 Hello and welcome to NewsClick. A recent government survey, the Periodic Labour Force Report, paints a rather optimistic picture of India's employment situation. It says that the unemployment rate has fallen in India thereby indicating a kind of economic recovery after the pandemic. But the report also shows that people are returning to work in farms and agriculture. Now, the agriculture sector is on the whole impoverished and farmers struggle to make ends meet very often. So how are India's farms supporting more people than they would have to in the normal course of things? And how does this increased dependence on farming square off against the claims about lower unemployment? We're going to discuss this with the well-known development economist Dr. Sintosh Mehrotra. He has analysed India's labour sector for many years and from multiple angles. Thanks very much for joining us, Dr Mehrotra. One of the things about the latest report of the PLFS is the employment pattern seems to be shifting. You and I have discussed this literally over two decades. You may not remember but I used to always pester you about from 2004-2005 onwards, attract that the agriculture sector was getting fewer and fewer people. Sometimes the decline of employment in agriculture was high. Sometimes it was faster. But now that trend seems to be reversing or it has reversed. Can you explain why? What does this mean? This is a catastrophic development for those people who've been forced to return and it is a very serious reversal of a trajectory of structural change that the economy was undergoing all the way till I believe 2015, particularly from the early 2000s. You see, let's just go back a little bit in time because a characteristic of economic development is structural change. Structural change is characterized by a rise in the share of industry and services in their contribution to output and a rise in their share in their contribution to employment while the share of agriculture to both output as well as employment drops. Now, unlike in China, in India, the pace of structural change was relatively slow at least until 2004. So between 1950 and 2004, the absolute number of workers in agriculture was always increasing. While the share of workers in agriculture was declining, the absolute number of workers in agriculture was increasing, which was highly problematic, which itself is an indicator of slow structural change. Now, because the growth rate of the economy picked up very significantly between 2004 and 2014 to 8% per annum on average, which is unprecedented in the history of post-independence India, that non-farm jobs began to be created at the rate of 7.5 million new non-farm jobs per annum. That actually led to workers being pulled out of agriculture in such large numbers that for the first time in India's post-independence economic history, the absolute number of workers in agriculture began to fall, which is a true sign of structural change. And on average, 5.5 million workers were leaving agriculture, which had the following effect. One, it led to a tightening of the rural labor market. And as a result of Manrega being introduced in 2005, together with that, we had the following effect that rail wages began to rise in rural areas in the open market and not just due to Manrega. That had a knock-on effect on rail wages in urban areas. So while in the last few years of the previous government, the UPA government, inflation rate had gone up, the fact of the matter is that because non-farm jobs were being created at this phenomenal rate of 7.5 million per annum, the real wages continued to increase. In other words, taking into account inflation. And that's a very important fact because that is the process that in East Asia, including in China, actually resulted in poverty falling on a dramatic scale in East Asia. And for the first time in India's history over that period between 2004 and 2014, we can say that the absolute number of poor in India fell, absolute number. So while the share of poverty in India was always falling, all the way from 73 when we first started counting poverty on a consistent basis, it was always falling. The fact of the matter is that until 2004-5, the absolute number of poor was still high, just as the absolute number of poor, in other words, it was high and not falling. And just as the absolute number of workers in agriculture was not falling. So the two went together prior to 2004 and actually went together, the two trends went together post 2004 in the sense that poverty fell and workers moved out of agriculture. Now, sorry for this long background to the current situation because what happened after 2015 on account of series of policy mistakes like demonetization followed by badly designed and badly implemented GST is that you got growth rate falling after, you know, 2015-16. And then when growth rate falls consistently all the way till before COVID, it falls. And this process of people leaving agriculture slows down. It doesn't stop meaning the absolute number of workers in agriculture still declines. So from 2004 to 2019, just the year before COVID, the absolute number of workers kept falling. However, you rightly observed that 2020-21, 2022 and even up till certainly mid-23, which is the point up to which we have the PLFS data, the government data, we know that the absolute number of workers increased and increased dramatically. So much so that it was a complete reversal of the 15 years of change in agriculture. So, I mean, it is what was the shocking development happened. So while in sort of 17, 18, the share of agriculture and total employment is 42%, in 2021-22, it had shot up to 46.5%. And it has, sorry, in 2021. And then it fell slightly, but then it rose again in 2022-23. So what do you have currently? Recovery year actually, the recovery should have strengthened. Yes. So some people would have obviously come out of agriculture in sort of late 2022, rather by early 2022. But then because we find that non-farm jobs were not growing, they actually stopped coming out. So you see an increase in