India's labour participation rate is low by international standards. The global average is 63 per cent and China has an LPR of 71 per cent. In comparison, we have a low and falling LPR. The CMIE-BSE effort has documented its fall from over 47 per cent in January 2016 to less than 44 per cent in December 2017.
The low and falling LPR has been documented by three independent surveys -- by the National Sample Survey Organisation (NSSO) which is the official statistical agency, by the Labour Ministry's Labour Bureau and by the private effort of CMIE along with BSE.
According to the NSSO, the LPR (current daily status) fell from 54.6 per cent in 2009-10 to 53.1 per cent in 2011-12. According to the Labour Bureau, the LPR (primary status, which is a lot more lenient in classifying a person as part of the labour force) was lower at 52.9 per cent in 2011-12 and, it fell further to 50.3 per cent by 2015-16. According to the CMIE-BSE surveys, the LPR (daily status) fell from 46.6 per cent in 2016 to 43.9 per cent in 2017. While there are small definitional differences in the estimates of the three organisations, all three point to a low and falling LPR. In all cases, India's LPR is much lower than global standards.
Employment increased from 405.3 million in 2016 to 407.4 million (preliminary estimates) in 2017. This implies an increase of 2 million jobs during the year. This is very low compared to the estimated 11.5 million who should have come into the labour force during the year.
The 2 million increase in jobs in 2017 translates into a mere 0.5 per cent growth. Urban employment grew by 2 per cent while rural employment shrunk by 0.3 per cent. But, urban employment needs to grow much faster to absorb the growing population of young potentially employable people. There was a fall in the labour force (which is largely because unemployed people have stopped saying that they are willing to work or are looking for jobs) and 20 million continued to look for jobs in 2017. Of these, 8 million were in urban India. While urban India accounts for 34 per cent of the potential labour force, it accounts for 41 per of the unemployed.
The very tepid growth in employment in 2017 ties in with CMIE's CapEx data that shows very low traction on investments. New investment proposals dropped to Rs.8 trillion during the year compared to Rs.15 trillion in the preceding two years. Completion of new capacities dropped to Rs.4.6 trillion in 2017 compared to Rs.6.8 trillion in 2016. Low investment growth corresponds to low employment growth. If this is true, then 2018 does not look very promising for employment growth because it is very unlikely that investments will pick up in the year.
2018 began on a weak note. During the first week, the unemployment rate was 5.7 per cent. This is higher than its level during most of the preceding 12 monthly estimates. Unemployment rate in urban areas shot up to 7.8 per cent during the first week of 2018. Urban labour participation was also very low at just 40.4 per cent. Hopefully, this will recover in the coming weeks. But, for now this remains a hope and little else.
Consumer sentiment indices and unemployment rate are generated from CMIE's Consumer Pyramids survey machinery. The weekly estimates are based on a sample size of about 6,500 households and about 17,000 individuals who are more than 14 years of age. The sample changes every week but repeats after 16 weeks with a scheduled replenishment and enhancement every year. The overall sample size run over a wave of 16 weeks is 158,624 households. The sample design is of multi-stratrification to select primary sampling units and simple random selection of the ultimate sampling units, which are the households.
The Consumer Sentiment index is based on responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household's views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.
The unemployment rate is computed on a current daily basis. A person is considered unemployed if she states that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.
All estimations are made using Thomas Lumley's R package, survey. For full details on methodology, please visit CMIE India Unemployment data and CMIE India Consumer Sentiment.
The creation of these indices and their public dissemination is supported by BSE. University of Michigan is a partner in the creation of the consumer sentiment indices.