India’s Population Bomb and the Surprising Truth Behind It

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Debates on many issues in India, ultimately boil down to India’s huge population.
During the course of such debates, many educated Indians feel that India’s population is responsible for a bulk of its problems and needs to be controlled.

They are unable to distinguish between India’s huge population and the need to control it. Allow me to explain.

As per the National Health Survey of 2015-2016, the fertility rate in India stood at 2.2. This basically means that on an average 1000 women have 2,200 children, during their child-bearing years. In 1981, it was at 4.5. In 2001, it was 3.1. Slowly but steadily, things have improved on this front.

People have fewer children once they see their children survive. The infant mortality rate, or the number of infants who die before reaching one year of age for every 1,000 live births during the course of a given year, has been falling. In 2016, the infant mortality rate in India stood at 34. In 1996, this had stood at 75.

As Hans Rosling, Ola Rosling and Anna Rosling Rönnlund write in Factfulness—Ten Reasons We’re Wrong About the World – And Why Things Are Better Than You Think: “Parents in extreme poverty need many children… for child labour but also to have extra children in case some children die… Once parents see children survive, once the children are no longer needed for child labour, and once the women are educated and have information about and access to contraceptives, across cultures and religions both the men and the women instead start dreaming of having fewer, well-educated children.”

In the Indian case, while we can debate the well-educated bit, surely parents are having fewer children.

As mentioned earlier, the fertility rate in India stood at 2.2 in 2016. Not surprisingly, poorer states like Uttar Pradesh, Bihar, Rajasthan and a few states in the North-East, have higher fertility rates. These states also have high infant mortality rates.

As the Roslings write: “Every generation kept in extreme poverty will produce an even larger next generation. The only proven method for curbing population growth is to eradicate extreme poverty and give people better lives, including education and contraceptives. Across the world, parents then have chosen for themselves to have fewer children. This transformation has happened across the world but it has never happened without lowering child mortality.”

As the National Health Survey points out: “Women with no schooling have an average 3.1 children, compared with 1.7 children for women with 12 or more years of schooling.”
The replacement rate or the level of fertility of women at which the population automatically replaces itself, from one generation to the other, typically tends to be at 2.1.

Further, given India’s high infant mortality rate, in comparison to the developed countries, the fertility rate is perhaps already at the replacement level.

In fact, the fertility rate in urban India is at 1.8, whereas in rural India, it is 2.4.  Interestingly, as the National Health Survey points out: “Twenty-three states and union territories, including all the states in the south region, have fertility below the replacement level of 2.1 children per woman.”

The broader point here is that India is close to stabilising its population. Of course, this is not going to happen overnight and will take a few decades to pan out. As per the National Population Policy of 2000, India’s population should stabilise at 145 crore in 2045.

Also, the good thing is that India did not adopt a compulsory one child policy like China did. Given the preference for boys, it would have led to selective abortions, like happened in China. This is not to say that selective abortions don’t happen currently, but the situation would have been even worse.

The sex ratio at birth in 2016 was 940 females to a 1000 males. With a one child policy, the sex ratio would have been lower than its current level. And this would have had other repercussions.

To conclude, while India has a huge population, we have clearly reached a stage where the population will stabilise in the next few decades.

The column originally appeared in the Bangalore Mirror on April 25, 2018

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A Humble Request to the Modi Govt: Paper Money Works on Trust, Don’t Destroy It

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Money. Money. Money. It’s so funny. It’s a rich man’s world.

Or so sang the Swedish band Abba, many many years back. Rich man or poor man, money essentially functions on trust.

And the trust in Indian money has been destroyed repeatedly since November 2016, when demonetisation was unleashed on the hapless people of this country.

As we explained last week, demonetisation, the need of the Modi government to portray it as a success, and the lack of currency replacement at the pace it should have been replaced, has been responsible for the current currency shortage in large parts of the country.

Let’s look at Table 1, which basically lists the cash withdrawals made at ATMs using debit cards.

Table 1:Source: State Bank of India 

What does Table 1 tell us? It tells us that more cash is withdrawn from ATMs in the second half of the financial year (i.e. the period between October to March) than in the first half.

There are several reasons for it. The big festivals (Dusshera, Diwali, Christmas, Holi etc.) all fall in the second half of the year. So, does the procurement season for agriculture. This automatically means that the country on the whole withdraws more cash from ATMs in the second half of the year than it does in the first.

