Economic situation in 2024: Part 2

Part 2 of this five-part series takes a look at the unprecedented unemployment crisis gripping the country.

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Read part 1 here.

IN this five-part series, we take a look at the economic situation in the country in early 2024 in the context of the tall claims being made by the Modi government regarding the state of the economy.

In the second part of our review of the economic situation of the country in early 2024, we take a look at the unprecedented unemployment crisis gripping the country.

Deepening unemployment crisis

The Modi government is in denial about the unemployment crisis. The Union finance minister's budget speech does not even mention the word 'unemployment', and only says that various measures taken by the government have generated huge employment opportunities.

The The Indian Economy – A Review published by the Union finance ministry in lieu of the Economic Survey claims a significant decline in the unemployment rate: 

• The Periodic Labour Force Surveys (PLFS) by the National Statistical Office (NSO) estimate that the unemployment rate (UR) has declined substantially from 6 percent in 2017–18 to 3.2 percent in 2022–23.
• The Labour Force Participation Rate (LFPR) has increased from 49.8 percent in 2017–18 to 57.9 percent in 2022–23 [LFPR is the percentage of the working-age population engaged in work or making tangible efforts to seek 'work'].
• The youth (age 15–29 years) unemployment rate has declined from 17.8 percent in 2017–18 to 10 percent in 2022–23, while youth LFPR has expanded from 38.2 percent to 44.5 percent over the same period.
• The Worker Participation Rate (WPR) for youth (age 15–29 years) has increased from 31.4 percent in 2017–18 to 40.1 percent in 2022–23, implying that an additional 35 million people have found work, even though the population in that segment has increased only by 17 million [WPR, also called the employment rate, is the total number of people employed as a percentage of the working age population].

Also read: GDP data for Q3 2023–24: The mystery of a robust growth

The figures put out by the Review are based on PLFS data released by the National Sample Survey Office (NSSO). PLFS collects data in two ways— usual principal and subsidiary status (UPSS); and current weekly status (CWS).

Under the UPSS, the survey respondent has to recall their employment details from the last year— if the person has been engaged in an economic activity for at least 30 days in the previous year, they are considered employed.

In the CWS, the respondent has to recall the details over the past week— an individual is counted as being employed if they have worked for at least one hour on at least one day during the seven days preceding the date of the survey.

While both definitions have their limitations, the data based on the CWS are considered more reliable because the recall is better over the past week. However, the above figures given by the Review are based on the UPSS, probably because the UPSS unemployment rate is much lower than the CWS unemployment rate (see Table 2 for both UPSS and CWS data).

The biggest problem with the PLFS data is its reliability. Modi government's frequent interference in the country's statistical system, frequent changes in the methodology of the surveys, and suppression and delay in the release of the data— all have put the credibility of NSSO data under a cloud.

Here is a brief history of the Modi government's interference in the country's unemployment statistics.

During the first term of the Modi government, in September 2016, data from the fifth round of the Annual Employment–Unemployment Survey was released. This report showed that the unemployment rate in India had gone up to a five-year high of 5 percent in 2015–16.

The government panicked, and not only scrapped all subsequent Annual Employment–Unemployment Surveys, but also the quinquennial Employment–Unemployment Survey conducted by the NSSO— whose next round was due in 2016–17.

This survey on employment and unemployment had been conducted regularly every five years since 1972–73 in rural and urban areas, and provided extensive information about the volume and structure of employment and unemployment in the country, and also several other indicators related to the quality of workers and non-workers.

Consequent to the scrapping of these surveys, the government released no official data on the unemployment situation in the country for the next three years.

Subsequently, in 2017, it instituted another employment survey, the PLFS, to be done by the NSSO. This survey was conducted between July 2017 and June 2018. But with Lok Sabha elections coming, the Modi government decided to withhold the release of this data too.

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It did so despite the National Statistical Commission (NSC)— the apex body that coordinates India's statistical activities— approving its release. The NSC is an autonomous body; the government is not supposed to interfere in its functioning. In protest, on January 28, 2019, the last two independent members of the NSC, one of whom was also the acting chairman, resigned.

Finally, after the 2019 Lok Sabha elections were done and dusted, the government released the suppressed PLFS data. It showed that joblessness was at a 45-year high of 6.1 percent in 2017–18 (the Union has been collecting unemployment data since the early 1970s).

