Last month, the National Statistical Office (NSO) released the Periodic Labor Force Survey (PLFS) estimates for 2021-22. This is the fifth part of the annual survey that began in 2017-18. Unlike the quarterly urban surveys, which are available at intervals of a few months, the annual surveys provide estimates of employment and unemployment for India as a whole. The 2021-22 survey is important because it is the first one after the Covid pandemic.
First, the broad estimate. The total workforce or total persons employed in the economy is estimated at 542 million, which is 2 million more than in 2020-21. The unemployment rate for the country stands at 4.1%, marginally lower than 4.2% in 2020-21. Even for the population aged 15-29, which is broadly defined as youth, the unemployment rate declined marginally from 12.9% to 12.5%.
The data set indicates a recovery, but only marginal. The conditions are largely unchanged. But it is not the annual figures that cause concern. Rather, the fact that the estimates reinforce some of the trends seen since 2018-19 should worry policymakers. The PLFS estimates between 2017-18 and 2020-21 clearly show the distress in the economy – first due to the economic slowdown after 2016-17 and then its aggravation by the pandemic. The projections for 2021-22 confirm these trends.
A stronger evidence of the crisis is that the statistically observed workforce went back to agriculture, reversing the gains of structural change in the economy between 2004-05 and 2017-18. The absolute number of workers in agriculture declined by 33 million between 2004-05 and 2011-12. An almost identical decline was observed between 2011-12 and 2017-18. However, the recession and pandemic reversed this process. The agriculture sector saw the return of 36 million workers between 2017-18 and 2021-22. It was so evident that the absolute number of workers in agriculture was higher in 2021-22 than a decade ago in 2011-12. Apart from a reversal of structural change, the numbers also indicate a decline in per worker income in agriculture, making rural distress worse. Although the number of workers in agriculture is no longer growing, data show that those who took refuge in agriculture during the pandemic are yet to return to their original occupations. This indicates that the economy is yet to fully recover from the twin shocks of the recession and the pandemic.
Furthermore, the income and consumption estimates from the PLFS confirm the high degree of distress in the economy. The survey estimates also suggest that it is not only the rural economy that is witnessing slower growth in incomes, but also the urban economy, for which real incomes have declined. Per capita income from all employment sources in urban areas was 5,186 per month for the pre-pandemic year of 2018-19. By 2021-22, in real terms at 2018-19 prices, it had declined marginally 5,175 per month. For the country as a whole, per capita income grew by only 0.9% per year between 2018-19 and 2021-22. Per capita consumption in urban areas is lower than its level in 2018-19, although it has increased by 1.4% per year for the country. The decline in income and consumption is not surprising, as the PLFS data also shows that regular wages have continued to decline in real terms, with urban regular wages declining by 1.4% per year, compared to a 0.4% decline in rural regular wages. It’s fast.
The employment-unemployment estimate is an important barometer of the health of the Indian economy. Participation in economic activity by workers is as much an indicator of the level of economic activity as aggregate gross domestic product (GDP) data. The PLFS report confirms the extent of devastation caused by the pandemic and recession, which forced workers to return to agriculture. But the fact that a large number of them are linked to agriculture also suggests that the non-agricultural economy has not fully recovered. This is especially true in urban areas, where urban regular workers, who account for nearly half of all workers, are facing declining wage incomes. While the agriculture sector may have sheltered millions of people displaced from non-agriculture sectors, additional workers in agriculture are also reducing per worker income in this sector, adding to the pressure on farm incomes.
To revive the Indian economy, there is a need to increase employment in non-agricultural sectors along with an increase in income from such employment. It is also necessary for us to make the economic development of the country more employment-intensive, which would be the best remedy for poverty and distress in the economy.
Himanshu is Associate Professor at Jawaharlal Nehru University and Visiting Fellow at Center de Sciences Humanes, New Delhi
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