Now look at Table 1 carefully. The rate of increase in cash withdrawals has slowed down post 2012-2013. One possible reason for this has been the increase in digital transactions, which have gone up, but are still not big enough.

In 2016-2017, cash withdrawals in the second half of the year fell by 22.1%. This happened because in the aftermath of demonetisation there simply wasn’t enough cash going around in the system.

In 2017-2018, cash withdrawals in the second half of the year, are likely to be 12.2% more than the first half. (We use the term likely because the figure for cash withdrawals for March 2018, is an estimate).

This 12.2% growth is on a much larger base, than 2012-13. The cash withdrawals in the first half of 2012-2013 were around half of the cash withdrawals in 2017-2018.

Why have the cash withdrawals in 2017-2018 been much more? A major reason for this lies around the proposed Financial Resolution and Deposit Insurance Bill. At the core of this Bill, lies the suggestion that the deposits can be used to a rescue a bank or financial firm in trouble. But the truth is a little more complicated than that, as I had explained in a December 2017 piece.

The timing of this Bill coming after demonetisation was all wrong and created suspicions in the minds of people. And after that the university of WhatsApp struck, and many forwards started going around. These forwards wrongly suggested that the government had plans of seizing the money in banks.

But as is wont these days, people tend to believe what they read on their phones than logical and nuanced arguments offered elsewhere.

This fear of the government seizing deposits has to some extent led to people withdrawing more cash from ATMs than they otherwise would. In the four talks that we have given since November 2017 (in Greater Noida, Chennai, Mumbai and Hyderabad), the number one question that we got asked was, will the government seize our money?

This column originally appeared on Equitymaster on April 23, 2018.

This fear has been quite palpable, and the Modi government needs to address it.

 

The paper money that we use these days has no value of its own. It’s not like the money of yore, like gold or silver or tobacco or many other commodities, which had an inherent value of their own.

 

When it comes to paper money, it has value because the government of the day says so and people believe in it. It works purely on trust between the government and the citizens.

As Yuval Noah Harari writes in Sapiens—A Brief History of Humankind: “Money isn’t a material reality—it’s a psychological construct… Money is accordingly a system of mutual trust, and not just any system of mutual trust: money is the most universal and most efficient system of mutual trust ever devised.

 

And it is this trust that makes money go around. As Harari writes: “Because my neighbours believe in them. And my neighbours believe in them because I believe in them. And we all believe in them because our king believes in them and demands them in taxes, and because our priest believes in them and demands them in tithes.”

 

This trust in money was first destroyed during demonetisation, when the government set a last date (December 30, 2016) beyond which it wouldn’t accept Rs 500 and Rs 1,000 notes (For the record, the Bundesbank, the German central bank, still converts deutschemark, the German currency before euro became the currency of the Eurozone, into euros).
This trust continues to be destroyed with all the rumours around the FRDI Bill continuing to go around. These rumours need to be addressed, which they haven’t been.

 

Ultimately, any form of paper money works on trust. And if this trust is destroyed, nothing really is left because ultimately the only difference between a Rs 10 note and a Rs 2,000 note, is the quantity of paper and the ink, used in making these two notes, look different.

 

 

 

 

 

Why Indians Love Govt Jobs

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Indian Railways, the country’s largest employer, recently advertised for 90,000 vacancies. It got over 2.8 crore applications for it.

My calculations suggest that the number of applicants is around one-fifth of India’s youth workforce, which is actually looking for a job.

Nearly two lakh people applied for 1,137 constable vacancies in Mumbai Police. A newsreport suggests that this included 167 MBAs, 423 Engineers and 543 postgraduates. There were 3 individuals with an LLB and 167 individuals with a Bachelors in Business Administration, on the list.

Sometime back,129 engineers, 23 lawyers, a chartered accountant and 393 postgraduates in arts, were among the 12,453 individuals who were interviewed for the job of a peon, in the Rajasthan Assembly Secretariat. In total, 18 posts were to be filled up.

In May last year, nearly 25 lakh individuals wrote the exam for 6,000 Group D posts on offer in the West Bengal government.

There are many other such examples, which have been popping up over the last few years. The moment a government job is advertised, a huge number of people apply for it. The question is why?

India is currently going through a phase, where its working age population is growing at a faster rate than the overall population. This is thanks to the fact that people are having fewer children. Nearly a million Indians are entering the workforce every month. This amounts to nearly 1.2 crore a year, or around two and a half times the population of New Zealand.

