Opinion Job losses: figuring it out

Bibek Debroy<br> The Federation of Indian Export Organisations (FIEO) has said there will be 10 million job losses in the export sector by March.

February 4, 2009 01:39 PM IST First published on: Feb 4, 2009 at 01:39 PM IST

The Federation of Indian Export Organisations (FIEO) has said there will be 10 million job losses in the export sector by March. We know exports aren’t doing well and export growth has turned negative. There is no way India can reach the original export target of 200 billion US dollars. Exports are likely to be more like 175 billion dollars.

Exports can mean exports of goods or goods and services. With Commerce Ministry numbers,which come from Customs and DGCIS (Directorate General of Commercial Intelligence & Statistics),this is export of goods.

Figures also float around on export shares in the GDP and it is not very clear where they come from. For instance,export of goods in 2006-07 was 14% of the GDP,a figure from official Economic Survey. Using RBI data,one can work out an export of goods plus services ratio of around 21%. The higher figures of 25% that float around require some scrutiny,especially since they also include exports of petroleum products. If global crude prices drop,that number also declines. This is not to suggest exports are going to do well in 2008-09 or even in 2009-10,or that a bad export performance doesn’t have impact on the GDP growth. For instance,if export growth is zero,we shave off almost 4% from the GDP growth,assuming exports were earlier growing at 20%.

Many export sectors are labour-intensive (textiles and garments,gems and jewellery,leather,engineering,handicrafts) and according to Commerce Ministry figures exports directly employ 65 million people. More will be employed indirectly. Initially,Commerce Ministry said up to one million jobs might suffer because of slowdown. There is a big difference between one million and 10 million and we have been told FIEO’s figure is based on a survey.

Given aggregate employment elasticity of the GDP growth,4% shaving off means six million jobs lost. This doesn’t mean these jobs will be lost immediately. So is FIEO’s figure alarmist in the way ASSOCHAM’s earlier figure of 25% job cuts was,an estimate subsequently withdrawn? Is it designed to win an export package from government? Or,is it the case that we have a really scary employment scene,not only because of exports,but also because of the general slowdown?

Part of the problem is we have no systematic way of collecting employment data and whatever is available,comes with a time-lag. This will also apply to 2009-10,which will be more serious than Prime Minister’s Economic Advisory Council believes it to be.