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Mahesh Vyas: ‘We need a 5-year, 10-year plan to get labour participation rate right’

Mahesh Vyas, CEO of the think tank Centre for Monitoring Indian Economy, discusses how to save jobs and create new ones in the wake of the pandemic. He spoke before a nationwide audience on Zoom.

By: Express News Service | New Delhi | Updated: September 27, 2020 10:46:58 am
Mahesh Vyas, CEO of Centre for Monitoring Indian Economy. (Express Photo)

Mahesh Vyas, CEO of the think tank Centre for Monitoring Indian Economy, discusses how to save jobs and create new ones in the wake of the pandemic. He spoke before a nationwide audience on Zoom. Edited excerpts:

On the state of jobs in India since the pandemic started

There is a marginal difference between the official statistical machinery that generates the employment data and the CMIE (Centre for Monitoring Indian Economy) machinery.

The headline number used to be understood as the unemployment rate. But for a country like India… unemployment rate is not the most important indicator to look at.

One of the good starting points is the labour participation rate, which is how many people of all the people who can work, are actually willing to go out there and work. Those people as a proportion of all the people who are qualified to do this, which are people more than 15 years of age, that ratio is called the labour participation rate. Globally this number is of the order of 66% or so. Where are we in India? According to us, we are at a pathetic 41%. Where were we until recently? We have come down even by government statistics. It was around 50% till recently, then in around 2016-2017 or 2017-18, according to official statistics it came to 48% (we say it came down to 46%). Now, in recent times, it has come down to 43% in 2019-20, and now it is 41%. It went down all the way to 35% in April when the big lockdown hit us and it’s back to 41%. Mind you, 2% down compared to 2019-20, just appreciate this number. The working-age population in India is a billion. If you knocked out between 2019-20 and now, 2% of the labour participation, you’ve knocked out 20 million people.

The second thing, unemployment rate. Of all the people who come into the market to work, how many get jobs and how many are left without a job? Traditionally in India, this number used to be 2-3%, because most people in India couldn’t afford to remain unemployed. NSSO surveys have over decades shown us that the unemployment rate was of the order of 2-3%, till the PLFS came out and said in 2018 that this number had risen to 6.1%. Now CMIE has got a similar number for the same period — of the order of 6% in 2017-18. This number in 2019-2020 went up to about 7.5% or so, and in the pandemic lockdown we saw it rise to 23.5%. A quarter of the people who are seeking jobs were unable to find it and, mind you, the number of people seeking jobs itself came down very sharply, double whammy. This 23.5% remained till June. Then it came down to 8.5%, but 8.5% on shaving off of 2% of labour force.

Now, if you take a combination of these two, the number that I think is the most important is the employment rate. How many people are actually employed? That number is down to 37.5%. It was 39% in 2019-20, it was a little more than 40-43% or so before that. So only 37.5% of the people today are employed, of all the people who can work.

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On low labour force participation rate among women

This has fallen even according to official statistics and we show this fall far more steeply compared to the official statistics. Just take the difference, the labour participation rate for men is of the order of 75% (72% according to us) and for women is 25%. That’s a huge difference. According to us, 72% of men are willing to work and only around 11% of women are willing to work. Now why is this the case? Initially what happens is that as per capita GDP increases, women who are participating in agricultural activities… find it more useful to stay at home and help children’s education. They themselves get educated, then they help their children get educated, and they find the returns on that to be higher than themselves going out into the labour market. Even then, for decades together we are seeing labour participation among women falling…

For India’s demographic dividend to play out, we don’t have much headroom amongst men, because 75% of them are anyway participating. The headroom is all among women, which is down to 10-11%. Female labour participation even in urban India is extremely low, in fact lower than in rural India. So, we are losing out on educated, urban women who could be in the labour force, who could be increasing our per capita income, and could have helped the country grow much faster…

On trends in jobs lost

In 2019-20, we had a total employment count of 403 million and the lockdown came at the end of 2019-20. We lost 121 million jobs in April. Since then, many jobs have come back… So, what was 121 million jobs lost in April, in August is 11 million jobs lost, but what is the composition of this? The story of gender comes back again: 7 million jobs are of men, 4 million are of women. Of the 403 million, only 11% are women. (In) the proportion of job loss, 4 out of 11 are women, whereas only 11 out of 100 were women in jobs. Women lost jobs in demonetisation, they lost jobs in GST, disproportionately high, again we see women lose jobs disproportionately in this shock as well.

