Official India jobless data not accurate, say top economists: Reuters poll

Business Standard

2 days ago

India is the world's fastest-growing major economy at an annual rate of 7.4% in the January-March quarter, but so far growth has failed to create enough well-paying jobs for millions of young people
Reuters BENGALURU
The Indian government's unemployment data is inaccurate and masks the severity of joblessness and underemployment, according to a Reuters poll of independent economists, several of whom said the true jobless rate is around twice the official figure.
India is the world's fastest-growing major economy at an annual rate of 7.4% in the January-March quarter, but so far growth has failed to create enough well-paying jobs for the millions of young people entering the workforce each year.
Prime Minister Narendra Modi's government is now more than one year into a third term after losing a commanding majority, partly blamed on discontent among youth over their future prospects.
Over 70% of independent economists polled over the last month, 37 of 50, said the official unemployment rate, at 5.6% in June, is inaccurate. In a Reuters survey last year most economists flagged chronic joblessness as the government's biggest challenge.
Experts say outdated definitions of what constitutes a job in a country of more than 1.4 billion people are distorting the true scale of unemployment and underemployment.
"The whole thing to me is really throwing dust in your eyes. You say this is the unemployment rate, the growth rate - quite often, they don't make much sense. We have a massive employment problem and that is not reflected in the data," said Pranab Bardhan, professor emeritus of economics at the University of California, Berkeley.
"Most Indian workers are underemployed. If you are able-bodied and you did not work for any time, not even one hour in the last six months, unless you are rich, how did you feed yourself?... So you scrounge around and do something. And then you are employed. Now what does that employment mean?" asked Bardhan.
The Periodic Labour Force Survey (PLFS), which estimates India's official employment and unemployment data, counts anyone working even one hour a week as employed.
The Ministry of Statistics and Programme Implementation defended the credibility of its labour force data and its representation of India's labour market dynamics, saying the PLFS uses Computer-Assisted Personal Interviews to improve data quality and reduce errors, and noted international agencies use its data in their reporting.
While it is difficult to provide an alternate estimate of the jobless rate, 17 experts surveyed did, giving a median of 10%, ranging from 7% to as high as 35%.
For years, India published official unemployment rates of around 4%, partly because statisticians counted unpaid family labour and subsistence work as employment.
Experts argue this diverges from international norms and makes the jobless rate incomparable with other countries.
And it is not just academics and career labour market experts who are concerned about data accuracy.
"Unemployment is one of our big challenges and I don't believe the government data reflects the true ground situation," said Duvvuri Subbarao, Reserve Bank of India Governor from 2008-2013.
Subbarao said the kind of jobs being created also matters. As high-growth sectors like finance and IT tend to be less labour-intensive, he called for a sharper policy focus on manufacturing, which holds greater potential for large-scale employment.
About a quarter of experts polled had no problem with the accuracy of official jobless data.
"No one in the world has perfect employment data. People assume the U.S. labour force survey is perfect. It's not. Our PLFS is very robust now. People just don't want to believe it," said Surjit Bhalla, former executive director for India at the International Monetary Fund.
But several experts said even if methodologically sound, official figures fail to capture deeper challenges.
On its current path, India will take at least two decades to match the female labour force participation rates of other G20 countries, the survey found.
A lack of strong job creation is also showing up in stagnating wages.
"We are home to some of the big dollar billionaires… the wealth of some of the elite has been growing dramatically over the past decade. But real wages are not growing. Half of the workers are getting less than they got even 10 years ago. To me, these are not signs of a healthy economy," said Jayati Ghosh, professor at the University of Massachusetts Amherst.
"We should be prioritising good quality employment generation," she said.
Asked what the government should prioritise to create more high-quality jobs, several said improving education and skills, promoting private investment and reducing regulatory hurdles.
"Stop selling the narrative that farm jobs growth (is) to be read as jobs growth. Adopt an industrial policy, with a manufacturing strategy that is horizontal in nature, not a PLI type picking winners tactic, that is clearly failing," said Santosh Mehrotra, professor at the University of Bath.
PLI (Production Linked Incentive) is a subsidy scheme to boost domestic manufacturing. The government scaled back the scheme just four years after its launch.
(Additional reporting by Pranoy Krishna and Rahul Trivedi; Polling by Devayani Sathyan, Veronica Khongwir and Susobhan Sarkar; Editing by Ross Finley, Hari Kishan, Alexandra Hudson)
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