Covid or no Covid, govt’s job record abysmal

Senior Economic Analyst

Some people are addicted to leisure. They will lie in bed, even if they have nothing to eat. For such rare lot, the Modi regime has undoubtedly delivered on its promise of achhe din. For the rest, the government’s job record has been absolutely disastrous. And, please don’t blame Covid-19 for this. Tackling unemployment had been this government’s single biggest failure well before the coronavirus flew into India.

Employment surveys by the Centre for Monitoring Indian Economy (CMIE) tell us that about 404 million people had work in the first four months of 2019. In March 2020, before the lockdown set in, that number had dropped to 396 million. That’s a drop of 8 million jobs over a time period where the working age population would have gone up by about 10 million. Covid-19 only made matters worse. Three months into the lockdown and the gradual reopening of the economy, employment levels are almost back to where they were in March. CMIE’s data for July says that all but 11 million jobs that were lost are back. But, as CMIE chief Mahesh Vyas wrote recently, it is an unhealthy recovery.

Let’s confront the devil in the detail. In March, about 117 million, or 30 per cent of those employed were working on farms. In July, that number has risen to 126 million or 33 per cent of the total number of people with work. If there is one thing economists of different ideological persuasion agree upon, it is that agricultural employment is always exaggerated. A piece of land might need hands to till, but if there are three able-bodied people in the household, all of them will say they are employed in agriculture. This phenomenon has been called ‘disguised unemployment’. A 2016 report estimated that there were 52 million people in ‘disguised unemployment’ in India. Most of that would have been in agriculture.

So, one can safely assume that even in March, a significant chunk of those employed in farming were actually in disguised unemployment. It would have made no difference to farm output if they had simply withdrawn from agriculture. It is true that the need for labour goes up in the harvest and sowing seasons. But, the sharp rise in agricultural employment goes well beyond that need. It indicates that the total rise in jobs across the economy is because of a sharp rise in disguised unemployment and not any real productive job opportunities.

If we take agriculture out of the picture, there were about 279 million people with work in non-farming activities in March. Out of this, 121 million or about 43 per cent lost their jobs in April. By July, about 111 million out of them have found some sort of employment, out of which 10 per cent have gone back to farming. That means non-farm jobs have declined by 20 million between March and July this year.

What is worse is that some of the non-farming jobs that have come back are less secure and of lower quality than earlier. This is clear from the CMIE’s data on salaried employment. While all other forms of employment gradually increased after the cataclysmic drop in April, salaried jobs have reduced in July, after recovering in May and June. In 2019-20, there were about 86 million salaried employees in India. That number dropped to about 68.4 million in April. It went back to 72.2 million in June. Despite the overall recovery in July, the number of salaried employees dropped back to 67.2 million in July. That means there are fewer salaried employees in July than there were in April, despite the economy opening up partially.

Put this in the context of the large-scale reverse migration that has taken place since April. Estimates suggest that anywhere in the range of 8-10 million migrant workers have left our cities and towns and returned to their villages. That means the total number of people available for such work in urban India has dropped significantly. This means, even if every urban wage worker got back their job, the total number of such jobs should have fallen by 8-10 million. Instead, the net fall is less than 7 million. This suggests that many people who had salaried jobs in March, and then lost it in April, have switched to daily wage work now.

So, on the one hand, we have a drop in stable, salaried jobs and on the other, there are signs that disguised unemployment in agriculture has gone up sharply. This is a disastrous combination for India’s employment situation. It indicates that even if employment levels return to what they were before Covid-19, or even increase marginally, average incomes are likely to fall. That will further contract demand for goods and services in the economy. That, in turn, will reduce margins for businesses that will be forced to reduce costs further.

That will mean downsizing, pay cuts, switching to contract employment, reducing sales, administration and marketing costs, and cutting back on investments.

It is a vicious cycle for which the Modi government has no answer. The only policy instrument it has used is to provide handouts through its welfare schemes. This is a stop-gap, albeit much-needed, intervention which is helping the poor survive at a basic subsistence level. But it does not create productive jobs or lead to equitable and balanced economic growth. Modinomics simply doesn’t know how to deliver vikas.

The author is a senior economic analyst