This stage in any economy is referred to as the demographic dividend. As people enter the workforce and find jobs, earn and spend, the economy grows at a faster rate than it has in the past, and pulls many people out of poverty.

Of course, this is how things are supposed to happen, in theory.

The fact that so many people are applying for government jobs suggests that there are not enough jobs going around for India’s demographic dividend. This is countered by the idea that not everyone applying for a government job is unemployed.

It is just that we Indians love the security of a government job and hence, the huge number of applicants.

Is that true?

India’s unemployment is best represented by the term underemployment. What does this mean? It means that everyone who is looking for work all through the year, does not find it.

Data from Annual Report on the Employment and Unemployment Survey suggests that only three in five Indians looking for a job all through the year are able to find it. This basically means that 40% of India’s workforce is unable to find work all through the year. We may call this underemployment, but this is nothing but unemployment.

Further, there is a huge amount of disguised unemployment in India’s agriculture sector, which produces around 12% of the gross domestic product, but employs nearly 46% of the workforce. Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture. On the face of it, they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production would not suffer even if some of these employed people stopped working.

A bulk of the Indian workforce is employed in the informal sector. Estimates vary from anywhere between 65% to 92%. And these individuals are badly paid. This is something that the government acknowledges as well. As the Economic Survey of 2015-2016 points out: “The informal sector should… be credited with creating jobs and keeping unemployment low. Yet, by most measures, informal sector jobs are much worse than formal sector ones—wages are, on average, more than 20 times higher in the formal sector.”

The point being that informal employment pays badly. The average daily earnings of a casual worker in rural areas in 2011-2012 was Rs 138. In urban areas, it was Rs 173. A regular worker made Rs 298 in rural areas and Rs 445 in urban areas. Now compare this with a worker of a central public sector enterprise, who made Rs 2,005 per day, apart from having a secure job and several other benefits. This basically means that a casual worker working in rural areas made around 6.9 per cent per day of what the worker of a CPSE made in 2011-2012.

There is no reason to believe that this would have changed by now. This clearly explains why Indians love government jobs. It takes away the insecurity of working for the informal sector and at the same time pays much better. Who wouldn’t apply for a government job in such a case?

Let’s look at a little more recent data.

As the Report of the Seventh Pay Commission, released in November 2015, points out: “To obtain a comparative picture of the salaries paid by the government with that in the private sector enterprises, the Commission engaged the Indian Institute of Management, Ahmedabad, to conduct a study. According to the study, the total [monthly] emoluments of a General Helper, who is the lowest ranked employee in the government, is Rs. 22,579, [which is] more than two times the emoluments of a General Helper in the private sector organisations surveyed, at Rs. 8,000-9,500.”

Hence, the IIM Ahmedabad study, “on comparing job families between the government and [the] private/public sector, has brought out the fact that… at lower levels, salaries are much lower in the private sector as compared to government jobs”.

As per the Report on the Employment and Unemployment Survey, nearly two-thirds of self-employed and contract workers, make up to Rs 7,500 per month or Rs 90,000 per year. The per capita income in 2015-2016, for which the above data is valid, was at Rs 1.07 lakh. This basically means that a bulk of India’s non-salaried workforce, earns a significantly lower income than the per capita income.

As far as the salaried workforce is concerned, around 38% of them make up to Rs 7,500 per month. Hence, the salaried part of the workforce is in a much better position. This clearly shows that there is an economic incentive for even the educated lot to apply for low-level government jobs.

India’s underemployment problem can be solved with more job creation in the formal sector, which isn’t happening. As per the Centre for Monitoring Indian Economy, in 2017-2018, Indian companies scrapped projects worth $ 117 billion, which is the highest number ever. 40% of these projects were dropped in the period January to March 2018.

In such a situation, how will formal jobs ever be created?

The Economic Survey summarises it best: “The challenge of creating ‘good jobs’ in India could be seen as the challenge of creating more formal sector jobs.”

The column originally appeared on Firstpost on April 24, 2018.

Corporates Will Continue to Default on Bank Loans

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We have extensively written about how corporate loan defaults have screwed up the state of banks in general in India, with public sector banks in particular.