the share of agriculture in total employment from 2021-22 to 2022-23. Now, all of this means that this is the river, this by itself would be very catastrophic. However, it goes hand in hand with something else, which is very serious, which is why I call this a reversal of structural change. So let me just say that very briefly so that I'll let you ask your next question, which is the following. You see, as I began by saying the meaning of structural change is that the share of manufacturing increases in total output as well as in employment. And that was certainly happening all the way till from 2004-12. However, what we notice at least in terms of number of workers, however, post-2013, the share of manufacturing in total workforce begins to fall off. And what is important is that it goes hand in hand with the contribution of manufacturing to GDP actually falling also from about 15 onwards, which is really shocking because after the 1991 economic reforms, for a 25-year period, the contribution of manufacturing to GDP was in the region of 16-17 percent. It didn't fall below that. Post-2015, believe it or not, despite all the talk was about making India. But post-2015, the share of manufacturing in GDP actually falls from 17 to 15 to 14 to 13 until it begins to revive most recently. And this compounds the earlier proposition that I've been presenting to you, which is that agriculture has seen much more workers. So let me pause there. Yeah. This is very interesting and important also because I remember the Krishnamurti Committee commission was set up in the early 2000s. And then India's goal given to the committee to basically try and figure out how we do this was to take the manufacturing employment from 15 to 25 percent, believe it or not. But I think under this government's term for the last 10 years, we've seen the peaks are consistently falling. Now, agriculture to manufacturing, but in the middle, we have something called self-employment. And the PLFS paints a very dark picture on that front. Have we ever seen such a massive rise? I mean, this relates to women working more and more for no pay at all. I find that personally upsetting. I'm sure lots of women would be extremely angry to even hear that we recognize this as a job. Can you explain why this is happening? Also, please put it in the context that about a decade ago, this trend had started that the number of women workers was declining. They were studying more as the reason that was given. So now are they going back to, what are they going back to? What are these women likely to be doing? Yeah, I think you put your finger on two very important trends, that of unpaid family labor and how that's associated with women. So what I've just been saying about the increase in the number of workers in agriculture has gone hand in hand with the fact that workers went back, most of those were males. And also simultaneously, you see women who had left the agricultural labor force and were leaving it until 2012 because there was mechanization taking place in agriculture to a much greater extent, not just because young girls, both under six as well as those between six and 14 were going to school. So both things were happening on the mechanization side. It led to less educated women who were earlier in agriculture falling out and young girls were going into school so they were not joining agriculture. So this is also part of that whole process of the decline in the labor force, two or three processes which you pointed your to. Now the interesting thing you also pointed out and rightly so which has been interestingly claimed as a great success that there has been job full growth by government economists that the you see if unpaid family labor increases in the way we define employment in the PLFS that's counted as employment. Unpaid family labor is still employment that leads to the labor force participation rate increasing, worker participation rate increasing and unemployment falling which is what you've seen in the PLFS since 2017-18 and now and the government claims this as a great success. In fact, it is the exact opposite far from being a success it is the exact opposite. Let me explain that CMI which has an internationally compliant IOLO compliant definition of employment versus work does not regard unpaid family labor as employment and hence not only is the size of its total labor force smaller and workforce smaller its unemployment rate is higher which is why what was making news till about you know about 10 days ago you will recall was the highest ever open unemployment rate of 10.07 in the economy. Now that is because their definition of employment is compliant with the IOLO definition. We continue to use an age-old definition of employment which regards unpaid family labor is employment. Now let me explain to you but let me give you some numbers on how much has been the increase in the total number of unpaid workers please appreciate the following. Please appreciate the following I was saying to you earlier that between 2004 and 2014 the absolute number of workers in agriculture was falling simultaneously to that the absolute number of workers in who were called unpaid family labor fell from 100 million in 2004 to 74 million in 2012 which means sort of 10 crore down to 7.4 crore okay in a 7-8-8 year period. Now notice what happens that number continues to fall all the way to 17-18 which is what I was saying to you that people are leaving agriculture and among them are also women so that number from 74 million in 12 falls to 55 million in 2018 okay in other words 7.4 crore drops to 5.5 crore right after 17-18 or up to 9 after 19 in particular it begins to rise and has not stopped rising so can you imagine we're at the following situation in the last six years that you know PLFS has been put out since 17-18 to 22-23 the absolute number of unpaid family labor has gone up from 55 million to 95 million a 40 million increase is 45 40 million increase from 55 to 95 million is that a sign of distress totally a sign of distress because what has happened here I'm talking