Vijay Kumar Gaba

 Recently, the growth in per capita GDP of India has been in the news. The government statistics claim that per capita income of India has almost doubled in the past nine years. This claim has generated intense discussion over the economic performance of the incumbent government; especially relative to the previous UPA government (2004-2014).

Without getting into a political argument and keeping the statistics aside for a while; I would like the popular debate to take the following into consideration:

·         The last census of India was done in 2011. Therefore all “per capita” data points are using an estimated number of the population. There is a possibility that the actual number could be different from the estimates.

·         In the past twelve years there have been significant changes in the socio-economic and demographic structure of the country. The youth population has increased materially. Millions of professionals (engineers, doctors, management & accounting professionals etc.) and other graduates have passed out of colleges and millions have dropped out of colleges. Not all of these are fully or partially employed.

Besides, demonetization of high value currency (2016), implementation of GST (2017), and Covid-19 pandemic (2020) accelerated the trends towards formalization the economy and digitalization of trade and commerce stressing millions of the micro and small businesses (mostly self-owned) and migrant laborers.

The rise in inequalities and dispersion of income and wealth must be factored while using “per capita” data to measure the welfare, quality of life and purchasing power of the bottom 75% of the population.

·         Traditionally, the primary sources of data on the workforce and employment have been the (i) decennial population census and (ii) nationwide quinquennial surveys on employment and unemployment by the erstwhile NSSO under the Ministry of Statistics and Programme Implementation. The latest Census data is available for the year 2011. Similarly, the quinquennium NSSO data on employment and unemployment is available up to the year 2011–12 only.

From 2017-18 National Statistical Office (NSO) of MoSPI started publishing Periodic Labour Force Survey (PLFS). PLFS data is published annually for both rural and urban and the total population; and quarterly for the urban households.

For the purposes of PLFS, the Labour force includes persons aged 15-60yrs who were either working (or employed) or those available for work (or unemployed). Some persons in the labour force may be abstaining from work for various reasons. Subtracting that number from the labour force gives the number of actual workers. These workers are further categorised as persons who are engaged in any activity as self-employed or regular wage/salaried and casual labour. The difference between the labour force and the workforce gives the number of unemployed persons.

As per the latest data NSO PLFS available (FY21), India has a low labour force participation rate of 41.6%. The rate is lower for urban labour force (38.9%) vs Rural labour force (42.7%); and for female workers (25.1%) vs male workers (57.5%). In urban India the female labour participation rate is dismal 18.6% vs still poor but higher 27.7% for rural female workers.

Clearly, (i) the data availability and quality is of not very high quality; (ii) employment conditions cannot be termed as good; and (iii) India is wasting the demographic dividend.

·         Unlike other developed economies, we could not create enough unskilled and semi-skilled jobs in the manufacturing and construction sector during the transition of economy from agrarian to industrial. In fact, unlike the US and Europe, we jumped from agriculture to services mostly skipping the industrial part. Now we are trying to fill the gap by encouraging manufacturing. However, the unfortunate part is that manufacturing is no longer labor intensive now. It is not feasible to transit a large number of unskilled or semi-skilled agriculture workers to industry or even construction. Consequently, there remains massive disguised unemployment in agriculture.

At the same time we do not have enough highly skilled people needed for globally competitive manufacturing. The corrective action to encourage manufacturing is thus not working well, at least so far. 

The only feasible way to correct the occupational structure of the country is to focus on accelerated development of the agriculture sector and make the farm workers more productive.

 As I mentioned yesterday (see here), unemployment in India is a multidimensional problem. Unemployability (skill deficit), underemployment, disguised unemployment, gender disparity, regional disparities, are some of the contours that define the state of unemployment in India. The genesis of the reasons responsible may be traced to traditions, education system, colonial legacy, economic policies, and demographics. Obviously, the solution for a multidimensional problem also needs to be multidimensional. The classical solution, i.e., industrialization alone is definitely inadequate for managing the complex unemployment situation in India.

Employment framework in India

As per 6^th Economics Census (2013), there were 58.5mn business establishments (excluding public administration, crop production & plantation, defense and compulsory social service activities) operating in the country. Of these ~96% establishments were privately owned while just ~4% were government owned. These establishments employed 131.29mn people (52% in rural areas and 48% in urban areas).