This can be made out from the fact that the aggregate domestic corporate lending non-performing assets (or bad loans) of scheduled commercial banks, as of December 31, 2017, stood at Rs 6,63,877 crore. Bad loans are loans on which repayment has not been made for 90 days or more.

The total domestic bad loans of scheduled commercial banks on December 31, 2017, stood at Rs 8,31,141 crore. This means that the corporate bad loans account for 80% of the overall bad loans of banks.

Having said that, it doesn’t make much sense to paint all the corporates with the same brush. Borrowing is an essential part of corporate growth and that cannot suddenly go out of the equation.

Care Ratings has carried out a very interesting study on corporate borrowing and how the different kinds of borrowers (as per the total amount of borrowing) are placed in their ability to repay bank loans, at this point of time.

Care Ratings took a sample of 2,314 companies, which excludes banks and other finance companies. The total borrowing of these companies stands at Rs 20.02 lakh crore as of March 31, 2017.

The interest coverage ratio of these companies stood at 3.92. Interest coverage ratio is basically obtained by dividing operating profit of a company (or companies) by interest payments that need to be made on outstanding loans, during a particular period. This ratio fell to an almost similar 3.9 for the period April to December 2017.

This tells us that on the whole, the corporates are making enough money to keep servicing the interest that is due on their debt. But averages as usual hide the real story, which starts to change, as soon as we start to dig a little more.

Let’s look at this in detail one by one:

  1. For the period April to December 2017, 578 companies in the sample with an outstanding debt of Rs 4.78 lakh crore, which amounted to 24% of the total debt, had an interest coverage ratio (ICR) of less than 1. This basically means that companies which have taken on one fourth of the corporate debt (as per the sample used) are not earning enough money to keep servicing the interest payments on their debt.

    When the interest coverage ratio is less than one, the operating profit made by the company is less than the interest payment that is due. In such a situation, neither the company, nor the bank is left with many options. If the company’s situation does not improve, it is more than likely to default on the bank loan.

    How has the situation changed when we compare the financial year 2016-2017 with the period April to December 2017? In 2016-2017, 524 companies with total debt amounting to Rs 5.42 lakh crore, had an interest coverage ratio of less than 1.

    What this means is that in April to December 2017, more companies ended up with an interest coverage ratio of less than one. Nevertheless, a smaller amount of money was at stake.

  2. Let’s take a look at Table 1:

    Table 1: Distribution of companies and ICR according to debt sizeTable 1 makes for a very interesting reading. Let’s start with the large companies with a debt of Rs 5,000 crore or more. There are 68 such companies. Their interest coverage ratio has come down from 3.22 to 3.08. But this fall is not huge.

    Further, there are 23 companies with a total debt of Rs 2.82 lakh crore, with an interest coverage ratio of less than one. This basically means that large companies form a bulk of the debt of Rs 4.78 lakh crore of companies, with an interest coverage ratio of less than one.

    This basically means that the banks haven’t seen the last of corporate defaults and more defaults will happen in the time to come.

  3. The companies with a debt of Rs 2,500-5,000 crore are in the worst possible space. The interest coverage has fallen from 2.26 for 2016-2017 and to 1.73 during the period April to December 2017, respectively. Clearly the positon of these companies on their ability to keep paying interest on their debt has come down.

    There are 56 companies in this bracket. Of these 22 companies have an interest coverage ratio of less than one. These companies have a total debt of around Rs 75,000 crore. These companies (along with large companies with an interest coverage ratio of less than one) primarily operate in the steel, engineering and textiles sector. Take a look at Table 2.

    Table 2:

  4. Interestingly, companies with lower levels of debt seem to be better placed on the interest coverage ratio front.
  5. The study further shows that the companies with higher levels of outstanding debt have seen sharper declines in their interest coverage ratio during April to December 2017, in comparison to 2016-2017. As Madan Sabnavis and Rucha Ranadive, the authors of this report put it: “A combination of declining interest coverage ratio and interest coverage ratio less than 1 is a good signal to identify debt service failure.”

To conclude, what these data points tell us for sure is that the banks haven’t seen the last of corporate defaults. There is more to come.

This column originally appeared on Equitymaster on April 17, 2018.

18,000 Employees of Air India Cannot Hold the Nation to Ransom

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Newsreports suggest that 11 Air India unions representing more than 10,000 employees have started a social media campaign with the Save Air India slogan.

The Indian government plans to sell 76% of its stake in the airline. Under the current terms, the buyer needs to give a guarantee that the permanent employees of the airline will not be fired for at least one year.