about rural only now I'll just tell you the numbers for urban because that same problem is occurring in urban areas as well and both together are showing up as an increase in labor force participation and in workforce participation and together that's showing up as a decline in unemployment and the government is building the narrative and selling this narrative across the country and the globe and especially in its election campaigns now that unemployment is falling and that's because oh there's been a fantastic recovery so so this is a false narrative they're absolutely literally lying and you have a situation where unpaid family labor means essentially that I mean following situations can arise in rural areas that women and this is particularly true for men but sorry for women it's not but though it's not true only for women that you know family farms which are earlier not being which were left being left fallow they are coming in to sort of that farm is being tilled may the man has come back so some parts of the of the family farm several two or three brothers one was working outside one was working there so some part of the family farm was not being farmed now the returning husband and the wife begin to it's not just that young girls have rejoined young girls have have joined agriculture and they are among the unpaid family but in the urban areas you'll find the following phenomenon that earlier the man would run the shop pretty much on his own and had a hired worker now casual work is that was a casual worker that hired worker that's right casual workers so share of casual workers is dropping unpaid family labor in urban areas has gone up from 7.3 million in 1718 or 1819 to 9.2 million in 2223 so in other words that same phenomenon is happening in urban areas as well so this is a sign of distress and this is this shows up in something else let me explain it shows up that it because non-farm jobs have stopped growing regular share of you see there are three types of employment in our economy one is self-employed of which there are mainly two parts one is the own account worker and the other is unpaid family labor and there is an increase in own account worker so own account worker in the rural areas would consist of that person who comes back and starts stealing his farm okay okay so he's the cultivator he starts stealing his farm so these are the two categories own account worker and unpaid or he may be running a little shop or he may be running his his little craft or whatever because he could very well have been a potter or something earlier and he comes back to his pottery work some you know I'm talking about rulers now so what what you what you get in fact is these things showing up in real wages meaning real wages which had earlier been growing all the way till 12 had begun to slow down till 17 18 actually stagnate thereafter in real terms partly because inflation has gone up and partly because the jobs are not there therefore nominal wages are not going growing so sharply recall right recall compared to this earlier the real wages had been increasing because non-farm jobs had been growing I'm talking about 2004 to 14 right yeah let me pause there no so so then what you know the agricultural workforce is climbing in numbers the casual workers going down I think even the construction worker is going down which was the biggest source of employment even in that time when you know people were leaving agriculture one of the critiques of the Indian economy at that time used to be that well you know you're creating jobs and construction what's so great about that but now we don't have even that you know growing at the same base casual is down agriculture is high women are not earning money men are also not earning money so how does how does one understand not just the economic but you see I consider the politicians the best weatherways why why is there so much silence on this are people living off the gains that they made in that high growth phase is that what is keeping people afloat well my gut feeling is that what's people what's keeping people afloat is dissaving meaning whatever savings they had they're running those down because they're in their wages are not growing up meaning real wages are not growing so what you're seeing at the macro level in the in the statistics is the following that consumption is not rising and if consumption is not rising how are people keeping afloat they're dissaving so saving is a proportion of GDP has has come down household savings is what I'm talking about particularly it has come down to about 20 21 percent from about 24 percent or so household savings so and people have borrowed and that's how they are keeping themselves afloat so that's really what is what is happening so in this context the narrative that you are hearing about poverty haven't come down to 1 percent and if that was the case why is the government having to give 80 crore people free rations it's giving free rations because it doesn't want a backlash in elections it has created a labharti class among the poorest particularly those who came back to the villages and those I mean are surviving on the strength of manrega in rural areas that's right or they're surviving on whatever minimum casual wages that are casual work that is available because you're you're right casual work is less available I just want to make a correction on in respect of construction you see construction jobs I have to tell you have not fallen off they've slowed in their increase but ever since ever since 13 they've gradually continued to climb so to so for instance in 17 18 there were 3.8 crore construction jobs today there are 5.6 crore that's for males that's for males and though I see that that's that that I mean for females there is some increase but there is not that much of an increase so actually so correction is the following what we noticed was that even post 17 18 please remember 17 18 was the year of the highest open unemployment rate in 45 years you probably remember that right now what the government then realized