New Delhi: Amid criticism from the opposition on a lack of adequate employment opportunities, the ruling Bharatiya Janata Party often cites the monthly data from the Employees’ Provident Fund Organisation (EPFO) to show that the formal sector employment is growing in India.
It has also introduced several recruitment drives to show that it’s focussing on the country’s job growth.
However, none of the initiatives appear to have helped create enough jobs in the economy. These initiatives, coupled with dismal data, come at a time when high inflation is threatening economic recovery.
Firstly, as per economists, the EPFO monthly data is flawed. Moreover, it captures only a small portion of the formal sector employment.
EPF or Employees’ Provident Fund is a government-established savings scheme for employees of the organised sector. The EPF interest rate is declared every year by the EPFO, which is a statutory body under the Employees’ Provident Fund Act, 1956.
In 2018, the Narendra Modi-led government started a new initiative to release monthly EPFO data to measure employment in the formal sector. It covered the “payroll” data starting September 2017.
The question is, has it achieved its goal?
According to CMIE’s Mahesh Vyas, writing in the Business Standard, this “payroll” data is the net addition of EPFO subscribers in a month. This is the gross additions less exits but including re-subscription of exited members every month.
The EPFO continues to release its annual estimates as well.
The latest edition of the annual EPFO data for 2021-22 – which was released in December – showed a slowdown in job creation in the formal sector.
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During 2021-22, 46.34 million members contributed to the EPFO – only 0.06 million higher than the contributing members in 2020-21, Business Standard reported.
However, the 46.34 million contributing members in 2021-22 is much lower than the 48.92 million contributing members seen in the pre-pandemic year of 2019-20, the newspaper reported.
Simply put, EPFO contributions had not recovered to its pre-pandemic levels till at least 2021-22. In fact, It had declined by 5.3%, the report added.
The contributing establishments have declined from 660,204 in 2019-20 to 591,184 in 2021-22, the EPFO annual reports show. It’s a massive 10.5% decline during these two years, the business daily said.
However, the number of EPFO contributions, as per the annual estimates, do not match with the monthly data, the daily said.
An analysis of the monthly data by the newspaper showed that the net addition to EPFO subscriptions grew by 7.7 million in 2020-21 and by another 12.2 million in 2021-22. This implies a 20 million net increase in EPFO subscribers.
This is dramatically different from the annual reports placed in parliament that suggest a fall of 2.6 million in the same period, the report said.
The monthly data released are provisional estimates, which are revised multiple times, or even not revised at all. They are released with a lag of less than two months.
For instance, the latest monthly EPFO data – which provides the provisional estimates for October 2022 – was released on December 20, 2022.
The newspaper examined revisions to the estimates of April 2021.
The first estimate of net addition to EPFO subscribers in April 2021 was 12,75,729. This estimate was released in June 2021. It was revised downwards in each subsequent release till the release dated May 2022. By then, the April 2021 estimate fell by a massive 45% to 698,876.
Similarly, the first estimate for May 2021 released in July 2021, which was 919,772, dropped to 441,760 by May 2022. This was a 52% downward revision in 11 months.
After the revisions, the numbers seem to go substantially downward, which means, the initial monthly estimates of the EPFO can be significantly misleading.
Note here that the annual estimates are never revised.
“The twist in these revisions is that they are available for a month till all the monthly data for its financial year are released. So, the first release of April sees 11 revisions in as many subsequent months, May sees 10 revisions, June sees 9, and so on till the March release, which never sees a revision. This is strange, and an unsatisfactory position because it produces a monthly time series of net EPFO subscriptions that has data of varying levels of reliability,” writes Vyas, MD and CEO of the Centre for Monitoring Indian Economy (CMIE).
He also raised a question on whether the April 2021 estimate that was last revised in May 2022 was the final estimate or were there more revisions that were never released.
The annual report, therefore, is still a better provider of the employment data. And, it suggests that employment fell in the formal sector during 2020-21 and stagnated in 2021-22, Vyas said in the report.
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The CMIE, on the other hand, which is based on a large household survey, titled the ‘Consumer Pyramid Household Survey’, is a better indicator of employment and unemployment.
It showed that India’s unemployment rate rose to 8.3% in December, the highest in 16 months, from 8% in the previous month.
The survey machinery generates consumer sentiment indices and unemployment rate.
The consumer sentiment index is based on the responses to five questions on the lines of the Surveys of Consumers conducted by University of Michigan in the US. The five questions seek a household’s views on its well-being compared to a year earlier, its expectation of its well-being a year later, its view regarding the economic conditions in the coming one year, its view regarding the general trend of the economy over the next five years, and finally its view whether this is a good time to buy consumer durables.
The unemployment rate is computed on a current daily basis. A person is considered unemployed if she says that she is unemployed, is willing to work and is actively looking for a job. Labour force is the sum of all unemployed and employed persons above the age of 14 years. The unemployment rate is the ratio of the unemployed to the total labour force.
Separately, despite a year-long recruitment drive to fill reserved vacancies in the Indian Institutes of Technology and Central Universities, only around 30% of faculty vacancies were filled, The Wire had reported.
According to a BBC report, only a little over 2% of the workforce have secure formal jobs with access to social security, which includes an EPFO account, and written contracts of more than three years.