·         About 60% of business establishments were in rural areas while about 40% operated in urban areas. Out of these, about 78% establishments were engaged in non-agriculture activities, while ~22% were engaged in agriculture related activities (excluding crop production and plantation).

·         During the 8yr period between 2005-2013, the business establishments grew by ~42% from ~41mn to ~58mn. In this period agriculture establishment grew ~116% while non-agriculture establishment grew ~29%.

·         Out of total ~58mn establishments about ~72% were Own Account establishments (meaning with no hired worker). These Self Owned Establishments (SOEs) grew 56% during 2005-2013. About 63mn people (48% of total employed people) are employed in these SOEs.

·         About 96% of establishments had less than 5 workers. Another 3% have 6-9 people employed.

·         The government or public sector employed only 7% of the people. 79% people worked in proprietary establishments. Organized private and cooperative sector employed only 14% people.

·         About 36% of business establishments were operated from the home of the Self Owner, while another ~18% were operated from outside the home without any fixed structure.

·         Livestock accounted for ~87% of the agriculture activity.

·         Retail trade (~35%) and Manufacturing (~23%) were dominant non-agricultural activities.

·         Out of 1.87mn handicraft/handloom establishments, employing 4.2mn people, 79% were family affairs without any hired worker.

From this data, I decipher that—

(a)   About 96% establishments have less than 5 workers. Another 3% have 6-9 people employed. Only three states - Tamil Nadu (13.81%), West Bengal (11.07%) and Maharashtra (10.02%) have more than 10% establishments with 10 or more workers.

Most of the legislations relating to employment and social security provisions (ESI, EPF, Gratuity, Bonus etc.) apply only to the establishments with 10 or more hired workers. Implying that only ~1% of the total private workforce is eligible for statutory social security benefits. Even the new labour code (The Code of Social Security, 2020 that would subsume most of existing laws) covers only the establishments with 10 or more workers.

(b)   Livestock accounts for 87% of the agri sector related establishments. The whole of it cannot be dairy farming. Obviously, meat (including bovine meat) is a big business in terms of employment.

(c)    Out of 1.87mn handicraft/handloom establishments, employing 4.2mn people, 79% were family affairs without any hired worker.

From my experience I know for sure that a large number of these establishments employ household children as workers. In my knowledge none of the legislative provision or policies designed to prevent child labour and promote child safety and security deals adequately with a parent employing his child for his business, as the child is not a hired worker in this case.

The worst part is that if the parent business is impacted due to any adversity, the children are affected most, as they are mostly unemployable in other businesses.

(d)   About 36% of business establishments were operated from the home of the Self Owner, while another ~18% are operated from outside the home without any fixed structure.

From my experience I know that most of these business establishments may not exactly be "authorized" from civic and town planning view points. This creates a number of problems from everyone. Grocery and other daily need shops operating from homes; tailoring shops; automobile repair shops create nuisance for the neighborhood; pose environment and safety hazard; put pressure on civic amenities like power, water and sanitation; motivate corruption; and above all lead to serious problem of child labor, underemployment and disguised unemployment. Town planners, civic administrations, and government often fail to recognize & accept this phenomenon and therefore are unable to find acceptable solutions.

(e)    Retail trade (~35%) and Manufacturing (~23%) are dominant non-agricultural activities in the country.

Organized retail and automation in manufacturing are a potent threat to these traditional sources of employment to traditionally skilled and semi-skilled workers. The redundant traditionally skilled and semi-skilled workers would obviously be competing with the unskilled labour in construction and “gig work” space, leading to massive underemployment, mis-employment and unemployment.

Some more on this on Tuesday.

Trivia

Regardless of the government data, the telecom sector may have created most of the incremental employment opportunities in India in the past two decades. From Gangotri to Kanyakumari and From Tawang to Kutch, wherever you go, it is common to find small shops selling telecom products (prepaid cards, mobile phones and accessories) and phone repair services. Telecom is also at the core of the entire new economy and startup ecosystem. However, unlike the traditional employment provider textile, the government has never promoted the telecom sector. To the contrary, efforts have been made to weaken the sector.