was that you see because of their NPAs the banks were not lending to industry and to construction sector etc because their NPAs are client so what the and they're because of the strict regime put in place by Raghuram Rajan as well as by Urjit Patel you know the NPAs got exposed now what now government got very worried on account of that because the economy was obviously slowing as a result of the of credit slowing down so what the government did was to tell the banks because they are public mostly public sector banks they're a public sector dominated economy to lend to NBFCs non-banking financial companies NBFCs were the ones which lent to construction companies please remember that construction companies had seen their inventory rising because consumption had been dropping because of growth falling all the way till 2020 so so what so the government came in and said told the banks you lend to NBFCs let the NBFCs lend to construction companies okay okay so the result of that was that construction companies continued to stay afloat and create create some jobs however there was a foundational flaw in this in the design of NBFCs borrowing because NBFCs borrow short when they are lending long to construction sectors for long periods they are borrowing for short period that model collapsed when one or two you know I remember that sort of what was that DHL and then one or two other NBFCs they began to collapse when they collapsed that crisis again stopped the growth in lending and also slowed down construction so you know the economy has been has undergone multiple shocks mostly on account of economic policy mistakes and that's how we are where where we currently are where the government is having to spin a narrative about low unemployment and high work you know growth when in fact the growth is high only because the economy contracted very severely by 6.6 percent more than twice the contraction of the global economy during covid and that's why the rebound has been faster and so it's while it's true that we are we might have grown at six and a half percent we will grow at about six six point three percent this year we might have grown faster earlier we are slowing down we are unlikely to continue to grow but the point is the world is growing slower so you know we suddenly become the fastest growing large economy of the world and we then keep start patting ourselves in the back the factor the matter is if we want to reduce poverty want to create jobs in the non-farm sector we have to grow at nothing short of eight percent and that's where we are not so our potential is much greater we are not growing at that rate and we are certainly not generating the non-farm jobs that's a very worrying picture you're painting Dr. Mahirotra but it's can't be heard because it's the government's figures which are telling us what's happening thank you very much for joining us and thank you for sharing your insights with us before you go I wanted to also you know sort of remind our viewers that recently in another interview at another channel you you had actually said that the total net unemployment figure in India has grown by roughly three times um you know can you just explain the source of this figure like how do we get yeah the source of the figure is very straightforward it is the same uh national sample the national survey organization of india which is part of the ministry of statistics which till 2012 which is the which is the data point that I was citing uh used to do what was called the employment unemployment survey and it used to be done every five years and since then from 17 18 it has started it is being done every year so there's an annual survey and that's called the periodic labor force survey and what I estimated was that in 2012 uh the absolute number of unemployed was 10 million one crore and in 17 18 which is the year that we know very well as the year which had which saw the highest unemployment rate in our country for 45 years the total unemployed had shot up by three times to 30 million or three crore since then uh the the after 17 you know the growth rate slowed all the way till the beginning of 2020 for nine quarters right and then we had a national lockdown very badly designed very poorly planned and which imposed a national lockdown on a country of 140 million billion people at four hours notice the result was that the economy came to a standstill now that led to more unemployment and we currently have have added another seven or eight million to the total unemployed so and in addition please note and in addition you have the following phenomenon the which we have been discussing here that if people are appearing as though they are employed it's only because of unpaid family labor having gone up by 40 million please recall what I and in rural areas and if you add the five five million in urban areas that 45 million are unpaid family labor increase alone right you if you were if you had a nationally compliant definition of unemployment you need to add that 45 million as well absolutely so let me let me close by giving you uh what worries me about our country our demographic dividend will run out in another 15 to 17 years before 2040 okay and we currently have three groups of people who need non-farm employment one is of course the stock the excess stock which we have in agriculture which needs to be pulled out which was true prior to covid meaning meaning meaning that you see in 2019 itself 42% of the total workforce was contributing only 15% to GDP which is the agriculture's contribution 42% were working in agriculture two or three more sentences and that share has only increased so you got to pull workers out of agriculture one two the absolute number of stock of unemployed I've already mentioned to you and third are those who are joining the labor force every year which is about 5 to 6 million per annum who are turning 15 having gotten educated so three groups who need to be employed and therefore we need to generate at least 10 to 12 million new non-farm jobs every year thank you very much again dr. Melota