Demonetisation, GST impacted jobs more than NSSO's headline numbers suggest

The real impact of demonetisation and the goods and services tax (GST) — two big economic decisions taken by the Narendra Modi-led National Democratic Alliance — on jobs has been much more than what is shown in the headline unemployment rate figures given in the National Sample Survey Office’s (NSSO's) report for 2017-18.

According to the current weekly status (CWS) approach of the NSSO’s periodic labour force survey (LFPS), the unemployment rate stood at 8.9 per cent in 2017-18. In this approach, the activity status of a person is determined on the basis of the reference period of one week.

The unemployment rate, measured in terms of the usual status approach, stood at a 45-year high of 6.1 per cent in the July 2017-June 2018 period, as reported by Business Standard on Thursday. In this approach, which is normally used in the Indian context, the activity status of a person is determined on the basis of the reference period of one year. 

The NSSO report has been withheld by the government and is yet to be released officially.  

The field work of the NSSO survey was done between July 2017 and June 2018. So, according to the CWS approach, people disclosed their employment status to the surveyors during July 2017-June 2018 – months after demonetisation of high-valued currency was announced by the government, in November 2016.

“CWS is a better measure for mapping the impact of demonetisation and the GST on jobs as the employment status of people during July 2017-June 2018 is known. The usual status approach captures only the partial impact of demonetisation,” said a former chief statistician, who didn’t wish to be named.

According to the CWS approach, the unemployment rate for females was 9.1 per cent and for males it was 8.8 per cent, the NSSO report showed. This was higher than the unemployment rate in usual status, at 5.7 per cent for females and 6.2 per cent for males.

“The figures show the double-whammy effect of demonetisation and the GST on jobs. Taking the CWS approach makes sense as the usual status approach considers 365 days, but the former takes into account the status within seven days and factors in the impact of the government’s major economic decisions,” said Mahesh Vyas, chief executive officer, Centre for Monitoring Indian Economy.

The labour force participation rate (LFPR) for females continued its downward trend in 2017-18 as it stood at 23.3 per cent, sharply down from 31.2 per cent in 2011-12 and 32.6 per cent in 2009-10. The LFPR for males didn’t see much change from the previous years. The LFPR for males also declined from 79.8 per cent in 2011-12 to 75.8 per cent in 2017-18. This means that more females are exiting the workforce in India compared to males who are willing to work. This was in the age group of 5 years and above.

However, in the working age population group (15 years and above), the proportion of the active labour force declined twice for females between 2011-12 and 2017-18 in the age group 15 years and above. Compared to 2011-12, the LFPR for females fell by around 8 percentage points to 23.3 per cent in 2017-18, whereas the LFPR for males dipped by 4 percentage points to 75.8 per cent in 2017-18. So, only about a quarter of the females in the country were either working or seeking jobs.