Sunday 24 October 2021
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HomeEconomyJob creation hit by slowdown: 16 lakh less payrolls in 2020

Job creation hit by slowdown: 16 lakh less payrolls in 2020

Also, migrants have been making significantly less financial contributions to their families in their places of origin from job destinations


The Indian economy is expected to expand at 5% in FY20. The slowdown is now having a visible impact on payroll creation, in simpler terms, job creation. In FY19, India had created 89.7 lakh new payrolls as per the EPFO data. In FY20, as per the current projection, this number could be at least 15.8 lakh lower, says the latest analysis by Economic Research Department of State Bank of India (SBI).

The EPFO data primarily covers many a low paid job as the salary is capped at Rs 15,000 per month. Union government jobs, state government jobs and private jobs are not part of this ambit as such data have moved to NPS, beginning 2004.

Interestingly, even in the NPS category, state and union government are supposed to create close to 39,000 jobs less in FY20 as per current trends. Hence, the number of new payrolls created in FY20 could be at least 16 lakh lower than in FY19.

There are several trends that are apparent from the payroll data, says SBI. First, the payroll creation is the sum of existing and new payroll, with existing payroll the aggregation of the extent of formalisation and, second, job. New payroll is the first payroll creation.

Second, the extent of formalisation has declined steadily and is now currently at 9.5% of the overall payroll creation (11% in FY19). The extent of formalisation could decline further and this implies that GST collections are unlikely to recover significantly towards the Rs 1.1 lakh crore threshold that the government expects in the coming months.

Third, the number of second payrolls is increasing significantly and this, coupled with the projection of a lower new payroll creation in FY20, indicates the possibility that adequate new payrolls are not being created.

Fourth, the prospect of lower job creation in the government sector indicates that the state is not recruiting new payrolls in lieu of retiring government employees.

Fifth, SBI estimates that labour productivity growth was stagnant during FY15-FY19 using the RBI KLEMS data. Such low and stagnant productivity encourages over-borrowing by corporations and households, only to deleverage later. A similar logic applies to the social and political impact of low productivity growth. The moot point is that, says SBI, such deleveraging will only delay consumption growth.

Sixth, SBI finds evidence of a decline in remittances by labourers to selected states in India in the last one year. These migrants have been making significant financial contributions to their families in their places of origin from job destinations. The remittance data shows a decline in remittances in states like Assam, Bihar, Rajasthan, Odisha and Uttar Pradesh.

It is possible that the delay in resolution of cases under the Insolvency and Bankruptcy Code (IBC) may have prompted companies to downsize their contractual labourers.

Seventh, EPFO should take utmost care to remove the niggling problems with the EPFO data, recommends the SBI.

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