Jobs outside formal economy not getting counted; more informed debate needed, says FM

According to the finance minister, the current debate on employment focusses only on jobs in the formal economy

Finance Minister Nirmala Sitharaman has called for a more informed discussion on India's employment scenario, saying the focus is far too much on what is happening in the formal economy.

In a post-budget interview on February 2 with Rahul Joshi, Editor-in-Chief, Network18, the finance minister said that if new companies were now being registered at a faster pace than before, it could not occur without the creation of new jobs.

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"The question about employment, I am afraid we are repeatedly focussing only on those indicators pertaining to the formal economy — which is important, I am not denying it. So college recruitment, IIM-like campuses, are important. But equally, the jobs that are getting created in the middle and lower order, are not getting counted at all," Sitharaman said.

Moneycontrol reported on January 3 that some premier Indian Institutes of Management (IIMs), which normally achieve 100 percent placements in just a couple of days, have been struggling for the last two months to find jobs for their students.

However, the finance minister said the employment debate in India needed more complete data.

"I think a fairer, open, and exhaustive picture of India's employment — both in the formal and non-formal areas — will have to have some kind of wider base. And we need to bring in such data so that the discussion can be more informed," she said.

As per the latest data from the government's Periodic Labour Force Survey, the overall urban unemployment held steady at 6.6 percent in the second quarter of 2023-24, unchanged from April-June 2023. At 6.6 percent, the rate of unemployment in Indian cities is at its lowest ever since the survey was started in 2018-19.

According to Sitharaman, banks' credit growth provides a good illustration of the job creation going on in the economy, especially concerning small and medium enterprises.

"Why would new companies get registered in a bigger number than before if employment is not being offered? Companies cannot operate in a vacuum without human beings in them," she said.

In its January 29 report reviewing the Indian economy, the finance ministry said that as of November 17, 2023, bank credit to micro, small, and medium enterprises had registered a Compound Annual Growth Rate (CAGR) of 14.2 percent from 2018-19 to 2023-24.