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Wednesday, 17 January 2018 04:04
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EPFO data suggests much higher growth than believed

 

Though traditional employment data from official sources suggests India continues to be in a phase of jobless growth, data from EPFO suggests employment growth, and in the formal sector at that, is exceptionally robust—at least 4.5 million in FY17 and 5.5 million in FY18, based on data pro-rated from actuals from April to November 2017. While TV Mohandas Pai and Rajesh K Moorti of Aarin Capital Partners were the first to use EPFO data to show the official Labour Bureau data on jobs creation was incorrect—in articles in this newspaper—Pulak Ghosh of IIM and Soumya Kanti Ghosh of SBI have cleaned up the EPFO data considerably to arrive at their conclusions. While the EPFO’s raw data suggests there are 8.7 crore member accounts, the duo removed 2 crore accounts because the data was incomplete; another 1 crore were removed because they came in via various amnesty schemes given to firms which needed to be deducting EPFO contributions but didn’t. The names were also run through various de-duplication software to ensure their uniqueness.

Finally, they zeroed in only 18-25 year-olds, to ensure only new employees were captured; new employee accounts that didn’t have steady EPFO contributions were also dropped on grounds they may be fraud accounts. All data pertains to the formal sector as informal sector employees don’t contribute to EPFO. The data, however, doesn’t jell with most macro parameters. Investment growth, for instance, remains sluggish, as does consumption growth. If formal sector employment grew by at least 5 million, informal employment is likely to have exceeded that—India’s work force increases by around 15 million each year. Such high growth, logically, has to be the result of reasonably high investment growth and has to result in robust consumption growth, neither of which is true for several years now.

Even if an aberration, the data is a significant addition to that on Indian jobs and economists who argue jobless growth need to explain this. There is also considerable employment generated from other sectors like education; Ghosh & Ghosh use automobile sales, for instance, to argue this sector alone generated 2 million driver jobs in FY17. Even if the EPFO data looks exaggerated, the traditional labour data doesn’t look convincing either. Surely the spread of traditional and formal retail—and now, e-tail from the likes of Amazon and Flipkart—should have created millions of jobs? Arvind Singhal of consulting firm Technopak, for instance, estimates at least 2 million jobs were created in the retail sector over the past year, apart from 5 lakh each in tourism and apparel/footwear. At the end of the day, the government needs to work with industry to create more robust and timely data — indeed, getting pan-India payroll data, as in the US, has to be attempted at the earliest. Once GST stabilises, the good news is that, for the first time, India will have very robust data on consumption and across all cities/states — that will also help estimate GDP and jobs in a better manner.

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Front-page story

JOBS GROWTH

EPFO data says 5.5mn jobs created in FY18

New data derived from Employees’ Provident Fund Organisation (EPFO) accounts suggest that, contrary to the jobless-growth narrative, India created at least 5.5 million jobs in the formal sector in FY18, on top of around 4.5 million in FY17 — that is, not only are the number of jobs created many times greater than that put out by organisations such as the Labour Bureau, even the growth is significantly higher than that suggested by them. The analysis, by Pulak Ghosh of IIM Bangalore and Soumya Kanti Ghosh of State Bank of India, was released on Tuesday. The data are at variance with not just headline GDP data, it doesn’t jell with consumption or investment data either. After all, if investment is so sluggish, where are these jobs being created? And if this is the level of jobs creation, why is consumption growth so sluggish? But the problem is that the traditional Labour Bureau-type data don’t capture what is happening either. Arvind Singhal of consultancy firm Technopak estimates, based on about seven jobs for each Rs 1 crore of turnover, that the retail sector alone (both organised and unorganised) generated 2-2.5 million jobs over the last 12 months.

He estimates another 500,000 jobs apiece would have been generated by tourism and apparel/footwear. “Few of these jobs,” Singhal says, “would reflect in the EPFO data, so this is in addition to what the Ghosh-Ghosh study estimates.” TV Mohandas Pai and Rajesh K Moorti of Aarin Capital Partners were the first to use EPFO data to show the official Labour Bureau data on jobs creation was incorrect in articles in this newspaper. Pulak Ghosh and Soumya Ghosh have cleaned up the EPFO data considerably to arrive at their conclusions. While the EPFO’s raw data suggest there are 8.7 crore member accounts, the duo removed 2 crore accounts because the data was incomplete; another 1 crore accounts were removed because they came in via various amnesty schemes given to firms which needed to be deducting EPFO contributions but didn’t. The names were also run through various de-duplication software to ensure their uniqueness.

Finally, they zeroed in only new contributors who were 18-25 years old, to ensure they were capturing only new employees; new employee accounts that didn’t have steady EPFO contributions were also dropped on the grounds they may be fraud accounts. All data pertain to the formal sector as informal sector employees don’t contribute to EPFO. In addition, Ghosh & Ghosh say there is also considerable employment generated from other sectors like education. In the automobiles sector alone, based on automobile sales, they estimate this sector generated 2 million driver jobs in FY17.

 

 

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