Worse, the data showed that the total number of jobs in the economy had actually fallen during the period 2012 to 2018— from 47.42 crore in 2011–12 to 46.51 crore in 2017–18 (Table 1). It is the first time this has happened since independence.

Table 1: Total employment, 2012 to 2018 (in crore)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

In all probability, the Modi government has now tweaked the data collection methodology. This suspicion arises because even though the country's GDP growth rate has been slowing down since 2017–18, data put out by subsequent PLFS surveys show an increase in the LFPR and a decline in the unemployment rate between 2017–18 and 2022–23 (Table 2)! 

Table 2: LFPR, WPR and UR for All Workers Above 15 years (percent)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

PLFS data also show that both the LFPR and WPR have been increasing— which means that this decrease in the unemployment rate has not occurred because of an increase in discouraged workers (who drop out of the labour force because they cannot find work), but because the economy has been creating more jobs. So, the PLFS data imply that despite the economy sinking into recession, employment generation is robust!

What is even more incredulous is that PLFS data show a decline in unemployment and an increase in LFPR and WPR even during the pandemic year 2020–21, a year when official figures admit that the economy contracted by 5.8 percent— and Professor Arun Kumar estimates that it actually contracted by 29 percent due to the total collapse of the informal sector (which is not taken into consideration in official data).

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This implies that the economy created more jobs during the pandemic year 2020–21 as compared to the pre-pandemic year! In their enthusiastic massaging of survey data, the government's spin doctors probably forgot that the data must show at least some increase in unemployment during the pandemic year for it to have some credibility.

Basing itself on PLFS data, the State of Working India 2023 report of Azim Premji University estimates the total number of unemployed in the country to be 3.5 crore (on the basis of CWS) in 2021–22 (see Table 3). On the basis of UPSS, the number of unemployed falls to just 2.3 crore.

Table 3: Key labour market indicators (based on CWS, in millions)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

Facts on the ground belie Modi government's claims. Just two years ago, in 2022, there were job riots twice within the space of six months in UP and Bihar— first over delays and irregularities in the railway recruitment examination, and then against the Agnipath scheme.

These riots were clearly a reflection of youth anger against the worsening unemployment situation. The severity of the unemployment situation in the country is also revealed in a reply given in Parliament by the minister of state for personnel, public grievances and pensions on July 27, 2022.

The minister stated that between 2014 and 2022, a staggering 22.06 crore applications for jobs were received by the Union government, of which 7.22 lakh persons were recruited.

According to data provided by the minister, in 2020–21, 1.8 crore persons applied for jobs with the Union government, while 78,000 recruitments were made, and in 2021–22, 1.87 crore applications were received and 38,000 recruitments made. Yet PLFS unemployment data shows that only 2.3 crore people were unemployed in 2021–22!

In June 2022, about 17 lakh people applied for 3,400 jobs requiring a minimum qualification of Class 10 in the developed state of Gujarat.

Towards the end of 2022, the Maharashtra police received more than 11 lakh applications for 18,300 posts of constables and drivers. In mid-2023, the state received more than 11.5 lakh applications for 4,600 posts of talathi, a Group C post.

In UP, the Staff Selection Commission's (SSC) Multi-Tasking Staff (MTS) 2023 recruitment examination for Group D jobs (peon, watchman, gardener, etc.) saw a staggering 55 lakh people apply for 11,400 jobs.

This is more than double the number of applications received for the previous exam in 2022— another clear indicator of the rapidly worsening employment situation. While the minimum educational requirement was only a high school diploma, candidates with much higher qualifications, such as BTech, MTech, BBA, MBA, and MSc degrees applied for these jobs.

Also read: GDP growth: The gap between reality and rhetoric

These facts unequivocally show that there has been no decline in the unemployment crisis in the post-Covid years as claimed by the PLFS data. The country's official statisticians have indulged in statistical jugglery to paint a rosy picture of the employment situation.

In this article, we attempt to probe into PLFS data to find out what is actually happening on the jobs front in the country. But before that, let us briefly take a look at another reputed dataset, that is increasingly being relied upon by economists and policy researchers because of the suppression of key economic data by the Modi government.

