Why a debate over jobs has pitted the Centre against Citigroup

A row has broken out between the Indian government and Citigroup – over jobs.

Citigroup in a recent report contended that India would ‘struggle to create enough jobs’ even with a growth rate of 7 per cent.

The labour ministry, meanwhile, has said the report “fails to account for the comprehensive and positive employment data.”

But what did the Citigroup report say exactly? And how has the Centre responded?

Let’s examine the row and the debate surrounding it.

What happened?

As per The Times of India, the Citigroup report stated that India must create around 12 million new jobs every year to keep up with the expanding labour market.

The report by Citi economists Samiran Chakraborty and Baqar Zaidi said that India, with a growth rate of 7 per cent, would only create eight to nine million jobs per year.

“Even 7 per cent GDP growth might not be able to fulfil the job requirement over the next decade,” Citi’s chief India economist Samiran Chakraborty wrote in the note.

As per Bloomberg, the report hinted that India would need to take steps to boost its citizens’ job prospects and skills.

Chakraborty and Zaidi also said the quality of the jobs being created is not up to par.

The report quoted data as showing that 46 per cent of India’s workforce is still in agriculture.

This despite agriculture being less than 20 per cent of India’s GDP.

The report said that manufacturing comprised 11.4 per cent of jobs in 2023.

This figure was lower than 2018 – an indication that the sector hasn’t rebounded since the COVID-19 pandemic.

The report stated that the formal sector is employing fewer people now than it was during COVID-19.

In 2023, the formal sector employed just 25.7 per cent of workers – the lowest level since 2005.

Just 21 per cent of the workforce, around 122 million, are in a job where they earn a salary or wages.

That figure is three per cent lower than it was prior to the pandemic.

Meanwhile, half the 582 million workers in India are self-employed, the report stated.

The Citigroup economists have suggested the Centre undertake a slew of measures including increasing the potential of manufacturing, enticing foreign companies to India and hiring around 1 million government workers.

They also recommended combining several employment programs to make a better impact, as per Bloomberg.

How has the Centre reacted?

The labour ministry has countered the Citigroup report.

It cited the Periodic Labour Force Survey (PLFS) and RBI’s  capital, labour, energy, material and services (KLEMS) data as showing that India has created more than 80 million jobs from 2017-18 to 2021-22.

That’s an average of 20 million job every year.

As per BNN Bloomberg, the Centre has claimed India has created more jobs than the number of people looking for work.

It added that participation in the labour force spiked to 58 per cent in 2023 from under 50 per cent in 2018.

The ministry also claimed the Citigroup report is flawed.

It said it “fails to account for the comprehensive and positive employment data available from official sources such as Periodic Labour Force Survey (PLFS) and the Reserve Bank of India’s KLEMS data.”

The Centre added that India created jobs “…despite of the fact that the world economy was hit by COVID-19 pandemic during 2020-21 which contradicts Citigroup’s assertion of India’s inability to generate sufficient employment. This significant employment creation demonstrates the effectiveness of various government initiatives aimed at boosting employment across sectors.”

The Ministry of Labour and Employment strongly rebuts such reports which do not analyse all official data sources available in the public domain, it added.

The Annual PLFS report depicts an improving trend in labour market indicators related to: (i) Labour Force Participation Rate (LFPR), (ii) Worker Population Ratio (WPR) and (iii) Unemployment Rate (UR) for persons of age 15 years and above during 2017-18 to 2022-23.

For instance, the WPR i.e. employment increased from 46.8 per cent in 2017-18 to 56 per cent in 2022-23.

Similarly, the labour force participation also increased in the country from 49.8 per cent in 2017-18 to 57.9 per cent in 2022-23.

The Unemployment Rate declined from 6 per cent in 2017-18 to 3.2 per cent in 2022-23.

The PLFS data shows that during the last 5 years, more employment opportunities have been generated compared to the number of people joining the labour force, resulting in a consistent reduction in the unemployment rate.

This is a clear indicator of the positive impact of government policies on employment, it stated.

