22/12/2018 12:28 AM IST

Employment Has Stagnated In Modi's Tenure, Says Former BJP Finance Minister Yashwant Sinha

An exclusive excerpt from Yashwant Sinha's new book that reviews Prime Minister Narendra Modi's track record in managing the Indian economy.

Francis Mascarenhas / Reuters
Job seekers lie on railway tracks as they block train services during a protest demanding recruitment into the railway services in Mumbai on March 20, 2018. 

There is clearly a jobs crisis in India.

‘Where are the jobs?’ Road Transport and Highways Minister Nitin Gadkari asked reporters in August 2018, in the midst of a stir by Marathas for job reservation. Labour Minister Bandaru Dattatreya confessed in May 2017 that India was undergoing ‘jobless growth’. He said his ministry would compile figures for the last three years, but in June 2018 the Modi government withheld the labour ministry’s quarterly employment survey (QES) for 2017–18. The QES had been in place since 2009; officials said it was now likely to be abandoned. BJP president Amit Shah defended abandoning the survey saying its formal employment figures did not include those who were self- employed. Further, there were reports in October 2018 that the government is embarrassed by the draft report of Parliament’s Estimates Committee on GDP which uses labour ministry data and so BJP MPs were attempting to derail the report’s adoption by the committee.

What is self-employment? Modi, in the course of a television interview in January 2018, asked rhetorically: ‘If a man selling pakodas outside the TV office takes home Rs 200 at the end of the day, is that not self-employment?’ It became a joke. Had the prime minister instead spoken about a carpenter becoming an entrepreneur, people would have taken him seriously. But the mighty pakoda is such a thing that it only evoked derisive laughter. Also it was a distraction from the more serious issue of unemployment and underemployment.The other jobs he mentioned were of autorickshaw drivers, tea-stall boys and newspaper deliverers – all in the informal sector. These are nobody’s idea of an aspirational job. 

The government is desperate in the election year to control the narrative on employment generation in India.

Then, in July 2018, the prime minister, in his reply to the motion of no-confidence moved in Parliament by the Telugu Desam Party, asserted that employment generation under his government had been robust. He defended his administration’s record with remarks that relied on conjecture rather than data.

  • ‘India produced 17,000 new chartered accountants [CAs] in the fiscal year 2016–17; 5000 of them may have started their own accounting practice. If we assume each accounting practice hired twenty new people, there were one lakh new accounting firm jobs created,’ said the prime minister. But according to the Institute of Chartered Accountants of India the total number of CAs in India was 2,82,193 at the end of 2017. A large chunk does not practise in India. An informed guesstimate of the number of new CAs India produces each year is between 4000 and 7000.
  • ‘India produces 80,000 new doctors, dentists and health care graduates every year. If we assume 60 per cent of these started their own medical practice and employed five new people each, then the medical profession created 2,40,000 jobs,’ said the prime minister. But many of the doctors may themselves be unemployed!
  • India produces 80,000 new lawyers every year. If 60 per cent of them started their own new legal practice and each employed two or three people, the legal profession created two lakh new jobs,’ said the prime minister. But if you go to any district or subdivisional court, you will find countless briefless lawyers hanging around waiting for clients. How can briefless lawyers afford to hire more people?
  • ‘There were 7.6 lakh new commercial vehicles sold in India last year. If we assume 25 per cent of these were replacement vehicles and 75 per cent new vehicles, and each new vehicle employs two people, then the transport sector created 11.4 lakh new informal jobs,’ said the prime minister. But in fact the industry expects that replacement vehicles will drive growth in the coming years due to an ageing fleet.
  • ’25.4 lakh passenger vehicles were sold last year. Let’s now assume 20 per cent are for replacement of old vehicles and 80 per cent new. If only 25 per cent of these new vehicles employed one driver, this alone created five lakh new jobs for drivers,’ said the prime minister.

The keywords in all these assertions are ‘may’, ‘assume’ and ‘if ’. Instead of hard data, the prime minister relied on hypotheticals in the Lok Sabha. In fact, Mahesh Vyas of the CMIE argues, even if one were to accept these numbers, they represent a shift of workers from one sector to another (from agriculture to transport, for instance) so that the net gains in employment are almost non-existent – and it is new employment which India urgently needs.

But not to worry. The government announced that Modi would, on Independence Day 2018, launch a special magazine on employment and self-employment. The magazine would be edited by the PMO, and it would be available free of cost. The government is desperate in the election year to control the narrative on employment generation in India. As of October 2018, there has been no sign of this magazine. 

If I have a business that employs eighteen people, I’m not registered with the EPFO. The moment I hire two more, I have to register. The fresh employment here was only two persons, but according to EPFO data it is twenty people. That is obviously incorrect.

 That is why Modi and his advisers have made much ado about the enrolment figures shown in the Employees’ Provident Fund Organisation (EPFO) to substantiate their narrative about job growth. Companies with twenty or more employees are supposed to register with the EPFO. By March 2018, the EPFO showed new enrolment over the previous six months of about six lakh new employees per month (these figures were by August scaled down by the EPFO itself to below four lakh per month). For 2017–18, the estimate came to 70 lakh jobs

Yet I would argue, as many others have, that EPFO figures cannot be the basis for fresh employment data.

Let me give a simple example. If I have a business that employs eighteen people, I’m not registered with the EPFO. The moment I hire two more, I have to register. The fresh employment here was only two persons, but according to EPFO data it is twenty people. That is obviously incorrect.

What the EPFO data shows is the formalization of the economy. With the introduction of goods and services tax (GST) in July 2017, it is now difficult for businesses to escape notice.Thus the rate of formalization of businesses is growing – which is a good thing for the country. One can never oppose this. What I oppose, however, is taking this formalization data and treating it as if it is fresh employment data. And if the formal economy only employs a slice of the workforce – estimates range from 8 per cent of the total workforce to 15 per cent, and even at the most liberal guesstimate that would mean just a bit over seven crore Indians in the formal sector – then the EPFO is going to be generating big numbers of formalization for quite some time to come.

As a result, in the eight months from September 2017 to April 2018, the CSO endorsed the EPFO statistics to say that 41 lakh new jobs were created. The labour bureau’s QES, however, showed only two lakh new jobs in the formal sector. No wonder, then, the government has decided to abandon the labour bureau’s survey, citing time lags and the need for the survey to move out into the informal sector.

This is after Wire.in reported in February 2018 that in a joint presentation to the PMO, the chief economist of the State Bank of India and a professor of the Indian Institute of Management (Bengaluru) found that 30 to 40 per cent of the EPFO data was ‘unclean’.

So what is the true picture of jobs in India? According to the World Bank, India’s population in 2016 was 132 crore. The Bank also says the employment rate (the proportion of working age people who are employed) in 2017 came down to 51.9 per cent.

A more reliable figure comes from the CMIE: it says the employment rate averaged 42.9 per cent January– October 2016. Then it fell, thanks to demonetization. In March 2018, it stood at 40 per cent. ‘The number of persons employed in 2017–2018 was 406.2 million (40.62 crore). This was 0.1 per cent or (46 lakh) lower than the 406.7 million employed in 2016–2017,’ its report says. In statistical terms, employment has stagnated, while there are one crore Indians who reach an employable age every year.

Cover of the book authored by former BJP Finance Minister Yashwant Sinha with journalist Aditya Sinha. 

Yashwant Sinha is a former finance minister and external affairs minister. Aditya Sinha is a journalist.

Excerpted with permission from India Unmade: How Modi Government Broke The Economy, Yashwant Sinha with Aditya Sinha, Juggernaut.