CMIE data on unemployment

Another important data source about the employment and unemployment situation in India is the household survey data put out by the CMIE (Centre for Monitoring Indian Economy, a leading private business information company). Table 4 gives the unemployment rate in the country according to the CMIE (we have calculated the yearly figures by averaging the monthly unemployment rate given out by the CMIE).

These unemployment figures are clearly closer to reality. The UR, which was 4.6 percent in 2017–18, rose to 6.3 percent in 2018–19. It shot up to 10 percent during the year the country was hit by the pandemic.

The marginal recovery from the economic collapse (as discussed in Part 1 of this article) has led to a slight decline in the UR, but unemployment continues to be higher than before the pandemic. Not only that, the UR has once again started increasing in financial year 2024— it increased to 8.1 percent in 2023–24, significantly higher than the UR of 7.6 percent in 2019–20.

Table 4: UR, 2017–18 to 2023–24 (CMIE data) (in percent)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

This means that the recovery has occurred primarily in sectors and activities which are not employment-intensive; implying that the employment-intensive petty and small-scale sectors have been left out of the ambit of the recovery.

This is precisely what we have pointed out in Part 1 of this article series, where we have discussed the problems with the country's high post-pandemic GDP growth rate data.

Estimating the actual unemployment rate in India

Good data or bad data, data always reveals a lot. A deep dive into PLFS data reveals several problems with the data collection methodology of PLFS, because of which the employment data derived from it becomes so ludicrous.

The category of unpaid workers

The government has been trying to discredit the CMIE data, claiming that the surveys of such private organisations are "generally neither scientific nor based on internationally accepted norms".

Whereas the fact is the CMIE sample is actually larger than that of NSO's PLFS and covers both the organised and unorganised sectors, and both rural and urban areas.

Not only that, the CMIE data is better, because it uses internationally compliant definitions, which PLFS does not!

The NSSO / PLFS data collection methodology regards unpaid family labour as employment. In the PLFS data, within the category of self-employment, there is a special category called "unpaid helper in family enterprises". India is perhaps the only country in the world that includes such workers in employment data.

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As per the definition of the International Labour Organisation (ILO), which is followed by all countries of the world but not India, employment covers only that part of the work that is remunerated.

Therefore, unpaid work of any kind, whether in the family enterprise or within households in care and other activities, is considered work but not employment. Yet in India, the official data include this category in the workforce. The CMIE data too does not include such workers in the category of the employed.

Let us go back to the PLFS data, rework it on the basis of "internationally accepted norms", and calculate the unemployment rates after excluding the "unpaid workers" from the category of employed.

For this, we disaggregate the PLFS data for the period 2017–18 to 2022–23 by type of employment: self-employment, regular paid or salaried work, and casual labour. This is done in Table 5 for all workers of all ages, in the UPSS. For comparison, we also give the data for the CWS for 2017–18 and 2022–23.

Table 5: Percentage distribution of workers by status in employment (All ages, the UPSS and the CWS data)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

As we can see in Table 5, the proportion of unpaid self-employed has increased— from 13.6 percent to 18.3 percent of all workers over the six-year period from 2017–18 to 2022–23. The CWS data too show a similar increase.

This increase in the unpaid workers working in family enterprises only reflects an inability to find paid jobs. It confirms our analysis, made in Part 1 of this article series, that the post-pandemic economic recovery only reflects the recovery in the organised sector; the unorganised sector continues to be in crisis.

As per the internationally accepted ILO definition, all these unpaid workers should be included in the unemployed, not in the employed. We calculate the actual WPR and actual UR in Table 6, after excluding the unpaid workers from the category of employed and including them in the unemployed.

As can be seen from Table 6 for 2022–23, the WPR drastically falls, from 41.1 percent to just 33.6 percent (and for CWS, from 38 percent to 32.1 percent). This is only to be expected, as the WPR had been inflated due to the addition of unpaid workers. Note that this actual WPR figure broadly matches WPR figures from CMIE data. As per CMIE data, the WPR for 2022–23 was 36.6 percent.

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The actual unemployment rate for 2022–23 shoots up to 20.7 percent for all workers (see Table 2). This is six times the official PLFS unemployment rate as per the UPSS (3.2 percent). The CWS data also shows a very similar unemployment rate for 2022–23 (19.8 percent).

Table 6: Actual WPR and UR for all workers, all ages (UPSS data, in percent)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

From this, we can calculate that the total unemployed in the country is not 2.3 crore as claimed by the Modi government, but 14.9 crore.