National Sample Survey Organization (NSSO) recently published a very interesting report. The report highlights how an average Indian uses his time. Based on a survey conducted between January and December 2019, the report describes how Indian household uses their time especially on unpaid caregiving activities, volunteer work, unpaid domestic service producing activities of the household members, learning, socializing, leisure activities, self-care activities, etc.

The key finding of the survey (conducted for persons aged 6yrs and above) could be listed as follows:

Engagement of people in various activities

·         The percentage of women engaged in employment and related activities is very low (18.4%) as compared to male (57.3%). The percentage of rural women in employment is higher (19.2%) than the urban women (16.7%).

·         More rural women (25%) produce goods for own use than the urban women (8.3%).

·         About 81% women provide unpaid domestic services for household members. This ratio is almost similar for rural (82.1%) and urban (79.2%) women.

·         The culture of volunteering for social work is very poor in the country. Only 2.4% people were found to be engaged in unpaid volunteer, trainee and other unpaid work. The rtio is very similar for rural and urban population; and also for male and female members.

·         Only 21.9% of people are found to be engaged in any learning activity. This is worrisome for a young country who aspires to be technology leader of the world.

·         Over 91% people engage in socializing, community participation and religious practices. About 87% people engage in cultural activities, leisure, mass media and sports activities. The proportion of people engaged in these activities is similar in rural and urban areas; and also for male and female members. This explains the poor productivity, massive disguised unemployment & underemployment. It must be a cause of worry for the policy makers; but a strong indications for the corporate planner trying to sell goods and services to these people.

Time spent on various activities

·         On average Indian household spend 11.4% of their time on employment and related activities. For male this ratio is 18.3% while for female it is just 4.2%.

·         About 9% of time is spent on unpaid domestic services. Male members spend just 1.7% of their time on unpaid domestic services, while for women this ratio is 16.9%.

·         A miniscule 0.1% of time is spent on volunteer work.

·         Indian household in rural and urban areas spend less than 7% of their time on learning; while almost 19% time is spent on socializing, leisure, mass media and religious practices etc.

·         Over 50% time is spent on “self-care and maintenance” activities. For a lower income country like India this sounds rather ostentatious.

A few weeks ago, National Statistical Organization (NSO) released results of two important social sector surveys, i.e, Health and Education. The surveys conducted as part of 75th Round of Natinal Sample Survey (NSS) between July 2017 and June 2018, highlight some very important trends in household expenditure on Helath and Education. The key findings of the surveys are listed below:

State of "Healthcare" in India

• About 7% of rural population and 9% of urban population reported suffering from some ailment during the 15days reference period. 28% of people in 60yr+ category 11% in 45-59yr category reported ill.

• Since 2014, there has been a marked decline in number of people suffering from anemia and tuberculosis.

• About 3% of population required hospitalization in past 365 days. The rate of hospitalization was much higher (8.5%) in case of people above 60yr of age. On an average, about Rs. 16,676 in rural India and Rs. 26,475 in urban India were spent on medical expenditure for hospitalization.

• About 42% of population availed treatment in Public hospitals, 55% of population availed treatment in Private hospitals and 2.7% of population availed treatment in Charitable/ trust/ NGO-run hospitals.

• 95% of patients preferred allopathic treatment.

• About 14% of the rural population and 19% of the urban population had health expenditure coverage. Among them, about 13% of rural and 9% of urban population were covered by Government sponsored health insurance.

• Rural households primarily depended on their ‘household income/savings’ (80%) and on ‘borrowings’ (13%) for financing expenditure on hospitalisation. Dependence of the urban households on their ‘income/savings’ was slightly more (84%) for financing expenditure on hospitalisation, than on ‘borrowings’ (about 9%).

• In rural areas, about 90% childbirths were institutional (in Government/private hospitals) and in urban areas it was about 96%. Among women in the age-group 15-49 years, about 97% of women took pre-natal care and about 88% of women took post-natal care.

• Surgery was done in about 28% of hospital childbirths in India. In Government hospitals only about 17% of childbirths were surgery cases and, in Private hospitals about 55% of childbirths were surgery cases.

• In rural India, only about 28% (48% male and 10% female) aged persons (60yr above) and in urban India 33% (57% male and 11% female) aged persons are economically independent. The dependent aged persons are mostly supported by their own children (79% rural and 76% urban) or spouse.

