Editorial 1 : The employment stories
Introduction: The employment analysis in India is a complex task. As more refined data comes on employment, disagreements over the interpretation of those data happen more frequently.
Analysis of employment data from 1983 to 2023
- NSSO data from 1983 to 2023 is analysed to gauge the changing nature of employment.
- It is found that since 1983 for every sub-period under consideration, principal employment has grown.
- There has been no period that has seen any jobless growth.
- Principal employment measures those working for the bulk of the year as opposed to subsidiary employment, which is predominantly part-time, of shorter duration and is in addition to the principal activity of a person.
- Therefore, only principal employment is included in the calculation of employment.
Findings from the analysis
- In that period, the fastest increase in employment has been from 2017-18 to 2022-23 when about 80 million additional employment was reported.
- This translates to about 3.3 per cent growth annually, much higher than population growth during the period.
- It is also found that this growth is very well spread — rural and urban sectors, manufacturing, agriculture, construction and services, age segments, women, etc.
Growth in the employment of women and older citizens
- Interestingly, the growth has been highest for women during this period, by more than 8 per cent annually.
- Also, it is found that older citizens (age 60 plus) are entering employed status in larger numbers, at about 4.5 per cent annually.
Reason for the growth in employment of women and older citizens
- There could be different arguments for this.
- The most common argument we hear is that there is increasing distress and women and older people have no choice but to work.
- But there are other possibilities as well.
- With falling fertility rates, improved access to water, energy, etc., those involved in care- and home-related work now have greater flexibility if they choose to work.
- In the case of older cohorts, it is found that employment in this segment has been growing since the 1980s and could also be reflecting the greater lifespans.
Growth in employment in various economic sector
- Among economic sectors, though manufacturing and construction grew well at 3.4 and 5.9 per cent annually, higher growth has been achieved in earlier years as well.
- However, the greatest success has been in agriculture and services.
- Within agriculture, we obtain results that suggest it is not so much the cropping sector but livestock and fisheries that may have seen the greatest rise.
The growth in employment is dominated by self-employment and unpaid family work
- A characteristic of this growth, however, is that of total growth in employment of 80 million, a large part or 44 million is for own account workers and unpaid family workers.
- These are typically self-employed and this form of employment is not necessarily seen as entrepreneurial but a fallback option for those who do not have any other avenues.
- But note that this is the same segment that was the beneficiary of the massive PMMY scheme (Mudra) that disbursed slightly less than Rs 23 lakh crore among 380 million accounts in the period starting 2015-16 until the end of 2022.
- Therefore, if there is growth in self-employment, some of it presumably is due to the large government transfers to this cohort.
- At the same time, such a large increase in Direct Cash Transfers in this period may have also contributed to greater employment opportunities.
- Deciphering the underlying cause is key to understanding whether growth in this segment is desirable or can be sustained.
Relative stagnation in the growth of real wages
- A relative stagnation in aggregate wages and salaries is also found in recent years.
- For the period 2017-18 and 2022-23, the average annual growth of salaries and wages is at 6.6 per cent in nominal terms but barely 1.2 per cent over five years after being corrected for inflation.
- In other words, while in the aggregate any wage distress is not found, there is not a great improvement in living conditions also.
- This could be for many reasons — if such large numbers enter the workforce, some dampening of wages and salaries is to be expected.
- At the same time, it could also reflect a deeper issue of stagnating labour productivity.
Conclusion: Whether it is government welfare programmes, changing economic structure, changing demographic structure, or distress that is causing the surge in employment requires more careful analysis. It is evident that there are many contradictory stories playing out simultaneously where employment growth is concerned. Simplistic narratives will do a disservice to all.
Editorial 2 : Pause and pivot
Introduction: Retail inflation, as measured by the consumer price index, eased marginally to 4.83 per cent in April, down from 4.85 per cent in March, as per data released by the National Statistical Office.
What is Headline Inflation?
- Headline inflation is the total inflation in an economy.
- It is the raw inflation figure reported through the Consumer Price Index (CPI).
- The headline inflation figure includes inflation in a basket of goods that includes commodities like food and energy.
About Core Inflation
- It is the change in the costs of goods and services excluding the price variations in seasonal elements, such as those related to food and energy.
- Food and energy prices are exempt from this calculation because their prices can be too volatile or fluctuate wildly.
What is driving the decline in inflation?
- The decline was driven, in part, by a softening of prices in the fuel and light segment.
- Core inflation remained subdued, while food inflation edged upwards to 8.7 per cent, from 8.52 per cent the month before.
- At a time when real interest rates are at levels that can be considered as “excessive”, this continuing divergence between food and core inflation presents a dilemma for the monetary policy committee.
Inflation in different constituents of food basket
- The disaggregated data shows that within the food category, inflation remained elevated across several segments such as cereals, meat and fish, eggs, vegetables and pulses.
- There are, however, expectations of a good rainfall season this year — as per the India Meteorological Department, the southwest monsoon is “most likely to be above normal”.
- This would bode well for agricultural production, and also help keep a lid on prices.
Inflation in non-food category
- In the non-food category, inflation remained subdued in most of the segments such as clothing and footwear, household goods and services, recreation and amusement.
Food inflation and Monetary Policy Committee
- The uncertainty over the trajectory of food inflation weighs heavily on the MPC — food inflation has now been above 8 per cent for many months.
- In his comments following the last committee meeting, RBI Governor Shaktikanta Das had said that the MPC must remain vigilant “as uncertainties in food prices continue to pose challenges.”
- A recent study by economists at the RBI has noted that “high food and fuel inflation can get generalised in the system through inflation expectations,” and that if inflation expectations are not anchored then the “impact of a food prices shock may not be transitory”.
Dilemma across central banks of economies regarding rate cuts
- Central banks in major developed economies across the world are yet to begin cutting rates.
- However, recent events point towards the possibility of a divergence in policy across these countries.
- In its last meeting, the US Federal Reserve had noted a lack of progress on the inflation front — in March, the consumer price index had edged up to 3.5 per cent, from 3.2 per cent the month before.
- Commentary from the Fed has led to a reassessment of when the central bank will begin to cut rates and by how much this year.
- Across the Atlantic, there are indications that the European Central Bank is likely to begin cutting rates in June.
- And in the UK, recent comments from the Bank of England also point towards the possibility of rate cuts this summer.
- In India, the RBI expects inflation at 4.5 per cent in 2024-25.
- However, as there remains considerable uncertainty over food prices, the minutes of the last committee meeting indicate that a policy pivot in the immediate future seems unlikely.
Conclusion: The food prices is rising in India, the inflation in core segment remains subdues. Yet it is the uncertainty in the food price, which makes it unlikely for RBI to cut its policy rates in near future.