After that the buyer is allowed to offer a voluntary retirement scheme to the employees.
This condition along with the fact that any prospective buyer has to takeover two-thirds of the Rs 48,447 crore debt (as on March 31, 2017) of the airline, has led to a situation where none of the Indian airlines are interested in buying Air India. (We don’t know about the foreign ones as yet).

Newsreports also suggest that the International Finance Corporation, the private investment arm of the World Bank, is likely to underwrite the debt amount of Air India for the successful buyer of Air India.

It is highly unlikely that any prospective buyer will buy Air India without any arrangement to handle the $7.5 billion debt of the airline (Rs 48,447 crore at $1=Rs 65).

Given how risky and difficult the airline business is, such a huge debt amount can pull down even a currently profitable airline. Also, it is worth remembering here that two out of three mergers that happen, fail.

While, the debt part of the airline can be handled, how the government handles the employees of Air India, is more important.

As on January 1, 2017, the airline had 18,049 employees. In comparison, IndiGo had 14,576 employees as on March 31,2017. IndiGo also employed 8,225 employees on a temporary/contractual/casual basis. Indigo has 40% share in India’s domestic airline business and is a profitable airline. Air India has 12% of India’s domestic market share and has a 17% share in flights in and out of India and it loses money.

How do things look at the employee cost level? The employee benefit expenses of Air India during 2016-2017, stood at Rs 2,558 crore. This worked out to around 11.5% of the total revenue earned during the course of the year.

In comparison, Indigo spent Rs 2,048 crore and this worked out to around 10.6% of the total revenue earned by the airline during the course of the year. Clearly, the employee cost is much more in case of Air India.

Having said that, the difference is not much but can nevertheless be important in a low margin business like airlines are. For any prospective buyer of Air India, one of the easiest ways to control costs, is to get rid of the non-productive part of the employee base.

And any prospective buyer having paid good money to the government would want to employ this strategy. This is a low-hanging fruit, but the current terms of sale don’t allow a prospective buyer to do that.

But such a situation is likely to arise only if the government is able to sell Air India.

Before that, the employee unions are likely to show their nuisance value by making it as difficult as possible for the government to sell Air India. The social media campaign is
just the starting point. The opposition parties are likely to join in as well.

The Congress politician Manish Tewari recently tweeted about what happens if British Airways buys Air India. He went on to ask, “won’t souls won’t souls of millions of Freedom Fighters who sacrificed everything turn in their graves?

This is terribly bad rhetoric, given that British Airways was privatised way back in 1987, but then the Congress party has always liked the idea of the government owning public sector enterprises (This is not to say that the Bhartiya Janata Party doesn’t). The British Airways is just another private airline now and one of the most successful privatisations ever carried out in Britain. So, if British Airways buys Air India, it will be a great thing because the airline has some experience in turning around a government owned airline, and running it profitably over the years.

As far as the employees are concerned, their protests are hardly surprising given that most of them have spent their lifetimes working for a government owned company. The future is unlikely to be as cozy as it is under the current owner and they will make every effort possible to ensure that continues.

But the current owner has spent a lot of taxpayer money to keep this airline going. Between April 2010 and December 2017, the accumulated losses of the airline were at Rs 46,256 crore.

To keep the airline going, the government invested Rs 26,545 crore into the airline since April 2011. Over and above this, the airline has taken on working capital loans from banks, which as on March 31, 2017, stood at Rs 31,088 crore. This basically means that the airline keeps running because of the loans it keeps taking on. The banks are lending to the airline primarily because it is owned by the government, leading to the actual debt of the government going up. They would have long-stopped lending to a privately owned airline in a similar situation.

The larger point being that every extra rupee that the government spends on this airline, is a rupee taken away from something else. Let’s take the case of defence. In fact, Vice Chief of Army Lt Gen Sarath Chand told a Parliamentary panel sometime back that 68 per cent of the Army’s equipment is in the ‘vintage category’. “Funds allocated is insufficient and the Army is finding it difficult to even stock arms, ammunition, spares for a 10-day intensive war. All the three services are expected to be prepared for at least 10 days of intense battle,” he said. This is clearly not a good trend. There are more important
things that India needs to spend money on than Air India.

Also, if the government is serious about genuine privatisation (and not the kind where LIC buys government’s stake in public sector enterprises) of loss making as well as profitable government companies, it is important that the sale of Air India goes through.

