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Mahesh Vyas: ‘We need a 5-year, 10-year plan to get labor participation rate right’

28th September, 2020 Economy

Context: Mahesh Vyas, CEO of the think tank Centre for Monitoring Indian Economy, discusses how to save jobs and create new ones in the wake of the pandemic. He spoke before a nationwide audience on Zoom.

On the state of jobs in India since the pandemic started

  • There is a marginal difference between the official statistical machinery that generates the employment data and the CMIE (Centre for Monitoring Indian Economy) machinery.
  • The headline number used to be understood as the unemployment rate. But for a country like India. Unemployment rate is not the most important indicator to look at.
  • One of the good starting points is the labor participation rate, which is how many people of all the people who can work, are actually willing to go out there and work.
    • Those people as a proportion of all the people who are qualified to do this, which are people more than 15 years of age, that ratio is called the labor participation rate.
  • Globally this number is of the order of 66% or so.

Where are we in India?

  • We are at a pathetic 41%. In around 2016-2017 or 2017-18, according to official statistics, it came to 48%.

The second thing, unemployment rate

  • Of all the people who come into the market to work, how many get jobs and how many are left without a job?
  • Traditionally in India, this number used to be 2-3%, because most people in India couldn’t afford to remain unemployed.
  • NSSO surveys have over decades shown us that the unemployment rate was of the order of 2-3%, till the PLFS came out and said in 2018 that this number had risen to 6.1%. Now CMIE has got a similar number for the same period — of the order of 6% in 2017-18.
  • This number in 2019-2020 went up to about 7.5% or so, and in the pandemic lockdown we saw it rise to 23.5%.
  • A quarter of the people who are seeking jobs were unable to find it and, the number of people seeking jobs itself came down very sharply, double whammy.

How many people are actually employed?

  • That number is down to 37.5%. It was 39% in 2019-20, it was a little more than 40-43% or so before that.
  • So only 37.5% of the people today are employed, of all the people who can work.

On low labour force participation rate among women

  • This has fallen even according to official statistics and we show this fall far more steeply compared to the official statistics.
  • Just take the difference, the labour participation rate for men is of the order of 75% (72% according to us) and for women is 25%. That’s a huge difference.
  • According to us, 72% of men are willing to work and only around 11% of women are willing to work.
  • For India’s demographic dividend to play out, we don’t have much headroom amongst men, because 75% of them are anyway participating.
  • The headroom is all among women, which is down to 10-11%. Female labour participation even in urban India is extremely low, in fact lower than in rural India.
  • So, we are losing out on educated, urban women who could be in the labour force, who could be increasing our per capita income, and could have helped the country grow much faster.

On trends in jobs lost

  • In 2019-20, we had a total employment count of 403 million and the lockdown came at the end of 2019-20. We lost 121 million jobs in April.
  • Women lost jobs in demonetisation, they lost jobs in GST, disproportionately high, again we see women lose jobs disproportionately in this shock as well.
  • The lockdown opened up in rural India faster, MNREGA helped increase jobs over there, the kharif crop was very good.
  • Still, the distribution of the losses of this 11 million is broadly in line with the share of rural and urban.
  • Total job losses are 11 million, but salaried job losses are 21 million and this is the only category that is seeing job losses.
  • Farmers have seen a gain of 14 million, small businesses have seen a gain of 7 million.

On whether Atmanirbhar Bharat Abhiyan can create more jobs

  • Atmanirbhar Bharat Abhiyan does not help save jobs, does not help create jobs. It does not help on this front at all.
  • In a broad economic sense, the term Atmanirbhar Bharat Abhiyan suggests like Vocal for Local, an economy that does not really encourage globalisation.

What was the Atmanirbhar Bharat Abhiyan proposal all about?

  • It was about providing liquidity, easy loans to MSMEs. MSMEs did not want easy loans, and if you give very easy loans, you just spoil them.
  • They will just create massive NPAs, become irresponsible.

Also look at this in one more way: What does easy liquidity do?

  • It does not help labour.
  • It helps the owners of MSMEs, who have got easy finances available with them.
  • They could use it for settling anything or they can even run away with it because anyway this is a very easy loan. So, I think this is getting it wrong, this is not good for labour at all.


  • In an arithmetic way, people who are more than 15 years of age, their population is growing at a rate of 2 million per month, approximately. So, we require of the order of 9 million jobs, if you are willing to accept a labour participation rate of 40% (which in my opinion is not acceptable)…
  • A 5-year, 10-year perspective plan will be able to exploit our demographic dividend. Otherwise we are letting it go by.