India likely to create 16 lakh fewer jobs in FY20: SBI Report
The country is reading itself for the new financial year 2020-21 with a hope of seeing a fruitful and encouraging Union Budget but the latest report...
The country is reading itself for the new financial year 2020-21 with a hope of seeing a fruitful and encouraging Union Budget but the latest report released by State Bank of India (SBI) has thrown a stone that panics India. SBI in its research report – Ecowrap - released on Monday, January 13, 2020, said, the economic growth which is expected to grow at 5% in FY20 has hurt employment generation. Slow growth in payroll/job creation has become visible now.
The report and the slowing economy gives a reason to be worried about the job creation opportunities in the next fiscal. It raises a question that will the government and its initiatives to be announced via budget will be able to compensate for the joblessness that has been created in almost every category of employment or will just end as a speech?
The report in its projection for FY20 says at least 15.8 lakh fewer formal jobs will be created in India in this fiscal as compared to 89.7 lakh new payrolls in FY19. As per the calculation is done by the report, during April-October 2019, the actual net new payroll was 43.1 lakh which annualised comes out to be 73.9 lakh for FY20.
The EPFO data primarily covers low paid jobs as the salary is capped at Rs15,000 per month. 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 Central 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.
The report talks about trends that are apparent from the payroll data and they are
1. The payroll creation is the sum of existing and new payroll, with existing payroll the aggregation of the extent of formalization and second job. New payroll is the first payroll creation.
2. The extent of formalization has declined steadily and is now at 9.5% of the overall payroll creation (11% in FY19). The extent of formalization could decline further and this implies that GST collections are unlikely to recover significantly towards the Rs1.1 lakh crore threshold that the Government expects in coming months.
3. 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.
4. The prospect of lower payroll creation in Government indicates that the Government is not recruiting new payrolls in lieu of retiring Government employees.
5. In its estimate based on RBI KLEMS data, the bank said that labour productivity growth has remained stagnant during FY15-FY19. It says, such low and stagnant productivity will encourage corporation and household to borrow more, which will be deleveraged later, which will delay consumption growth and in return can create a big risk to economies and fiscal systems.
6. It finds 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. The remittance data shows a decline in remittances in states like Assam, Bihar, Rajasthan, Odisha & UP. The delay in resolution cases under IBC may have prompted companies to downsize their contractual labourers.
7. EPFO should take utmost care to remove the niggling problems with the EPFO data.
The report, which is out in public at present, suggests that poor job creation will build pressure on the government on joblessness, which is already facing few challenges like student-led protests on the streets as well as weakest economic growth in a decade.
It seems that the Modi Government's November 8 2016, decision to declare almost 86 per cent currency notes of the country as an invalid and unprepared launch of the GST are two big reasons that had an impact on corporations and corporates, who planned to either reduce the number of jobs or create fewer jobs. Besides in a hunt to the divestment of several PSUs like BPCL and Concor among others, the government has stopped itself from hiring new faces against retiring Government employees.