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Modi vindicated as IIM study debunks jobless growth theory, says 15 million added to labour force yearly

Publication: Financial Express
Date: January 17, 2018
URL:      https://www.financialexpress.com/economy/modi-vindicated-as-iim-study-debunks-jobless-growth-theory-says-15-million-added-to-labour-force-yearly/1018590/lite/?__twitter_impression=true

The Narendra Modi-led government got a big boost as a new study finds that 15 million people are being added to the labour force every year, busting the theory that jobs are not being created in the country. The study, authored by SBI group Chief Economic Advisor Soumya Kanti Ghosh and Pulak Ghosh, said, “Given declining population, we estimate that on an average 25 million babies born per year (this has been calculated after adjusting infant morality rate from crude birth rate) has remained largely constant in the last three decades. Out of 25 million, we expect that 15 million are added to labour force (after conservatively assuming 40% of them voluntarily remain out of labour force or are involved in domestic/agriculture work).”

Earlier in November, Congress vice-president Rahul Gandhi had launched an attack on the government asking them to quit if they’re incapable in providing jobs. “Mehngi gas, mehnga ration, band karo khokhla bhashan, daam bandho, kaam do, varna khali karo singhasan,” he had tweeted in November.

The study also calculated the number of jobs in enterprises from the membership of Employees’ Provident Fund Organisation (EPFO), Employees’ State Insurance Corporation, General Provident Fund and National Pension System (NPS). Interestingly, the study is the first of its kind to use these kinds of data sets.

Eartlier, former NITI Aayog vice-chairman Arvind Panagariya, had also recommended using this kind of database in a report submitted by task force on employment. “Unfortunately in India, we don’t have any proper source either to measure the total work force or the total individuals on payroll. To make an effort in this direction, we collected primary data from three major sources, EPFO, ESIC and NPS,” says the report.

The study, titled “Towards a Payroll Reporting in India”, estimated that 3.68 million jobs were generated till November of FY18, which would imply 5.5 million in the entire year. “Based on all estimates, payroll of 5.9 lakh (i.e. 7 million annual) generated every month in India in current fiscal,” the report added.

Interestingly, the study has zeroed in only new contributors who were 18-25 years old, to ensure they were capturing only new employees. Further, new employee accounts that didn’t have steady EPFO contributions were also dropped on the grounds they may be fraud accounts. All data pertain to the formal sector as informal sector employees don’t contribute to EPFO. In addition, the authors say there is also considerable employment generated from other sectors like education. In the automobiles sector alone, based on automobile sales, they estimate this sector generated 2 million driver jobs in FY17.

The authors have also provided various suggestions to the government, reproduced below.

It should be mandatory for the professional bodies, hospitals, nursing homes etc. to submit the details of new joinees every 3 month to the local Government offices. 

From April 1, 2018 Government should ask every GST filer for giving total number of permanent employees on payroll and total no of contract employees on payroll  Some tax deduction (per person) may be given for domestic help, if their name and details are registered with tax authorities by the household employing them.

Currently NPS give extra tax deductions of Rs 50,000 p.a. Government should continue this incentive and provide new incentives also to encourage people to join NPS.

Earlier, the congress leader Rahul Gandhi had said, that the prime minister should say if he is unable to address the problems like unemployment and the Congress will come and do it in six months. “Farmers and youth are the two main issues concerning India and if Modiji cannot address these, he should say so and the Congress will come and do it in six months,” Congress Vice -president Rahul Gandhi had said during the recent Uttar Prasdesh polls.
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