16/04/2019 5:57 PM IST | Updated 16/04/2019 8:14 PM IST

50 Lakh Men Lost Their Jobs After Demonetisation: Report

The most vulnerable sections of society, especially the informal sector, were hit hard by demonetisation and GST, said the report.

File photo of a protest against unemployment led by the Trinamool Congress. The issue has become the most significant in India's politics in the past two years as economists say the twin economic shocks of demonetisation and Goods and Services Tax have adversely affected jobs more in the informal sector, which provides employment for the majority.

NEW DELHI―Five million men, most of whom belonged to vulnerable sections of society and worked in the informal sector, lost their jobs over the two years beginning late 2016 when Prime Minister Narendra Modi announced demonetisation, says a new report.

The ‘State of Working India 2019’ report was released on Tuesday by the Centre for Sustainable Employment (CSE), Azim Premji University, Bengaluru.

“This is a net figure and therefore, whatever jobs may have been added elsewhere, there have been enough jobs lost, on balance five million less work opportunities were there, so that is not a good thing for the economy. Particularly given that we have been seeing what appears to be a strong GDP growth. So, in this case, to end up with net job losses is not a good thing. We should be seeing a workforce increase rather than decrease,” said Prof. Amit Basole, the lead author of the report who heads CSE.

Basole added that data shows that the fall in jobs occurred around the time of demonetisation (in the four-month period between September and December 2016) and plateaued by December 2018 (September-December 2018 is the last four-monthly period the researchers looked at).  

This is a net figure and therefore, whatever jobs may have been added elsewhere, there have been enough jobs lost, on balance five million less work opportunities were there, so that is not a good thing for the economy. Particularly given that we have been seeing what appears to be a strong GDP growth.Amit Basole

The report says that job losses began around the time that Modi announced demonetisation, but is careful to add that it could not establish a “causal relationship” based on the data available. When HuffPost India asked Basole what could be the possible reasons for loss of jobs and employment opportunities, he said, “Apart from demonetisation and GST, as far as informal economy is concerned, I don’t see any other reasons.”

Modi, who is currently campaigning for a second term at India’s helm for the BJP, has avoided mentioning at his rallies the lofty promises on employment he had made before winning a massive mandate in 2014. Not only has his government been unable to provide meaningful jobs to all, policy missteps like demonetisation have only worsened the crisis in the Indian economy.

The government has also been accused of suppressing unfavourable jobs reports from its own agencies such as the NSSO. A Business Standard story based on the report said that India’s unemployment rate was at a 45-year high in 2017-18.

After an analysis of the labour force participation rate (LFPR) and workforce participation rate (WPR) for men with differing education levels, the CSE report says that the decline in both has largely been driven by less-educated men in both urban and rural areas.

It then builds on this finding to conclude that, “...there is a large differential impact by level of education. This is consistent with the idea that the informal sector, where we can expect the share of less educated men to be higher, was hit hardest by demonetisation as well as the introduction of GST.”

Evidently, the most vulnerable sections of the economy had been hit hard. 

However, when asked why data for job losses for women was not tabulated, Prof Basole explained, “We feel less comfortable with the women’s figures that CMIE gives. We compared Labour Bureau 2016 with CMIE 2016 since it is closeby in time. Those are the two we chose to compare and we saw that the comparability is good for men and not good for women.”

The report has a few other significant findings as well.

  • Overall unemployment has risen steadily post-2011 and reports say the unemployment rate was around 6% in 2018, double of what it was from 2000-2011.
  • India’s unemployed is comprised largely of the higher educated and the young.
  • The age group 20-24 years is “hugely over-represented among the unemployed”.
  • Women, the report further confirmed, continue to face higher unemployment rates and labour force participation rates than men.
  • Open unemployment is largely a concern for those under 35 years of age and those who are educated beyond Class 10, and particularly beyond Class 12. 

What’s the source?

A closer reading of the report shows that researchers arrived at the 5 million job loss figure after analysing data from the periodical Consumer Pyramids Household Survey conducted by the Centre for Monitoring of Indian Economy (CMIE), a private business information company, which conducts India’s only private sector national survey of households for measuring several indicators of household wellbeing, including employment. The researchers say they relied on the CMIE data because both official surveys for measuring employment and unemployment―one conducted by the Labour Bureau and another conducted by the National Sample Survey Organisation―have not been released by the government for the period under review―2016 to 2018.

The report also found little merit in the Modi government’s use of sector-specific data sources such as the Employee Provident Fund Organisation (EPFO) database and the MUDRA database for assessing employment numbers as they only correspond to a small part of India’s workforce, and that too only the formal sector.

The report also dedicates a substantial section to possible solutions to the problem of unemployment.

“There are many different things that we should be doing at once. In the report we have selected four issues to look at. One is extending the employment guarantee to urban areas to take care of the concerns of the informal sector, other is providing public services in health and education which will also help us create jobs. Third point is if you are spending well, as far as possible on productive things in getting people to work, then fiscal deficit won’t be a worry. Last point is about industrial policy. We need to have a much more comprehensive approach towards it,” said Basole.