Contrary to the report, which suggests a dire employment scenario, the official data reveals a more optimistic picture of the Indian job market, the statement said.

The ministry said that the formal sector employment figures are also being bolstered by government efforts to improve ease of doing business, enhance skill development, and provide incentives for job creation in both the public and private sectors.

The EPFO data suggests that more and more workers are joining formal jobs.

During 2023-24, more than 1.3 crore subscribers joined EPFO which is more than double compared to 61.12 lakh who joined EPFO during 2018-19.

Moreover, during last six-and-a-half years (since September 2017 to March 2024) more than 6.2 crore net subscribers have joined EPFO.

As per The Times of India, the Centre also pointed to the gig economy.

“The gig workers are expected to form 6.7% of the non-agricultural workforce or 4.1% of the total livelihood in India by 2029-30,” the Centre said.

‘Private data sources have several shortcomings’

The ministry said that it is well known that the private data sources, which the report/media refers to as more reliable, have several shortcomings.

These surveys use their own derived definition of employment unemployment which is not aligned to either national or international standards, it said.

The sample distribution and methodology are often critiqued for not being as robust or representative as official data sources like PLFS.

Therefore, it stated that reliance on such private data sources over official statistics can lead to misleading conclusions and thus, should be used with caution.

Further, the ministry said that some authors use data selectively which undermines the credibility of their analysis and does not present an accurate picture of the employment scenario in India.

Such reports fail to consider the positive trends and comprehensive data from official sources, it stated.

The official data sources like PLFS, RBI, EPFO, etc. show consistent improvements in the key labour market indicators, including increased LFPR and WPR, and a declining Unemployment Rate during last five years.

The ministry emphasises the credibility and comprehensiveness of official data, cautioning against the selective use of private data sources that can lead to misleading conclusions about India’s employment scenario.

The government remains committed to creating a robust and inclusive job market, and the evidence suggests substantial progress is being made in this direction, it stated.

As per Economic Times, the Centre also pointed to data from the National Pension System.

It said the NPS had witnessed over 7,75,000 new subscribers enrolling in 2023-2024.

This is a 30 per cent spike from the 594,000 new subscribers in 2022-23.

Debate around jobs

Jobs have been a sensitive topic for Prime Minister Narendra Modi’s government.

Analysts linked the lack of jobs and high inflation with Modi’s failure in polls last month to win a majority in the directly elected house of the parliament, meaning he had to rely on allies to return to power for a third term.

The Reserve Bank of India on Monday also released its jobs report.

The report, a routine release from the central bank, has traditionally only shown historic numbers.

On Monday, however, the central bank said it is attempting a provisional estimate of productivity for the total economy for the first time for the financial year 2023-24 based on available information.

It said India added 46.7 million jobs in the fiscal year ended March, far exceeding numbers in private surveys that point to high unemployment rates.

The employment growth rate was six per cent in 2023-24 versus 3.2 per cent in 2022-23, the Reserve Bank of India’s (RBI) data on measuring industry level productivity and employment showed.

It relied on time-series data on productivity performance – the India KLEMS database –  from the International Household Survey Network.

India’s total employment stood at 643.3 million in 2023-24 versus 596.7 million in FY23, RBI data showed.

The central bank uses data from the government’s National Accounts and Ministry of Labour to extrapolate the country’s productivity and employment levels.

According to Economic Times, the database covers all the 27 industries that make up the Indian economy.

It also provides estimates for agriculture, manufacturing and services across India.

However, the Centre for Monitoring Indian Economy (CMIE),  another private think-tank that tracks joblessness in the country, reported that unemployment hit an eight-month peak of 9.2 per cent in June 2024.

The CMIE earlier reported that unemployment hit a peak of 9.18 per cent in June 2023, as per Financial Express.

It had earlier estimated the unemployment rate in India rose to eight per cent in fiscal year 2023-24 from 7.5 per cent and 7.7 per cent in the preceding two years.

It seems the debate between the private think-tanks and the Centre over jobs is set to continue.

With inputs from agencies