Around 600,000 jobs being created a month in formal sector in FY18: Study

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Busting the theory that jobs are not being created in the formal sector, a new study has found that 590,000 jobs were generated every month until November in the current financial year. This means that seven million jobs will be created in the formal sector in 2017-18 if one expands the trend on a pro rata basis. 

The study, authored by SBI group Chief Economic Advisor Soumya Kanti Ghosh and Pulak Ghosh, a professor with the Indian Institute of Management, Bangalore, calculated the number of jobs in enterprises from the membership of Employees' Provident Fund Organisation (EPFO), Employees' State Insurance Corporation, General Provident Fund and National Pension System (NPS). 

A report submitted by a task force on employment, headed by former NITI Aayog vice-chairman Arvind Panagariya, had also recommended using this kind of database. As such, this is the first study to estimate job creation using these kinds of data sets. 

This would be higher than the 4.5 million created the previous financial year, a period which saw disruption from demonetisation. 

The top 10 sectors of the economy — manufacturing and usage of computers, chemicals, textiles, contract engineering, garments, building and construction, trading, general engineering products and expert services — contribute about 75 per cent of total employment in the formal sector in India. 

The study found that there were 91.9 million employed people in the formal sector as of March 2017. If one adds those which contributed nothing to these funds, the figure will turn out to be 100 million. This is not significantly different from the figures arrived at by the National Sample Survey Organisation (NSSO). 

The study estimated that 15 million are added to labour force every year. Of this, around 6.6 million are possibly qualified manpower; the rest 8.4 million are non-graduates, non-qualified and dropout graduates.

It says by 2040 or so, it is expected that India's demographic dividend will be conclusively over. 

The total fertility rate is already down to 2.2 children for every woman and is expected to reach the replacement fertility rate of 2.1 by 2025. The replacement fertility rate is the birth rate at which the population level remains constant, taking into account the mortality rate and other factors.

As to how the government should go about the establishment survey, the study suggested that a trend analysis of EPFO data across 190 industries and across geographies should be done to reorient our skill development programmes towards such industries.

Also, a detailed analysis of labour on contract under the contract labour Act should be done to estimate the total number of people on contract. 

Currently, the Chandigarh-based Labour Bureau conducts the enterprise survey and NSSO does household surveys to estimate job creation. The study says that a survey by the Bureau gives a distorted picture of job creation. 

Other suggestions:
  • It should be mandatory for professional bodies, hospitals, nursing homes etc to submit details of new joinees every 3 months to the local government offices
  • From April 1, the government should ask every GST filer to provide total number of permanent employees and total number of contract employees
  • Some tax deduction (per person) may be given for domestic help, if their name and details are registered with tax authorities by the household employing them
  • Govt should continue giving NPS subscriber extra tax deductions of Rs 50,000 per annum; should also provide new incentives to encourage people to join NPS