• About 59% of boys and 60% of girls at all-India level had been fully immunised (i.e., received all 8 prescribed vaccinations). About 95% of children in rural India and 86% of children in urban India had received any vaccination from Government/ Public hospital (including HSC/PHC/CHC/Aganwari centre/mobile medical unit).

Household expenditure on Education in India

• Average household size in India is 4.3 (4.5 in rural areas and 3.8 in urban areas). Average no. of persons aged 3-35years per household was 2.4.

• Literacy rate among persons (aged7 years and above) in India is about 77.7%. Literacy rate is higher in males (84.7%) vs female (70.3%).

• ~32% of rural youth (15yr and above) and 14% of urban youth is still illiterate. Only ~6% rural population and ~22% of urban population is graduate or higher degree.

• In rural areas 92.7% of households and in urban areas, 87.2% of households reported availability of primary school within 1 km from the house. While only about 38% of rural households compared to around 70% of urban households reported secondary schools within such a distance.

• In rural areas 46.1% of males and 40.7% of females in the 3-35years age-group were currently attending educational institution. In urban areas these percentages were 46.7% and 42.6% respectively for males and females.

• 96.1% of students were in general education and remaining were in technical/professional education. Among the male students pursuing technical/professional education, 41.6% were pursuing engineering compared to 28.2% among the female students and 4.9% of the male students were pursuing medicine (which includes nursing) compared to 13.8% of the female students.

• In rural areas, 44.2% of the students at pre-primary level, 73.7% at primary level, 76.1% at upper primary/middle level, 68.0% at secondary & higher secondary level and 49.7% at graduate and above level attended Government institutions, while in urban areas, 13.9% at pre-primary level, 30.9% at primary level, 38.0% at upper primary level, 38.9% at secondary& higher secondary levels and 41.0% at graduate and above levels attended Government institutions.

• 77% of the students studying in Government institutions were receiving free education (nearly 81% in rural areas and 62% in urban areas). Percentage of students studying in private unaided institutions and receiving free education was nearly 2% in rural areas and 1% in urban areas.

• Nearly 14% students attending formal education received scholarship/stipend/ reimbursement for different level of current attendance.

• Average expenditure (Rs.)per student incurred during the current academic session for basic course was nearly Rs.8,331 for general courses, Rs.50,307 for technical/professional courses.

• Nearly 20% of students attending pre-primary and above level (21% of males and 19% of females) were taking private coaching in India. Incidence of taking private coaching was maximum at secondary level. (31% of male students and 29% of female students).

• Average expenditure in the current academic session for studying medicine in was Rs.31,309 in government institutions, Rs.1,01,154 in private aided and 94,658 in private unaided institutions. For engineering course, the expenditures were Rs. 39,165, Rs. 66,272 and Rs.69,155 in government, private aided and private unaided institutions respectively.

• Percentages of persons in the age group of 3-35 years dropping out of studies were nearly 14% in rural areas and 10% in urban areas. Among the ever enrolled persons of age 3-35 years, nearly 41% of males and 40% of females were not currently attending education in rural areas.

• Nearly 4% of rural households and 23% of urban household possessed computer.

• Among persons of age 15-29 years, nearly 24% in rural areas and 56% in urban areas were able to operate a computer.

• Nearly 24%of the households in the country had internet access in the survey year, 2017-18. The proportions were 15% among rural households and 42% among urban households. Nearly 35% of persons of age 15-29 years reported use of internet during the 30 days prior to the date of survey.

Observations

1.    The rural-urban and gender divide is still meaningful in the area of education and healthcare.

2.    The dependency ratio is very high for the aged. The social security penetration is abysmally low.

3.    Health insurance coverage continues to be low; thohg some improvement has been seen in past 5 years.

4.    At ~60%, immunization program coverage is very low.

5.    The traditional medicine system of India has lost its relevance.

6.    The average household size in urban India has fallen from 5 to below 4. One child is becoming a norm.

7.    Only ~4% students are taking professional/technical education.

8.    At secondary level, more than 60% rural children have to travel more than 1km to go to a school.

9.    Despite, more than two decades of total literacy mission, one third of rural youth are still "illiterate".

10.  Only one fourth households in the country have internet access. In rural areas the internet access is limited to just 15% of households.