The underemployed workers

The reworked data in Table 6 shows that unemployment rate for all workers only marginally increased during the pandemic year 2020–21, by just 0.9 percentage points.

Whereas all ground reports suggest that the unorganised sector suffered a terrible collapse during the lockdown, probably by as much as 70–80 percent during Q1 2021.

Subsequently, after the lockdown was gradually lifted, the unorganised sector struggled to recover due to the government's callous handling of the lockdown— the total relief package announced by the Modi government was amongst the lowest in the world.

The renowned economist Professor Arun Kumar estimates that for the full financial year 2020–21, the economy probably suffered a contraction of 29 percent, with the unorganised sector suffering a contraction of much more than this.

The unorganised sector accounts for 94 percent of the total employment— its sharp decline must have led to crores of people losing their livelihoods. Then why has unemployment for the financial year 2021 increased by only 0.9 percentage points, even in the reworked data?

Table 7: Percentage distribution of workers by status in employment after excluding unpaid workers (UPSS data)

Source: Annual Report, PLFS, July 2019–2020, and July 2022–23, available online at: https://mospi.gov.in.

In Table 7, we have calculated the percentage distribution of all workers by status of employment, after shifting the category of unpaid self-employed workers to unemployed.

As can be seen from the table, nearly 50 percent of all workers are self-employed, and their percentage has increased over the period 2017–18 to 2022–23 by 3 percentage points. Casual workers account for a quarter of all workers.

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A closer examination of this data reveals another important problem in the PLFS data collection methodology because of which the data does not reflect the huge increase in unemployment during the pandemic year 2020–21.

The overwhelming majority of casual workers work in insecure low-paid jobs with no social security, such as in the construction sector or in roadside eateries or in tiny enterprises. PLFS data give the average earnings of casual workers.

Table 8 gives the real earnings of workers, after making adjustments for inflation using CPI. The data shows that the real wages of casual workers have increased by a mere 2.6 percent over the period 2017–18 to 2022–23.

Even after this increase, the real wages in 2022–23 were only ₹7,899. The India Employment Report 2024 of the ILO gives the distribution of casual workers by monthly wages on the basis of PLFS data and estimates that 78 percent of the casual workers earn less than ₹7,500 per month.

How do people survive on a daily wage of ₹250 per month!

As regards self-employed workers, in most cases, self-employment reflects the absence of not just good quality paid employment, but any kind of paid employment. People selling idlis or pani-puris by the roadside, people selling fruits and vegetables on handcarts from 7 a.m. to 9 p.m., rickshaw pullers and auto-rickshaw drivers— most of all these self-employed people work these jobs because of the absence of any kind of paid employment.

None of these jobs has any kind of social security, no accident insurance, they often have to pay bribes to the local police, etc. Many even do not get free rations under the National Food Security Act.

PLFS data on earnings of self-employed workers (Table 8) shows that real wages for these workers had started declining even before the Covid pandemic. As is to be expected, they then fell sharply during the pandemic. The post-pandemic recovery led to some rise in wages, but the increase has been so anaemic that average real wages in 2021–22 were below those in 2017–18. It is only in 2022–23 that they crossed the pre-pandemic levels.

Table 8: Average real monthly wage or salary earnings of workers 

Estimated from PLFS various rounds (in ₹, CWS data) [15]

Source: State of Working India 2023

Despite falling real wages, the percentage of people in self-employment increased over the period 2017–18 to 2021–22. Why? Because there are no jobs.

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In 1973–74, India's Planning Commission defined the poverty line as that particular level of total spending per capita on all goods and services, whose food spending part satisfied the nutrition level of 2,200 calories of energy intake per day in rural India, and 2,100 per day in urban areas.

It applied this definition to NSS data for 1973–74 and estimated the poverty line to be ₹49/56 per day for rural and urban families. Since then, all kinds of subterfuges have been adopted by the government to change this definition and show a decline in poverty.

But if we stick to this sensible definition of the poverty line, and use the NSS data for 2017–18 to estimate the per capita expenditure level at which exactly 2,200 calories were accessed in rural India, then that works out to ₹70 in 2017–18, or ₹8,400 for a family of four. Updating it to 2022–23 (using the Agricultural Labourers Price Index), the poverty line works out to ₹10,981 per month.

