Investment data to be cleaned up after overstated jobs claims

A huge mismatch between the investment proposals of companies and the number of jobs that are really created from these investments, as opposed to the number that is projected, has prompted the government to consider a rejig of how it collects data on industrial investments. 

One single entry highlights why the re-examination is taking place. It relates to Noida-based GEW India, which said in its investment proposal in November 2018 that it estimated it would generate 1.87 million jobs on the back of an investment of just Rs 27 crore in the manufacture of prefabricated steel structures and pre-engineered buildings.

The company, with equity of Rs 4.5 crore, proposed setting up a 60,000-metric tonne capacity manufacturing plant. Its projected job creation figure led to a large bump in the employment figures that form part of the data on industrial investment proposals released by the Department of Promotion of Industry and Internal Trade (DPIIT).

The job generation claim by GEW India, among others, has catapulted the proposed employment in the industrial sector to the highest ever of 2.47 million in 2018, a three-fold rise year-on-year. In other words, proposed job creation grew by a disproportionate 226 per cent in 2018 compared to 756,919 jobs the previous year, while the proposed investment of Rs 4.6 trillion saw only 16 per cent growth.  

A DPIIT official said that, at most, the department checked whether the company in question was fake or not. “This particular company is a functioning one. They may have misreported on the employment number,” he added. 

The official said the department was planning to do away with the requirement of filing investment intentions and rather focus only on actual investments. “The data on investment proposals is misleading. There is no mechanism to verify and check the entry," he said. The DPIIT data on investment proposals, based on the Industrial Entrepreneur Memorandums (IEMs) filed, is an indicator of business sentiment in the economy and an early projector of the country’s likely economic trajectory as these intentions translate into actual investments with a time lag.

The number of investment proposals, which are essentially investment intentions filed by companies, stood at 2,173 in 2018, a 10 per cent growth year-on-year. 

Seeing that some of these investment proposals are unrealistic and given that it has no measures in place to verify each and every entry filed, the DPIIT is planning to do away with the investment proposal form. Instead, it will ask investors to file their actual investments.

The department has prepared a draft note for public consultation that recommends removing the mandatory requirement of filing Part A of the IEM form that seeks information on investment intentions. The aim is to improve the quality of official data.

The DPIIT figures are in sharp contrast with other official statistics which showed that India’s economy expanded at a 5-year low of 6.8 per cent in 2018-19. The unemployment rate rose to 6.1 per cent in 2017-18, the highest in four decades, according to data by the Ministry of Statistics and Programme Implementation.