Pakodanomics: Rhetoric over substance

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The truth is that unemployment is a worrying issue. Selling pakodas is forced self-employment and not job creation. And cherry-picking data to project a rosy picture is an old statistical trick.

Pakoda is a popular Indian snack. This is nothing new. What’s new is the attempt to equate selling pakodas with employment. According to International Labour Organisation, employment is defined as someone who gets paid basic remuneration that is not directly dependent on the employer’s revenue. So, does selling pakados count as employment? At least, Prime Minister Narendra Modi and BJP national president Amit Shah seem to think so. Pakoda is only a metaphor for selling any stuff on the street. The attempt to brand selling pakodas on the street and making Rs 200 per day as employment can be called a new discipline in economics — ‘Pakodanomics’.

In a recent TV interview the prime minister said, “If someone sells pakodas outside a TV channel office and earns Rs 200 a day, does that not count as employment?” He added further, “The person’s daily earnings of Rs 200 will never come into any books or accounts. The truth is massive people are being employed.” Reiterating the PM’s stance that selling pakodas outside offices should count as employment, Shah in his maiden speech in the Rajya Sabha last week quipped that “selling pakodas was better than being unemployed.” There is certainly no shame in selling pakodas, as Shah emphasised in his speech. While selling pakodas for survival is certainly better than being unemployed, no one would really sell pakodas out of choice. Neither can selling pakodas be counted as employment.

Whether it is Modi, Shah or finance minister Arun Jaitley, they all take recourse to rhetoric over substance when it comes to defending the government’s underwhelming performance on growth in several sectors of economy and job creation. Socio-politically, the government may have had a good time since it came to power in mid-2014, but jobless growth and stagflation have been the bane of economy over the last two years. Even in his budget, the finance minister has not attempted anything to create more jobs; instead, he has left it to the struggling private sector. The prime minister believes that the entire jobs crisis has been overblown. In his view, what is important is employment and not jobs. Employment can come in various forms, including self-employment. So, selling pakodas or any other stuff is employment.

The unfair argument is the implied assumption that if someone makes money, says Rs.200, by selling some stuff on the street, it amounts to generating employment. Self-employment can be out of choice or compulsion. There is no problem with voluntary self-employment. The problem is with self-employment out of compulsion for lack of jobs or formal employment opportunities. This is a major problem in India: according to the report on Employment-Unemployment Survey, 2015-16, as many as 46.6 per cent of the workforce is self-employed, against 17 percent salaried/regular wage earners, 3.7 per cent contract workers and 32.8 per cent working as casual labour. Majority of the self-employed workforce (67.5 per cent) earn up to Rs. 90,000 per year, of which 41.3 earn only up to Rs. 60,000 per year. The percentage for self-employed people earning between Rs 90,000 to Rs. 1.2 lakh a year is only 17.4.

India’s per capita income for 2015-16 was Rs. 94,130; in 2016-17 it was Rs. 1.03 lakh. This means that majority of the self-employed people in India earn less than the country’s average per capita income. Therefore, making Rs. 200 per day or Rs. 73,000 per year by selling pakados is 29 per cent less than the average per capita income for 2016-17. Clearly, being self-employed in India does not pay and earning Rs. 200 per day selling pakodas will keep you entrenched in poverty forever. It can rarely be a career choice for anybody. It is the scarcity of jobs that compels people to become roadside vendors. On the other hand, doing a job is more financially rewarding: 23.6 per cent of the salaried workforce earns between Rs. 1.2 to 2.4 lakh and 17.1 per cent earn between Rs. 2.4 to Rs. 6 lakh. This proves that being self-employed is not a solution to the problem but a symptom of the problem about which the government has done little. When the prime minister and BJP president try to sell ‘Pakadonomics’ as their government’s success story, they are actually deflecting attention to hide their failure.

Every year, more than 10 million youths join the work force. Quarterly employment survey data suggests that enough jobs are not being created to meet the demand. Jobs are created when the economy grows at a healthy rate. The average rate of growth of the Modi government has been below par; it has failed to achieve the average rate of growth recorded under the UPA regime over 10 years from 2004 to 2014, despite favourable oil prices and a healthy pick up in global growth rate. Hit by uncalled for measures like demonetisation and flawed implementation of Goods and Services Tax, growth and investment have dipped. This has impacted employment generation as industries are sitting on under-utilised capacity and banks are hit by lack of credit growth. As a result, fresh capex cycle is far from taking off.

Quoting Employees’ Provident Fund (EPF) figures, the prime minister in his TV interview had said that 7 million jobs will be created in 2017-18. This data is based on an independent report authored by Prof Pulak Ghosh of IIM Bangalore and Dr. Soumya Kanti Ghosh (Group chief advisor, SBI) titled ‘Towards a Payroll Reporting in India’. In his budget speech, the finance minister also indicated that India’s stagnant job market was beginning to show some movement as a result of steps taken by his government in the last three years. Jaitley also quoted the same independent report to claim that 70 lakh job will be created in the current fiscal. The Ghosh’s study is based on primary data sourced from three sources: EPF, ESIC (Employees’ State Insurance Corporation) and NPS (National Pension Scheme).

The report, released on January 15, 2018, says that as of November 2017, there were 36.8 lakh new EPFO members between the age group of 18-25 as compared to the previous year. Here the assumption is that 18 to 25-year olds indicated first time employees, employed in the organised sector. The study then projected the November 2017 data to the full year to claim that 70 lakh jobs will be created in 2017-18. According to experts, the major flaw in the Ghoshs study is that it assumes every 18-25-year-old who registered with the EFPO was a new job entry in the organised sector but does not take into account the possibility of many informal jobs turning into formal. For instance, a company is not required to register with EFPO if it has less than 20 employees but comes into EPFO ambit when it reaches the 20- employee mark. It also does not discount the impact of amnesty scheme for EFP defaulters which, according to reports, brought 20 lakh workers into EFPO ambit last year.

In FY-2015 the total number of EFPO contributing members grew by 7 per cent. In FY-2016, it grew by 8 per cent. But in FY-17, after demonetisation, it grew by 20 per cent and by December 2018, it had grown a further 23 per cent. This proves that the study quoted by the finance minister did not take into account the possibility of new entries coming into EFPO ambit as a result of formalisation of small and medium businesses because of demonetisation and GST. The truth is that unemployment is a worrying issue. Selling pakodas is forced self-employment and not job creation. And cherry-picking data to project a rosy picture is an old statistical trick.

The writer is an independent senior journalist.

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