India needs multiple policy initiatives to address job and income crises

While the stagnant salaries in private corporate sector amidst high profits (FICCI-Quess Corp report is the latest to flag it) has drawn attention of the policymakers, more so after the GDP growth in Q2 of FY25 slipped to 5.4%, three more developments have taken place which haven’t – but should because they are symptoms of multiple policy failures.

These developments are:

(a) On December 10, 2024, Union Labour and Employment Minister Mansukh Mandaviya made a strong case for redefining job/employment to include self-employment and women’s care work at home, at the CII Global Summit on Skill Development in New Delhi (he had raised it on November 22, 2024 too).

(b) On December 9, 2024, the Supreme Court asked the Centre, after learning that “free” ration was being given to 813.5 million people: “For how long freebies can be given? Why don't we work to create job opportunities, employment and capacity building…”

(c) On December 2, 2024, a news report revealed that the Centre deferred implementation of its last Big Bang jobs scheme, called the PM-Internship Scheme (PMIS), indefinitely. It promised internships to 10 million youth in five years in 500 top companies and was part of a package of the Prime Minister’s five schemes “to facilitate employment, skilling and other opportunities for 4.1 crore youth over a 5-year period with a central outlay of ₹2 lakh crore” (budget speech of July 23, 2024).

58.4% ‘self-employed’, now earning less than in 2017-18

First about what the Union Labour and Employment Minister said.

The minister may not be aware, which is quite ironical, but self-employment (“self-employed”) is very much part of the job/employment count (“workers or employed”) in the very annual PLFS reports he relied on to hail the Prime Minister, on November 27, 2024, for the doubling of women’s participation in labour force (FLFP) in seven years between 2017-18 and 2023-24.

In fact, “self-employed” are the largest chunk of Indian workforce – accounting for 58.4% in 2023-24, rising consistently from 52.2% of the total in 2017-18 (PLFS reports). They are most vulnerable too.

The PLFS reports show, theirs is the only category of workers whose average monthly “earnings” of ₹13,279 in 2023-24 was below the 2017-18 level of ₹14,792! There is hardly any need to calculate ‘real’ wage growth (which, incidentally, averaged -4.5% a year, using average CPI of 5.1% during FY18 to FY24).

A large chunk of ‘self-employed” are “unpaid” workers or “helper in household enterprises” who assist in household farm or non-farm activities – gone up to 19.4% of toral workforce in 2023-24, from 13.6% in 2017-18.

Developed nations have very little self-employed workers. The OECD data for 2023 shows, it is 14.1% in Euro area (19 countries), 6.1% in the US and France, Japan, Australia, Germany, Canada in between these two numbers. 

The PLFS reports also show the rise of workers in unincorporated “proprietary and partnership enterprises” (informal) in non-farm sector – from 68.2% in 2017-18 to 73.2% in 2023-24. This marks the failure of formalisation drives like the Prime Minister’s Rozgar Protsahan Yojana (PMRPY) of 2016 (providing PF support, which continues) and also the GST of 2017.

Not just the formalisation drive, the manufacturing push (‘Make in India’, followed by huge PLI- DLI subsidies) has also failed to create jobs. The high-productive and high-paying manufacturing’s job share has fallen from 12.1% in 2017-18 to 11.4% in 2023-24, while the informal and low-paying agriculture’s has gone up from 44.1% to 46.1% during the same period.

The Bank of Baroda’s August 21, 2024 report had shown jobs growth had slowed down from 5.7% in FY23 to 1.5% in FY24 in large corporate entities – despite high growth in corporate profits.

In fact, the main reason why the main growth engine of consumption demand has been subdued for long is lack of quality jobs, forcing a desperate rush of workers to vulnerable self-emplyment, unincorporated proprietary and partnership and unpaid work. This lack of quality jobs would also explain why despite high corporate profits, salaries are stagnant. Surplus workers always depress salaries/wages.

There is yet another symptom of the policy failures: Rise in FLFP.

Rise in FLFP: Is it a miracle?

The Union Labour and Employment Minister may also not be aware, another irony, that women’s care work at home is not considered as job/employment or work anywhere in the world, not just in India.

All PLFS reports (and its earlier versions) define “workers (or employed)” as “persons who are engaged in any economic activity” (which includes “unpaid” workers as they “assist in the operation of an economic activity”) and “economic activity” is defined as “any activity resulting in production of goods and services that add value to national product” (GDP).

Care work at home doesn’t fit into this definition of “economic activity” that the GDP measures as value added.

The FLFP has surely risen from 17.5% in 2017-18 to 31.7% in 2023-24. But this rise needs scrutiny and perspective:

(i) 36.7% women were “unpaid” workers in 2023-24 – up from 31.7% in 2017-18.

(ii) 15.9% women were in “regular wage/salaried” – down from 21% in 2017-18.

(iii) 64.4% women were in informal agriculture in 2023-24 – up from 57% in 2017-18

(iv) 11.4% women were in manufacturing in 2023-24 – down from 12.1% in 2017-18.

In short, the rise in FLFP is due to the rise of women workers in unpaid, informal jobs and fall in regular and better-paying manufacturing.

These are reflections of what the twin shocks of demonetization (2016) and GST (2017) and the pandemic lockdown (2020 and 2021) did to women: A desperate rush to any work to keep their homes afloat – paid or unpaid.

Hand-outs: “Free” ration, PM internship, PM-Kisan, PM-UY

Poor quick-fixes like “free” ration to 813.5 million Indians every month since April 2020 and its continuation until December 31, 2028 – which the Supreme Court criticised (mentioned erlier) – is branded as the Prime Minister’s “guarantee”. This isn’t just a symptom of multiple failures of economic policies but a perfect example of masking such failures as welfarism.

The internship scheme (PMIS), now deferred, is another symptom and a mask too.

Instead of focusing on generating quality jobs, the Centre made a grand promise to pay a monthly sum of ₹4,500 for a year and one-time grant of ₹6,000. The top 500 firms are to add a monthly ₹500 to it. This was announced on July 23, 2024 without consultations with industry, without a blueprint in hand and without assessing its utility – forcing Finance Minister Nirmala Sitharaman to a binge of assurances (in multiple interviews) a day later to assure industry that it was “not compulsory” but a “nudge”.

Here is the rub.

The Ministry of Skill Development and Entrepreneurship’s annual report of 2022-23, published nearly year earlier on September 18, 2023, had declared the Centre’s apprenticeship scheme of 2016 (“National Apprenticeship promotion Scheme (NAPS)”) a failure (“very low coverage of apprenticeship progremmes”).

The obvious question for the policymakers would have been: Why would an internship scheme deliver jobs when enough jobs don’t exist?

The following two direct cash transfers to millions of Indians are again both symptoms of a mask for multiple policy failures reflecting lack of ideas, imaginations and even lack of trying to find better solutions:

· The PM-Kisan, launched in 2019, hands over ₹6,000 a year. It was given to 103 million farmers during August-November 2024. The promise, and failure, of doubling the farmers income by 2022 or legalising MSP has been forgotten.

· The PM-UY (Ujjwala) scheme under which women get ₹200 per LPG cylinder up to 12 refills a year since 2023 (earlier ₹500) is a failure to tackle a massive household income crisis building up – which the National Accounts Statistics 2024, released on May 8, 2024, captured so comprehensively. This scheme’s beneficiaries numbered 103.3 million households as on November 1, 2024.

No well-performing economy need to give hand-outs to millions every month for years and yet take pride in being the fastest growing major economy or the fifth largest economy in the world (GDP size). Would it?