With conflicting official numbers, confusion clouds India's jobs scene

PK Mishra, Principal Secretary to the Prime Minister, hit the headlines recently, telling IIM-Sambalpur students that India needs to “create 8 to 10 million jobs annually”.

This is what the Economic Survey of 2024-25 said on January 31 (“78.5 lakh new non-farm jobs annually till 2030” or 7.85 million) — repeating its claim in its 2023-24 iteration. Such statements are significant because they come closest to acknowledging a chronic job crisis from an official source.

Historic job loss

The Azim Premji University analysed the Periodic Labour Force Survey (PLFS) of 2017-18 to say India lost 9 million jobs between 2011-12 and 2017-18 “for the first time in India's history”.

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This came to be seen as a ‘job-loss’ growth as the GDP averaged 6.8 per cent growth during the period. It was a marked shift from a ‘job-less’ growth that the 12th Five Year Plan document of 2013 pointed to, stating that 5 million jobs were lost in manufacturing between 2004-05 and 2019-10, although the total jobs went up by 2.76 million during the same period.

The GDP grew at average of 7.1 per cent during that period.

Four key questions

Coming back to the statement of Mishra and the Economic Surveys of 2023-24 and 2024-25, they raise more questions than answers. Here are four key questions.

Question 1: What is the source of this number (8-10 million or 7.85 million jobs needed annually)?

Question 2: How accurate is the Prime Minister’s claim (per a PMO statement of July 13, 2024) that “approximately 8 crore (80 million) jobs have been created in the past 3-4 years, thereby silencing the critics”? This would mean India created more jobs than needed (more of it later).

Question 3: Which of the two claims — jobs needed versus jobs created — is correct?

Question 4: How many jobs is India actually creating and how many more jobs are needed to be created in a year? This question presupposes we know the size of the Indian workforce.

It isn’t easy to give definitive answers for all but here is what can be said.

Unravelling state of jobs

Answer 1: Mishra, the PMO official, didn’t give the source of his claim. Presumably, it came from the Economic Surveys.

While PK Mishra, Principal Secretary to the Prime Minister, said India needs to “create 8-10 million jobs annually”, a PMO statement last year said India created 80 million jobs in the previous 3-4 years. Who is right?

The Economic Survey of 2023-24 had given its estimate by (a) “assuming constant WPR (worker population ratio) for men (54.4 per cent in 2023) and rising WPR for women (from 27.0 per cent in 2023 to 40.0 per cent in 2036), increasing by 1 percentage point every year” and (b) “the share of agriculture in workforce gradually declines from 45.8 per cent in 2023 to one-fourth in 2047”.

The assumption that the share of agricultural workers can be reduced is not backed by definitive plans. Rather, this report attributed the lack of job creations to (i) corporate sector (ii) artificial intelligence (iii) state governments, and (iv) youth lacking in skills and social media fostering bad habits in them.

Meanwhile, a World Bank report of 2018 had estimated that “more than 8 million” additional jobs were needed a year to “keep employment rates constant” or jobs for youth entering the job market every year for the first time.

Plenty of jobs

Answer 2: The Prime Minister’s claim of July 13, 2024 was based on the RBI-KLEMS report of July 8, 2024, which said India added 46.7 million new jobs in FY24 (P) and 170.1 million new jobs in seven years between 2017-18 (coinciding with the first annual PLFS report) and FY24 (P) and 171.88 million in 10 fiscals of FY15-FY24.

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['KLEMS' stands for Capital (K), Labour (L), Energy (E), Materials (M), and Services (S).]

In short, India is creating plenty of jobs — generating 171.9 million jobs in the 10 fiscals of FY15-FY24 covers the need for 21.5 years (at 8 million a year).

The problem with the RBI-KLEMS data was that it was a theoretical or statistical construct in the absence of actual data. It used many “assumptions” and “interpolation”, didn't give the actual value of the variables it used and the job numbers were just numbers — not even sector-specific jobs data.

Major discrepancies

It also showed massive job creations in the demonetisation, GST and pandemic lockdown years, when millions of jobs were lost. As against the Economic Survey 2023-24 estimate that India’s total workforce numbered 56.5 crore (565 million) in 2022-23, the RBI-KLEMS data showed it to be 596.7 million — higher by 31.7 million workers.

Had the rosy RBI-KLEMS data been correct, India wouldn’t need a corporate tax cut, abolition of angel tax, PLI-DLI subsidies, internship schemes or credit for MSMEs to boost jobs. Nor would India be sending youth to war-hit Israel for jobs or sign G2G agreements with 20 more countries to supply labour.

None of the Economic Surveys (2023-24 and 2024-25) acknowledged the RBI-KLEMS data, rather flagged the need for 78.5 lakh (7.85 million) new jobs annually. In any case, it isn’t the RBI’s mandate to estimate jobs.

Had the RBI-KLEMS data been correct, India wouldn’t need a corporate tax cut, abolition of angel tax, PLI-DLI subsidies, employment-linked incentive (ELI), internship schemes (PMIS) and apprenticeship incentives to corporates or pushed credit to MSMEs to boost jobs. Nor would India be sending youth to war-hit Israel for jobs or sign government-to-government (G2G) agreements with 20 more countries to supply labour.

Unreliable EPFO numbers

Answer 3: Apparently, the claims of plentiful job creations contradict what the PMO official and Economic Surveys of 2023-24 and 2024-25 said.

Answer 4: No official report or data says how many jobs are being created annually — or the gaps in job creation. The annual PLFS reports, which track the labour force, don’t give it either, as its numbers are based on surveys.

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However, separate official reports give the number of workers in the formal and informal sectors. The annual reports of the EPFO show that the number of “regular contributors” increased by 8.7 million in six years between FY16 until FY22 (up to which annual numbers are available) — or average of 1.45 million a year. The EPFO’s monthly numbers are unreliable as they are corrected multiple times for duplication errors.

The Annual Surveys of Unincorporated Sector Enterprises (ASUSE) show that the number of informal workers grew by 23 million between 2021-22 and 2023-24 — an average of 7.6 million a year in these three years.

Visible contradictions

Taken together (EPFO and ASUSE), India is producing over 9 million jobs a year or more than what it needs — just like the RBI-KLEMS.

But this raises more questions: Why are the PMO and Economic Surveys flagging the need for 8 million new jobs every year? Why have the Economic Surveys of 2023-24 and 2024-25 ignored the RBI-KLEMS and ASUSE data? The answers to these questions are not known or clear.

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Though the PLFS reports don’t give the total number of workers in India, the Economic Survey of 2023-24 used its unit-level data and adjusted it against population estimates to claim “56.5 crore” (565 million) workers in 2022-23.

A fuzzy reality

The accuracy of this estimate is suspect for two reasons: One, in the absence of Census 2021 data, population projections are based on Census 2011 data — more than a decade old.

Two, The Lancet published a study in March 2024 stating that India’s total fertility rate (TFR) had dropped to 1.9 in 2021 — below the replacement rate of 2.1. That is, the Indian population is not growing at the same rate as it did before 2021.