It is astounding that the average wage of casual workers in 2022–23 is 30 percent less than this poverty line. [This poverty line is for a family of four. But since more than 80 percent of the female workforce in India is not engaged in any paid economic activity (see below), we can take the data in Table 8 to represent household income too for most families.]

This means that the overwhelming majority of casual workers are living in penury. The average wage of self-employed workers is just 22 percent above this poverty line, which means a huge number of self-employed workers must also be living on the edges of destitution.

Nearly 50 percent of the workforce earns barely enough to eke out a living. Why do people work in such low-paying insecure jobs? Because there is no unemployment allowance in the country. So people have the option of either starving or taking up whatever jobs are available, doing any kind of work to somehow earn something and stay alive.

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All unemployment surveys in India, be it the NSSO surveys or the CMIE surveys, consider all these workers in the informal sector to be 'gainfully employed', even if they are earning subsistence-level wages.

The reason why the PLFS data shows such a marginal increase in unemployment in 2020–21 is because with the government giving only a paltry relief package, people were trying to do something or the other to somehow stay alive. By PLFS definition, all these people are included in the 'employed' category.

Defining all such people as 'employed' is actually ridiculous; they are all victims of an economy that is unable to create decent jobs. Any humane society would consider them to be unemployed, or at least under-employed. International covenants such as The International Covenant on Economic, Social and Cultural Rights, and India's Constitution explicitly state that all workers have a right to a decent job that ensures them and their families a life of dignity.

In 2015, the United Nations passed a landmark resolution announcing seventeen Sustainable Development Goals. One of these goals was providing "decent work for all". The ILO, in fact, says that only those who are doing "decent" jobs should be considered as employed.

The ILO defines "decent work" as work that delivers a fair income, security in the workplace and social protection for all, freedom for people to express their concerns (in plainer language, this means workers must have the right to form trade unions and engage in collective bargaining), and equality of opportunity and treatment for all women and men.

This means that all workers whose earnings are able to provide them only the bare necessities of life should be recognised as 'under-employed' and included in the unemployed.

If we include the underemployed in the total number of unemployed in the country, the unemployment rate would go from the 20 percent estimated above to at least 50 percent, if not more! Terrible figures indeed.

But as we see below, even these mind-boggling unemployment figures are an underestimate!

Discouraged workers

A third problem with PLFS data becomes evident if we examine the Labour Force Participation Rate. It reveals that despite the inclusion of so many unpaid workers, the LFPR in India was only 54.6 percent on the CWS basis and slightly higher at 57.9 percent on the UPSS basis in 2022–23.

This figure is significantly less than that for other countries. The LFPR for high-income countries is 74.6 percent, nearly 20 percentage points more; for middle-income countries, it is 64.7 percent; for low-income countries, it is 66 percent; even for sub-Saharan Africa, it is 67.6 percent. For other emerging market countries whom India considers as its peers, the LFPR is 68.4 percent for Argentina, 70.3 percent for Brazil and 65.4 percent for Mexico. The world average is 66.3 percent.

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India's LFPR is so low because of the country's terrible unemployment crisis that has only been getting worse during the Modi years. There are simply no jobs.

Consequently, many workers have simply given up looking for jobs out of frustration— because they have not been able to find a job for a long time. In official parlance, they are known as 'discouraged workers'; such workers are not included in the official figures of the unemployed, nor are they included in the labour force.

But actually, they should be included in both, as they have not dropped out of the labour force willingly, but due to frustration! Any pro-people system oriented towards providing decent jobs to all its people would seek to bring these workers back into the labour force.

Discouraged workers exist in all capitalist countries due to the chronic nature of unemployment in capitalism. For instance, in the US, while the total labour force was around 163 million in 2019, the number of discouraged workers was 10.22 million.

In India, the number of discouraged workers is much larger, as the unemployment situation is terrible. The number of discouraged workers in India above the global average can be estimated by comparing the LFPR in India with the global average— the LFPR in India is less than the global average by around 10 percentage points. That means the number of discouraged workers in India (above the global average) is at least 5.3 crore.

Including the discouraged workers in the labour force and unemployed would send the unemployment rate through the roof! India's unemployment crisis is among the worst in the world.

This piece first appeared in the Janta Weekly here.