CII estimates that in the last four years, just the MSMEs have created anywhere between 1.39 crore and 1.45 crore net new jobs. Here’s how they arrived at the data.
New Delhi: What has the Narendra Modi government done to create jobs? This discussion has been making waves in the media for the last year or so. From lakhs of devotees attending Kanwar Yatra to crores attending the Kumbh Mela, self-styled experts have used vivid imagination to ‘prove’ that India has a jobs problem.
One reason why there is no consensus on this topic is because there is no structured payroll survey in India.
The National Sample Survey Office (NSSO) conducts a periodic household survey to on employment. This survey is done every few years and the report of the 2017 survey is yet to be formally released. As per leaked and unverified reports of this NSSO survey, the rate of unemployment was high at 6.1%. However, since the government has not tabled the full report and details of sampling inclusions and exclusions are not known, the media reports remain a conjecture.
Then there is the Centre for Monitoring Indian Economy (CMIE), which relies on monthly estimates of about 150,000 household samples and periodic sample size boost to 500,000 plus. The sampling details are not released. But the last CMIE data from January showed unemployment was at 7.1%.
To fill the gap of the payroll survey, Professor Pulak Ghosh of Indian Institute of Management, Bangalore and Soumya Kanti Ghosh, an economist at State Bank of India, created a methodology, which relies on the data from the Employees’ Provident Fund Organisation (EPFO), launching a new initiative in 2017. This methodology has evolved significantly since, with Ghosh and Ghosh clarifying and finetuning various assumptions on payroll data. Their view is that India added almost 60 lakh net new jobs in 2018.
None of these methodologies is truly payroll-based, where the data is collected from the employers themselves. The Confederation of Indian Industry (CII), the flagship industry association in India, recently undertook a survey of the micro, small, and medium enterprises (MSMEs), asking them directly, how they saw the jobs picture evolving.
This CII survey is the first of its kind payroll survey, where the job givers and creators were directly responding, rather than sampling working individuals or extrapolating intermediary data. As many as 105,347 MSMEs from across industries and across the country responded to this survey. These firms were located in 28 states and 2 union territories, covering 350 industrial centres in the country and 388 SME clusters in these centres.
The survey results are eye-popping. As per the respondents, the net new job creation grew at 3.3% per year over the last four years. Extrapolating these numbers to the universe of the firms in the country, CII estimates that in the past four years, anywhere between 1.39 crore and 1.45 crore net new jobs have been created.
The highest contributing sectors for new jobs were hospitality and tourism, textiles and apparels, and metal products. Machinery parts and transport and logistics made up the top five sectors with the highest job creation.
Maharashtra, Gujarat, and Telangana were the top three states to create new jobs. This should not come as a surprise given that Maharashtra and Gujarat have accounted for a lion’s share of net new foreign investment, which in turn creates jobs for smaller local players. In terms of export-oriented jobs, Maharashtra, Tamil Nadu, and Telangana topped the list.
I can vouch for this first-hand. My own customer base is MSMEs. The near AND medium term outlook is bullish. As for the jobs part, well, my industry will continue to create more jobs (automation has an impact, but factored in). The recent relief to MSMEs has helped #MODIfiedJobs https://t.co/sXO5GuRAg2— Old_School_Engineer (@a_muglikar) March 9, 2019
Another interesting feature of this MSME survey was future expectations. The respondents came out very bullish about the future of jobs in the short term. These respondents expected employment to grow by a whopping 21% in the next year and 34.9% over the next three years. This positive outlook, despite the political risk of an election year, shows buoyancy in the economy.
Most respondents were also confident of creating more new jobs themselves in the next three years. While the Micro enterprises created an average of 2.7 new jobs in the last four years, Small Enterprises 5.4 new jobs, and Medium Enterprises 10.7 new jobs, they expected to add an average of 3, 7.5, and 8.1 new jobs in the next three years.
Almost 21% of the new jobs created by the respondents came from export-oriented sectors. India will likely finish the financial year 2018-19 with highest ever single year exports of $330 billion, it is hardly surprising that more enterprises are participating in this growth. Almost 59% of all new export-oriented jobs were created in the micro enterprises sector according to the CII report.
The CII clarified that their survey was not comparable to EPFO and Employees’ State Insurance Corporation (ESIC) data. The EPFO registration is mandatory only for firms with more than 20 employees, while the ESIC is applicable for firms with more than 10 employees. Most of the respondents in the CII survey were smaller firms.
The government measures like providing interest subvention for MSMEs creating jobs and making new investments and establishing a Trade Receivables Discounting System (TReDS) stood out as key enablers for growth.
Almost 66% of respondents said that they were able to fill their job vacancies in one month, an indicator that the skills gap in the economy was being addressed through various government and private initiatives. However, 52% respondents also felt that the average time taken to fill a job vacancy had actually gone up in the last four years. This may point towards a shifting skill set universe and a supply-demand dynamic showing that there were enough jobs on offer for those looking to work in this sector.
For too long, proprietary sampling methodologies have dominated this field. Whether or not these samples account for evolving economic environment and industry shifts remains a matter of conjecture.
The EPFO and ESIC data will eventually settle down once the effects of incremental formalisation of the economy reduce. This data can form a good long-term reconciliation against payroll data. The CII survey is a good first step towards using payroll data for understanding India’s job dynamics. Between these two methodologies, with more transparent sampling via NSSO and other agencies to establish a better qualitative view, India needs to get the labour reporting act together.
Meanwhile, MSMEs continue to be a critical part of India’s formal but fragmented economy. And it appears that they are creating jobs all around us.
The views and opinions expressed in this article are the personal opinions of the author. The facts, analysis, assumptions, and perspective appearing in the article do not reflect the views of MyNation
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Last Updated 9, Mar 2019, 4:46 PM