The demonetization done by the Prime Minister Narendra Modi on November 8, 2016, is still having its crippling impact on the informal sector of the Indian economy while the officials and economists close to the PM, are busy inflating the job generation figures in the last four years of the NDA regime and minimizing the impact of the demonetization on the unorganized sectors.
A latest study by the Centre for Monitoring Indian Economy (CMIE) shows that demonetization struck hard at the 15-24 age group and those over 66 in 2017 the main year after the PM announced his decision. The young group lost jobs to the level of 7.22 million during the year and the older group over 66 lost jobs to the level of 3.18 million. So, a total job loss of 10.40 million took place during the year 2017 and this was the immediate impact of the demonetization. In fact, this loss nearly wiped out the gains in jobs of 11.83 million in the25-64 age group during the year. But the PMO officials and the economist members of the PM’s advisory council are bragging about the job generation figures in the 25-64 age group without mentioning the job losses that took place in the younger and the older age groups. These two groups are most vulnerable and they belong to the informal sector.
Very recently, the International Labour Organisation (ILO) released a report on the informal sector in which it said that in the South Asian region, Bangladesh, Pakistan and Sri Lanka fare much better than India and Nepal where informalisation of jobs is high, especially among the younger people. The figures of ILO show that close to 81 per cent of all employed persons in India make a living by working in the informal sector with only 6.5 per cent in the formal sector and0.8 per cent in the household sector. Among the five south Asian countries, the informalisation of labour is most highest in India and Nepal. The higher the education level, the higher the chance to obtain formal employment.
In the Indian economy, the informal sector plays a very important role in creating employment but this sector has been given a bad jolt by the Prime Minister through demonetization. The impact still persists. The Government agencies have still no clear idea about the job losses in the informal economy. While the Prime Minister constantly talks of the poor in his election speeches, his actions have only worsened the plight of the poor. The CMIE study says that the 15-19 year olds are usually employed in low paid jobs requiring little education. Wages are generally paid in cash. Poverty drives these younger people to low paid work rather than studying in schools or colleges. In the wake of cash shortage following demonetization, these younger people were hit first. They became jobless, They had nowhere to go as cash became scarce.
But the Modi Government people are totally ignoring what is happening in the informal sector. They do not care to mention the job losses in this particular sector and flaunt the job generation figures in the 25-64 age groups which showed more than 11 million new jobs in 2017, according to CMIE figures. But overall, the new job generation was only 1.4 million during 2017 after taking account the job losses in the informal sector. One expects that the Government will make an honest assessment of what has gone wrong and try to correct the errors committed in the course of implementation. But the Govt economists, instead of making honest appraisal, are trying to hoodwink the people by cherry picking data to suit their theory of high job growth. Dr. Surajit Bhalla, a member of the PM’s economic advisory council and a loudmouthed Modi loyalist, has claimed a total generation of 15 million jobs in 2017 by dubious statistical analysis. The CMIE director Mahesh Vyas has blasted the data of Dr. Bhalla, by alleging that Bhalla picks data for the ages 25-64 from the CMIE and ignores the data on the age group of 15-24 and higher than 64.This was the cherry picking of selective data that suits the objective of the PMO economist which is pre determined.
The dichotomy of the Modi government’s economic policy making is that while there is a constant talk of building a digital India, there is no planned programme to impart skilling among the village poor to bring them to the ambit of the formal economy from the unorganized informal one. Even today, in large parts of the country, the people who lost their jobs due to cash shortage, have not been re employed. There has been big erosion in living standards of the poor who have been hit the most as a result of demonetization. If the informal economy’s woes are not taken care of, the high growth rate will have only limited impact.
The ILO report has reminded all the developing countries including India that the concerned governments will have to give priority to transform the informal sector by dealing with its present problems and creating conditions for its speedy transition to formal economy. Globally 2 billion people – more than 61 per cent of all employed people-work in the informal economy and 93 per cent of the world’s informal employment is in emerging and developing countries with the level of education seen as a key factor. Globally, when the level of education increases, the level of informality decreases, the report says, adding that people who have completed secondary and tertiary education are less likely to be in informal employment.
For the Narendra Modi Government, no holistic development of economy is possible without taking due care of the problems of the informal economy. The high incidence of informality in all it6s forms has multiple adverse consequences for workers, enterprises and societies and is, in particular, a major challenge to the realization of decent work for all and sustainable and inclusive development.PM may go on with his election campaign demagogy about New India and high job growth, but a crippled informal economy is a reminder that the four years of NDA regime is a big failure. (IPA service)
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