What is right and wrong with the PM's 1 crore jobs

by Mahesh Vyas

Prime Minister Narendra Modi stated in his response to the no-confidence motion in Parliament on July 20 that over one crore jobs were created in the country during the past one year. He said this estimate is based on a survey by an independent institute.

His arithmetic was as follows:

4.5 million subscribers enrolled into the Employee Provident Fund scheme during the nine months of September 2017 through May 2018. Another 0.57 million enrolled into the National Pension Scheme during the same period. Thus, we see over 5 million subscribers into these two schemes. The PM extrapolated this to 7 million.

Professionals, such as chartered accountants, doctors and lawyers are estimated to have added another 0.6 million jobs. 17,000 CAs joined the system. Then, a series of assumptions - 5,000 of these started new enterprises and each of these provided employment to 20 persons to give jobs to 100,000.

Of the 80,000 doctors, dental surgeons and Aayush doctors that graduate every year, 60 per cent start their own practice and provide employment to 5 persons each. This provides employment to another 240,000.

A similar 60 per cent of the 80,000 graduating lawyers provide jobs to 2-3 persons each and this adds another 200,000 jobs.

The transport sector added 2 million jobs to drivers and cleaners. New commercial vehicles that hit the roads, after discounting 25 per cent as replacements, provided jobs to 1.14 million. Half a million drivers were provided jobs by the 2.54 million new passenger cars that hit the road. Auto-rickshaws provided jobs to another 0.34 million.

The above adds up to 9.19 million, but the PM has rounded this off to 10 million.

I don’t think that there can be any dispute that jobs are being created. They are always created. The debate is whether sufficient jobs are being created on a net basis. Many are replacement jobs. A person who took up a truck driver’s job, for example, must have been a truck cleaner earlier and the new truck cleaner could have been a help at a roadside dhaba earlier. And, the dhaba-help was a farm labourer earlier. When he left the farms there was no replacement because he was excess labour there anyway. So, the truck driver’s job merely reflects jobs moving away from agriculture to services.

Similarly, EPS enrolments are not necessarily new jobs. They mostly reflect jobs moving from the unorganised sectors to the organised ones.

The independent institute advising the PM on jobs seems to have missed the point that the challenge is to create net additional jobs and not merely transfer jobs from one sector to another. There are other more serious flaws in the advice provided by the institute.

It has failed to notice that the 100,000 jobs provided by CAs should be considered counted in EPF already because the example states that each enterprise could be hiring 20 persons.

It failed to account for the fact that a fairly good proportion of commercial vehicles are purchased by State Road Transport Corporations, public sector companies, large private companies, mining companies, organised trucking and logistics companies etc. which are also covered under EPF or NPS.

Let’s return to the example of CAs. It is assumed that all CAs are necessarily employed. This may not be wrong. But, during times when investments are low (and there is no dispute on that one), it is quite likely that CAs are doing jobs that were earlier done by a commerce graduate. This leaves the commerce graduate unemployed.

Measurement of employment (and unemployment), like many other statistics, should be left to professional statisticians and professional organisations engaged in statistical measurement. It would be a disaster if, for example, back-of-the-envelope calculations (nowadays in spreadsheets) are passed on as employment estimates.

We must recognise that in a country like India where employment is mostly in the unorganised sectors, it can be measured only through a comprehensive household survey. The NSSO has just concluded (or at least was scheduled to complete) its household survey on the subject. It will take a few months before its results are released. But, CMIE’s Consumer Pyramids Household Survey already provides robust employment and unemployment estimates regularly.

It is likely that 10 million new jobs were created as the Prime Minister stated in Parliament. But, as I have explained above, not by the method that he describes and, more importantly, not on a net basis. On a net basis, according to CMIE’s CPHS there was no gain in employment in 2017-18.

First Published in Business Standard Link

Unemployment Rate
Per cent
6.1 +0.1
Consumer Sentiments Index
Base September-December 2015
100.6 0.0
Consumer Expectations Index
Base September-December 2015
99.7 0.0
Current Economic Conditions Index
Base September-December 2015
98.2 0.0
Quarterly CapeEx Aggregates
(Rs.trillion) Sep 17 Dec 17 Mar 18 Jun 18
New projects 1.25 1.51 3.42 2.32
Completed projects 1.25 1.16 1.56 0.91
Stalled projects 0.69 0.88 3.44 0.30
Revived projects 0.34 0.24 0.26 0.22
Implementation stalled projects 0.78 0.71 1.92 0.04
Updated on: 14 Aug 2018 4:20PM
Quarterly Financials of Listed Companies
(% change) Sep 17 Dec 17 Mar 18 Jun 18
All listed Companies
 Income 7.9 12.0 9.7 16.9
 Expenses 9.0 13.0 16.2 20.2
 Net profit -18.0 -14.3 -80.3 5.5
 PAT margin (%) 5.5 4.8 1.2 6.1
 Count of Cos. 4,508 4,503 4,325 2,657
Non-financial Companies
 Income 8.2 13.3 11.1 19.2
 Expenses 8.2 12.4 11.7 21.6
 Net profit -6.0 13.2 1.6 31.4
 PAT margin (%) 6.2 6.4 6.6 7.7
 Net fixed assets 9.2 11.8
 Current assets 2.9 7.2
 Current liabilities 11.0 10.4
 Borrowings 3.4 1.9
 Reserves & surplus 7.9 7.2
 Count of Cos. 3,464 3,471 3,347 2,098
Numbers are net of P&E
Updated on: 14 Aug 2018 4:21PM
Annual Financials of All Companies
(% change) FY15 FY16 FY17 FY18
All Companies
 Income 5.6 1.8 6.0 9.9
 Expenses 5.7 1.9 6.0 13.3
 Net profit 0.1 -9.7 25.8 -37.5
 PAT margin (%) 3.0 2.8 3.5 4.2
 Assets 9.5 10.2 7.5 13.2
 Net worth 8.5 11.3 7.7 12.8
 RONW (%) 5.8 4.9 5.8 5.7
 Count of Cos. 26,178 24,474 22,051 749
Non-financial Companies
 Income 4.9 1.0 5.8 8.5
 Expenses 5.1 0.4 6.1 8.0
 Net profit -9.4 19.9 20.7 6.6
 PAT margin (%) 2.0 2.4 3.0 9.3
 Net fixed assets 13.3 17.9 6.7 27.6
 Net worth 7.0 12.0 6.6 9.7
 RONW (%) 4.6 5.1 5.9 13.2
 Debt / Equity (times) 1.1 1.1 1.0 0.4
 Interest cover (times) 1.9 1.9 2.1 6.2
 Net working capital cycle (days) 66 65 62 8
 Count of Cos. 21,351 20,488 18,371 585
Numbers are net of P&E
Updated on: 12 Aug 2018 11:30AM