Why does the latest RBI jobs data show a bump in employment?

The RBI data

As the RBI’s Measuring Productivity at the Industry Level-The India KLEMS [Capital (K), Labour (L), Energy (E), Material (M) and Services (S)] database, released on Monday (July 9), the growth in employment in the country doubled to 6 per cent (provisional) in FY2024, compared to a 3.2 per cent rise seen in FY2023. In absolute terms, the number of jobs increased by approximately 4.67 crore to 64.33 crore in FY2024. In FY2023, the total number of workforce stood at 59.67 crore.

Since FY2021, the country added 7.8 crore, the data showed. The employment growth rate in FY2021 was 5.1 per cent and in FY2022 it stood at 3.3 per cent.

The RBI said the KLEMS database covers 27 industries comprising the entire Indian economy. The database also provides these estimates at the broad sectoral levels (agriculture, manufacturing and services) and at the all-India levels.

It includes measures of Gross Value Added (GVA), Gross Value of Output (GVO), Labour Employment (L), Labour Quality (LQ), Capital Stock (K), Capital Composition (KQ), the consumptions of Energy (E), Material (M) and Services (S) inputs, Labour Productivity (LP) and Total Factor Productivity (TFP).

The Citigroup report

Citigroup in a recent report said that given India’s demographic dividend, even 7 per cent GDP growth might not be able to fulfill the job requirement over the next decade under reasonable assumptions.

The research report had said that while the official unemployment rate is just 3.2 per cent (16 per cent youth), details reflect serious issues around quality of jobs and possible underemployment. Agriculture accounts for around 46 per cent of all employment but less than 20 per cent of GDP, while both manufacturing and services sectors absorb lesser share of labour than their share in GDP.

“Share of the formal sector in non-agri jobs is still only around 25 per cent. Only 21 per cent of the labour force has a “salaried” job, lower than 24 per cent pre-Covid. Share of employment in rural areas has remained at around 67 per cent between 2018 and 2023, indicating that the rural to urban migration process has practically stalled,” it had said.

Labour Ministry’s response to the Citigroup report

The Citigroup report met with a firm rebuttal from the Ministry of Labour and Employment on Monday. The Ministry said the Citigroup’s report “fails to account for the comprehensive and positive employment data available from official sources such as the Periodic Labour Force Survey (PLFS) and the Reserve Bank of India’s KLEMS data”.

Citing data from RBI’s KLEMS data, the Ministry said it indicates more than 8 crore employment opportunities created between 2017-18 to 2021-22 translating to an average of over 2 crore employment per year. It also said that more than 6.2 crore net subscribers joined EPFO between September 2017 – March 2024.

The Ministry said private data sources have several shortcomings. “These surveys use their own derived definition of employment – unemployment which is not aligned to either national or international standards. The sample distribution and methodology are often critiqued for not being as robust or representative as official data sources like PLFS. Therefore, reliance on such private data sources over official statistics can lead to misleading conclusions and thus, should be used with caution,” it said.

The latest PLFS report

As per the quarterly bulletin of Periodic Labour Force Survey (PLFS) released by the Ministry of Statistics and Programme Implementation (MoSPI), in May 2024, unemployment rate (UR) in urban areas decreased from 6.8 per cent during January – March 2023 to 6.7 per cent in January – March 2024 for persons of age 15 years and above.

The female unemployment rate declined from 9.2 per cent in January – March 2023 to 8.5 per cent in January – March 2024. Labour Force Participation Rate (LFPR) in urban areas has shown an increasing trend from 48.5 per cent in January – March 2023 to 50.2 per cent during January – March 2024 for persons of age 15 years and above, the PLFS data showed.

There was an increasing trend in Worker Population Ratio (WPR) for persons of age 15 years and above from 45.2 per cent in January – March 2023 to 46.9 per cent in January – March 2024.

Female Worker Population Ratio in urban areas rose from 20.6 per cent in January – March 2023 to 23.4 per cent during January – March 2024, reflecting an overall increasing trend in WPR, the PLFS showed.