India’s formal employment sector much larger than previously thought India’s formal employment sector much larger than previously thought

India’s formal employment sector much larger than previously thought
08 Feb 2018

India’s formal employment sector, especially non-farm payroll, is substantially larger than previously believed, the Economic Survey 2017-18 suggests.

The report defined 'formal employment’ in two separate ways: when employers provide some kind of social security to their employees, and when they are part of the tax net.

According to the study, 60 million people are formally employed from a social security perspective. Adding in the estimated 15 million government workers (excluding defence), the total rises to 75 million.

This figure amounts to 31% of the non-agricultural workforce, which is estimated to be 240 million by The National Sample Survey Office’s Employment-Unemployment Survey.

When ‘formality’ was defined in terms of being part of the Goods and Services Tax net, the formal sector was found to account for 53% of payroll, the equivalent of 112 million people. If government employment is added, the total population count increases to 127 million.

According to Bloomberg, India lacks a proper data set to track job creation effectively, which means that economists tend to use various proxies to make estimates.

A recent research paper using Employee Provident Fund Organisation (EPFO) data forecast that India will add seven million jobs to the economy during fiscal 2017-18 . But other economists have warned that the addition of new EPFO members to the figures does not automatically mean an increase in net new jobs.

The government’s own Labour bureau, which conducts a quarterly employment survey across labour-intensive industries showed that between January and March 2017, job creation stood at 185,000 compared with 122,000 in October-December 2016, and 32,000 in July-September 2016.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

 

India’s formal employment sector, especially non-farm payroll, is substantially larger than previously believed, the Economic Survey 2017-18 suggests.

The report defined 'formal employment’ in two separate ways: when employers provide some kind of social security to their employees, and when they are part of the tax net.

According to the study, 60 million people are formally employed from a social security perspective. Adding in the estimated 15 million government workers (excluding defence), the total rises to 75 million.

This figure amounts to 31% of the non-agricultural workforce, which is estimated to be 240 million by The National Sample Survey Office’s Employment-Unemployment Survey.

When ‘formality’ was defined in terms of being part of the Goods and Services Tax net, the formal sector was found to account for 53% of payroll, the equivalent of 112 million people. If government employment is added, the total population count increases to 127 million.

According to Bloomberg, India lacks a proper data set to track job creation effectively, which means that economists tend to use various proxies to make estimates.

A recent research paper using Employee Provident Fund Organisation (EPFO) data forecast that India will add seven million jobs to the economy during fiscal 2017-18 . But other economists have warned that the addition of new EPFO members to the figures does not automatically mean an increase in net new jobs.

The government’s own Labour bureau, which conducts a quarterly employment survey across labour-intensive industries showed that between January and March 2017, job creation stood at 185,000 compared with 122,000 in October-December 2016, and 32,000 in July-September 2016.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

 

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