India's Unemployment Challenge Can't Be Tackled By Doles As Usual

Structural changes in our economy have resulted in improved education levels and provided a modicum of social security

- T.C.A. ANANT

The National Statistics Office introduced a regular survey on employment through the Periodic Labour Force Survey (PLFS) in 2017, and has since been releasing regular annual and quarterly reports. Its data shows that since 2017, there has been a steady improvement in the employment situation, with a rise in both labour-force and work-force participation between 2017-18 and 2021-22, as shown in the accompanying table.

If these numbers are combined with the estimated increase in population, then they show a remarkable improvement in the availability of employment opportunities. If we compare the data with the last quinquennial survey of employment/unemployment (i.e., the EUS) in 2011-12, then the picture by 2021-22 is distinctly better.

This improvement in employment opportunities is accompanied by a clear downside: Indian unemployment rates are higher than those in 2011-12. The gap was particularly large in 2017-18, and has since reduced. However, even comparing figures in 2021-22 to 2011-12 shows that unemployment is higher in all categories, and for rural males has doubled since 2011-12. The increased unemployment rate when combined with the increase in population clearly shows that a far larger number of people are looking for work than in the past.

What could be the cause of this seeming paradox? A conventional explanation has been that India’s demonetization of high-value currency notes in November 2016 followed by GST implementation in mid-2017 delivered a shock to the economy, particularly its informal sector. This shock is said to still persist, causing the high unemployment rate; improved GST collections are then attributed merely to improved performance of the organized formal sector.