Chief Economic Advisor Nageswaran Calls For More Hiring By Indian Corporates

India's Chief Economic Advisor, V. Anantha Nageswaran, highlighted on Tuesday the limited reach of government action and the need for Corporate India to step up its hiring.

Prejudices still persist in corporate India, particularly towards female employees, he highlighted. Nageswaran was speaking at the launch of the 'India Employment Report 2024', by the Institute for Human Development in New Delhi and the International Labour Organisation.

The study looked at 20 years of data and analysed trends in youth employment in the context of the emerging economic, labour market, educational and skills scenario in India.

The latest EPFO provisional payroll data, as of March 24, also revealed that 16.02 lakh net members had been added in January this year. Of this, 8.08 lakh are new members, with the age group of 18–25 constituting 56.41% of that number—indicating the majority of individuals joining the organised workforce are youth, primarily first-time job seekers.

The Chief Economic Advisor said that government intervention alone will not solve every economic issue. Discussions on the report's findings must involve the commercial sector, industrial units, industry associations and academia, he said.

"We should ask ourselves, what can the government do for employment, short of hiring massively by itself... To think that for every social or economic problem, there is a government intervention is not quite correct. We need to get out of that mindset. "In the normal world, it is the commercial sector—those who engage in for-profit activity, who need to do the hiring," Nageswaran said.

The report, which prepared an 'employment condition index', revealed that between 2005 and 2022, there was a slow but steady improvement in employment conditions. This trend, however, was halted and reversed after the onset of the pandemic in 2019. "Notwithstanding the modest improvements, employment conditions remain poor," the report said.

Nageswaran mentioned a series of government initiatives aimed at employment and skilling over the years, including the skill development initiative, the NEP curriculum, the doubling of EPFO payroll additions, and efforts towards improving physical infrastructure, facilitating industrial and manufacturing growth and restoring the health of financial institutions.

But government regulatory and tax policy implementation regimes need to be less cumbersome, less coercive, and less predatory, he said.

While the Union government frames the rules, state and central government officials need to come together to make it easier for businesses to comply, he said.

"...It is still not easy, for example, to close a business in India. Even now, there are arbitrary tax demands accompanied by demands for records over six years and these are being made more often than they should be," Nageswaran said.

Among MSMEs, managements' bandwidth to grow business, seek new markets and get funding is generally very limited. That limited bandwidth is spent disproportionately on compliance, he said.

• The labour force participation, workforce participation and unemployment rate showed "long-term deterioration" between 2000 and 2019, but improvement thereafter, particularly both before and during the Covid-19 pandemic, except for two peak pandemic quarters.

• The female labour market participation rate, after declining significantly in earlier years, took on a faster upward trend as of 2019, particularly in rural areas.

• The pandemic reversed the transition to non-farm employment. After 2019, the slow transition reversed with a rise in the share of agricultural employment and the absolute size of the agricultural workforce.

• Due to the nature of employment growth since 2019, the share of total employment in the informal sector has increased.

• India's rate of urbanisation is expected to increase, with the migration rate expected to rise to around 40% in 2030.

• Wages have remained low, with wages of casual labourers seeing a "modest upward trend" during 2012–2022. Whereas, the real wages of regular workers either remained stagnant or declined. Self-employed real earnings also fell after 2019.

• Digitisation and introduction of new technologies are changing the structure of industrial employment, bringing on more digitally mediated gig and platform work, with fewer social security provisions.

• There is disparity in labour market improvements across states—Bihar, Uttar Pradesh, Odisha, Madhya Pradesh, Jharkhand and Chhattisgarh had much poorer employment outcomes. They were at the bottom in 2005 and remained so in 2022.