Now, the lockdown opened up in rural India faster, MNREGA helped increase jobs over there, the kharif crop was very good. Still, by the end of August, the distribution of the losses of this 11 million is broadly in line with the share of rural and urban… 70-30 is the urban-rural breakup (of jobs), 70-30 is the distribution of job losses as well.

Total job losses are 11 million, but salaried job losses are 21 million and this is the only category that is seeing job losses. Farmers have seen a gain of 14 million, small businesses have seen a gain of 7 million.

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On whether Atmanirbhar Bharat Abhiyan can create more jobs

My one-line answer this is, Atmanirbhar Bharat Abhiyan does not help save jobs, does not help create jobs. I am making a very categorical statement: It does not help on this front at all. In a broad economic sense, the term Atmanirbhar Bharat Abhiyan suggests like Vocal for Local, an economy that does not really encourage globalisation. Although nothing said in Atmanirbhar Bharat Abhiyan seems to suggest that, the heading does, except there is one clause which says that you can’t have global tendering, which I think is counter-productive. But I think if you try to make the country atmanirbhar, which means self-reliant, that means you should shun foreign goods and services and I think that’s not a very good thing to happen for the country. We require to export a lot, we require to import a lot, rather than be an inward-looking economy. We have suffered in the past by being an inward-looking economy. In 1992 we realised our folly and we have stupendous growth for many many years after that because we opened up…

Opinion| Action plans should be prepared to ensure success of Atmanirbhar Bharat project

What was the Atmanirbhar Bharat Abhiyan proposal all about? It was about providing liquidity, easy loans to MSMEs. MSMEs did not want easy loans, and if you give very easy loans, you just spoil them. They will just create massive NPAs, become irresponsible. Also look at this in one more way: What does easy liquidity do? It does not help labour. It helps the owners of MSMEs, who have got easy finances available with them. What makes you think that this will go to labour? Not necessarily. They could use it for settling anything or they can even run away with it because anyway this is a very easy loan. So I think this is getting it wrong, this is not good for labour at all.

On how many jobs the government can provide

There are many elements in this question. The first thing is, how much does the government really offer in terms of jobs? Our survey shows us it’s of the order of 14-15 million jobs that are there with the government, all kinds of governments put together. Our numbers are closer to 14 million than 15 million, but let’s keep it at 15 million and let us say that the whole pie is 400 million. So what are we looking at? It is an extremely small share. So the government jobs are hardly any jobs.

Another thing is, look at incrementalism, the additional jobs are next to nothing, they don’t even count. Total jobs are 15 million maximum. The central government official budget document says that the people employed in the central government is on the order of some 3.6 million. So 3.6 million over there and all governments put together we are talking about 14 million jobs out of 400 million jobs that aren’t much… The government should be itself providing a lot more jobs than it is providing today.

Usually people say government should create infrastructure, but what do we mean by infrastructure? It is usually your roads, ports, airports, those kinds of things, but once those roads and airports are made then it does not create any more employment. It is capital intensive. But you also require other infrastructure, social infrastructure — primary education, primary health centres — we require many more of them’ we require those labs we were desperately in need of when the pandemic hit us.

On how many jobs India needs

In an arithmetic way… people who are more than 15 years of age, their population is growing at a rate of 2 million per month, approximately. And, we have a labour participation rate of about 40%. So, 2 million per month, you cut it down to 0.8 million per month because of 40% labour participation rate and you multiply that by 12, you should be getting around 9-9.6 million jobs per year. So I think we require of the order of 9 million jobs, if you are willing to accept a labour participation rate of 40% (which in my opinion is not acceptable)… We have got about 35 million unemployed people right now. Are we going to leave them the way they are or at least take some of them away into jobs? And, we have a very low labour participation rate stock, how are we going to raise that labour participation rate to close to 65% that the world has? So the number of jobs that we are going to create is really massive, if we want to really grow into becoming a high per capita or a middle per capita income country. If we are willing to live in the conditions in which we are right now, we require about 6-8 million jobs per annum. That’s going to be very poor. So the number of jobs we should be creating… what we should be doing strategically for a country is to say, “How do I get my labour participation year up to 60-65%?” Maybe a 5-year, 10-year perspective plan to get that right, and that’s how we will be able to exploit our demographic dividend. Otherwise we are letting it go by.

Transcribed by Mehr Gill

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