Why the Latest RBI Jobs Data Show a Bump Up in Employment

Sub: Economy

Sec: Inflation and employment

Significant Increase in Employment

Employment Growth: Employment growth in India jumped by nearly 6% in FY24, compared to an increase of 3.2% in FY23.
Workforce Increase: The workforce increased by approximately 4.67 crore to 64.33 crore in FY24, up from 59.67 crore in FY23.

RBI’s Data Insights

KLEMS Database: The employment growth data comes from the RBI’s India KLEMS (Capital, Labour, Energy, Material, and Services) database.
Industry Coverage: The KLEMS database covers 27 industries, providing estimates at broad sectoral levels (agriculture, manufacturing, services) and all-India levels.
Historical Data: Employment growth rates in previous years were 5.1% in FY21 and 3.3% in FY22.

Key Metrics Tracked

Metrics Included: The KLEMS database tracks various metrics, including Gross Value Added (GVA), Gross Value of Output (GVO), Labour Employment (L), Labour Quality (LQ), Capital Stock (K), Capital Composition (KQ), consumption of Energy (E), Material (M), Services (S) inputs, Labour Productivity (LP), and Total Factor Productivity (TFP).

Contrasting Perspectives

Citigroup Report:
- Skepticism on Employment Growth: Citigroup’s report suggested that even with a 7% GDP growth rate, India might struggle to create sufficient employment opportunities due to its demographic dividend.
- Unemployment and Job Quality: The report highlighted issues around the quality of jobs and possible underemployment, noting that agriculture, which accounts for 46% of all employment, contributes less than 20% of GDP.
Labour Ministry’s Rebuttal:
- Positive Employment Data: The Ministry of Labour and Employment refuted Citigroup’s claims, citing comprehensive employment data from the PLFS and RBI’s KLEMS.
- Employment Opportunities: The Ministry pointed out that more than 8 crore employment opportunities were created between 2017-18 and 2021-22, averaging over 2 crore jobs per year.
- EPFO Subscribers: Additionally, over 6.2 crore net subscribers joined the Employees’ Provident Fund Organisation (EPFO) from September 2017 to March 2024.

Implications and Observations

Growth Amid Challenges: Despite macroeconomic challenges, including the impact of demonetization, GST rollout, and the COVID-19 pandemic, the data suggests significant employment growth.
Sectoral Contributions: The agriculture, manufacturing, and services sectors have contributed differently to employment and GDP, highlighting structural issues in job creation and economic contributions.
Formalization of Economy: The rise in formalization has led to robust tax collections but has implications for the informal sector’s employment generation capabilities.