar Pradesh and 1.25 crore aspirants for railway recruitment exams in 2022. Protests related to employment schemes further highlight the frustrations of job seekers

About KLEMS Database

• The Reserve Bank of India (RBI) released the India KLEMS Database on July 7, 2024, which outlines methodologies for measuring productivity and employment across 27 industries in the Indian economy.
• It does not independently estimate employment but relies on official data sources, including the Employment and Unemployment Surveys (EUS) by the NSSO and the Periodic Labour Force Survey (PLFS).
• The KLEMS data incorporates various economic measures, including Gross Value Added and Labour Quality, covering 27 industries across the Indian economy.

Challenges in KLEMS Database

• The Indian labor market is characterized by a significant unorganized sector, which employs approximately 94% of the labor force. This sector is difficult to survey regularly, leading to gaps and outdated data. 
• The last Census was conducted in 2011, and the Urban Frame Survey (UFS) data is from 2012-2017, resulting in reliance on older data that may not accurately reflect current employment conditions.
• The conflicting narratives from various sources, including the Prime Minister’s references to KLEMS data, have led to public confusion regarding the true state of employment in India.

Way forward: 

• Clear Communication of Data Sources: Government agencies and institutions should clarify how figures from different surveys (e.g., KLEMS, PLFS, ASUSE) relate to one another, and the implications of using outdated data in light of recent economic shocks.
• Regular and Comprehensive Surveys: The government should prioritize conducting more frequent and comprehensive surveys, particularly focusing on the unorganized sector, which employs a significant portion of the workforce.