If the 18,049 employees of Air India are allowed to hold the country to ransom then so will the employees of other loss-making government-owned companies like MTNL, BSNL and a whole host of other companies, in the days to come.

If the government doesn’t handle the employees of Air India seriously, then the entire idea of selling Air India, was yet another jumla to come out of this government.

This originally appeared on Firstpost on April 16, 2018.

Why 2.8 Crore Indians Applied for 90,000 Jobs in Indian Railways

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The Indian Railways recently got 2.8 crore applications for around 90,000 jobs it had advertised for.

This basically means that the ratio of number of applicants to the number of jobs stands at 311:1. Further, it means that 18.7% of India’s youth workforce (people in the age group 18-29) applied for it. Or to put it a little more simplistically, every one in five individuals who are a part of India’s youth workforce, applied for these jobs.

This is even without taking any education qualifications into account. If we do that (i.e. people who have at least passed the tenth standard or some such parameter), the proportion of India’s youth workforce which applied for these jobs in the Indian Railways would go up even further.

If this is not an indication of India’s massive jobs crisis, we don’t know what is.

The argument being offered against this is that just because someone has applied for a government job, does not mean he or she is unemployed. Of course, this is a fair argument, but an incomplete one. Allow me to explain.

Let’s us look at Table 1, a table we have used multiple times before.

Table 1: 

Table 1 clearly tells us that only 60.6% of India’s workforce which is looking for a job all through the year, is able to find one. So, yes Indians may not be unemployed, but they are terribly underemployed. Hence, nearly 40% of Indians looking for a job all through the year are unable to find one. Or two in five Indians who are looking for a job all through the year are unable to find one.

Further, this underemployment translates into low levels of income, as can be seen from Table 2.

Table 2: Self-employed/Regular wage salaried/Contract/Casual Workers
according to Average Monthly Earnings (in %) 

Table 2 shows us the income levels of India’s workforce. As far as the self-employed and the contract workers are concerned, nearly two-thirds of them make up to Rs 7,500 per month or Rs 90,000 per year. In case of contract workers, more than 84% of contract workers earn up to Rs 7,500 per month or Rs 90,000 per year.

The per capita income in 2015-2016 was at Rs 1.07 lakh. This basically means that a bulk of India’s non-salaried workforce, earns a significantly lower income than the per capita income.

The non-salaried workforce works largely in the informal sector, which forms a bulk of India’s economy (as high as 92% as per one estimate). As the Economic Survey of 2015-2016, points out: “By most measures, informal sector jobs are much worse than formal sector ones-wages are, on average, more than 20 times higher in the formal sector.”

Given these low levels of income primarily because of huge underemployment, so many people tend to apply for government jobs in general, and the recent vacancies in Indian Railways are no exception to this. People are looking for a regular and stable source of monthly income. They want to get rid of the irregularity of payment that they have to regularly deal with in the informal sector.

The Indian government is a good paymaster, especially at lower levels. As the Report of the Seventh Pay Commission points out: “To obtain a comparative picture of the salaries paid in the government with that in the private sector enterprises the Commission engaged the Indian Institute of Management, Ahmedabad to conduct a study. According to the study the total emoluments of a General Helper, who is the lowest ranked employee in the government is Rs 22,579, more than two times the emoluments of a General Helper in the private sector organizations surveyed at Rs 8,000-9,500.”

Hence, the IIM Ahmedabad study “on comparing job families between the government and private/public sector has brought out the fact that…at lower levels salaries are much lower in the private sector as compared to government jobs.”

In this scenario, it isn’t surprising that so many people apply for government jobs in India. The employment opportunities in the informal sector are irregular and simply don’t pay enough. India’s huge underemployment gets reflected in the number of people applying for government jobs.

And at the end of the day, underemployment is also a representation of unemployment and the huge jobs crisis that India is facing. There simply aren’t enough jobs/employment opportunities which will keep individuals occupied for the full year, going around, for everyone who is a part of India’s burgeoning workforce.

Indeed, that is something to worry about. And what is even worrying is that the Modi government is not worrying about this huge issue.

Postscript: Dear Reader, you must be wondering why are we still using 2015-2016 data even in 2018-2019. The Labour Bureau carried out six household-based Annual Employment-Unemployment Surveys (EUS) between 2010 and 2016. Of these, reports of five rounds have been released till date. The last report was released in September 2016. The question is, why has the report for the sixth round of the Survey not been released till date.

Recently, in an answer to a question raised in Parliament, the government said, “On the recommendations of the Task Force on Employment, however, this survey has been discontinued.” Basically, a survey that brought bad news in the form of huge underemployment that India has been facing, has been discontinued, and then the government goes around talking about lack of data.

The column was originally published on Equitymaster on April 16, 2018.

Modi government refuses to acknowledge India’s jobs crisis

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Indian Railways, India’s largest public sector employer, recently received more than 28 million applications for 90,000 jobs posts, it had advertised for. As of March 31, 2017, the Indian Railways employed around 1.31 million individuals.

The ratio of the number of applicants to the number of jobs stood at a whopping 311:1.
The number of applicants was more than the population of Australia, which was a little over 24 million in 2016. It was around 6 times the population of New Zealand, which in 2016, was around 4.6 million.

Using data provided by the Central Statistics Office of the government of India, we can estimate that the number of Indians between the ages of 15 and 29, who are most likely to apply for these jobs on offer, are at 360 million (189 million males and 171 million females).

This basically means that close to 7.8% of the population in the age group that can be categorised as India’s youth has applied for the 90,000 jobs on offer at the Indian Railways. What this calculation does not take into account is the fact that everybody in the age group 15-29 is not looking for a job.

Many individuals in this age group are studying. In case of females, many are married at a young age and take care of the family. In some other cases, females have been pulled out of school or college, and are waiting at home to get married.

We need to adjust for this i.e. take the labour force participation rate of this age group of the population into account, and then recalculate the numbers.

The labour force participation rate for males in the age group 15-29 is 63.1% (as per NSSO June 2012). These are the proportion of people who are actually looking for jobs. For women it is 18.3%.

There are two explanations for the low female labour participation rate. One lies in the fact that many individuals in this age group are still studying. Further, the overall labour force participation rate for females is also very low at 18.1%, and this reflects in this age-group as well.

Taking the labour force participation rates into account, the total number of people actively looking for jobs in the 15-29 age group works out to 150 million (119 million males and 31 million females).

This means close to 18.7% (28 million expressed as a percentage of 150 million) of the population in the 15-29 age group, has applied for the 90,000 jobs on offer at Indian Railways. Or to put it a little simplistically, one in five individuals in the 15-29 age-group has applied for the jobs on offer in the Indian Railways.

This tells us the sad state of affairs for the one million youth who are joining the Indian workforce every month. Another factor at work here is that the government pays much better at lower levels than the private sector in India does, which obviously gets many people to apply.

The above figures clearly show the lack of formal jobs in India. This is a problem that the Indian government is not willing to acknowledge. Recently, Jayant Sinha, a junior minister in the Modi government, called India’s jobs crisis more of a data crisis, in a column he wrote for The Times of India, India’s largest selling English newspaper.

In his column he stated that 6.5 million new jobs were created in the retail sector between 2014 and 2017. While he didn’t state the source of this data, some digging around suggests that he borrowed this number from Human Resources and Skill Requirement in the Retail Sector, authored by KPMG, for the NITI Aayog, a government run think tank.

The 6.5 million jobs that Sinha talked about was basically a forecast, which Sinha passed off as the actual number of jobs created.

As far as the lack of data is concerned, the Labour Bureau carried out six household based Annual Employment-Unemployment Surveys (EUS) between 2010 and 2016. Of this, reports of five rounds have been released till date. (Makes us wonder why has the report on the sixth round been held back up until now).

The report of the fifth round was released in September 2016. One the major findings of the report was that only 60% of the Indians who were looking for a job all through the year, found one. This figure showed the bad state of jobs in India, very clearly. This finding was consistent with a similar finding reported in the report on the fourth round of the survey as well.

Recently, in an answer to a question raised in the Parliament, the government said, “On the recommendations of Task Force on Employment, however, this survey has been discontinued”. Basically, a survey which brought bad news has been discontinued and then the government goes around talking about lack of data.

There is enough data that suggests that India is facing a huge jobs problem. The so called demographic dividend is collapsing. The Modi government refuses to even acknowledge this problem. The first step towards solving any problem is to acknowledge it. If you don’t acknowledge a problem, how do you solve it?

The column was originally published on April 13, 2018, on AsiaTimes.