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India To Create 16 Lakh Less Payrolls In FY20, Labour Remittances Decline

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India To Create 16 Lakh Less Payrolls In FY20, Labour Remittances Decline
Aparajita Gupta - 13 January 2020

New Delhi, January 13: The economic slowdown is now having a visible impact on payroll creation. In FY19, India had created 89.7 lakh new payrolls as per the EPFO data. In FY20, as per current projected this number could be at least 15.8 lakh lower.

The EPFO data primarily covers low paid jobs as the salary is capped at Rs 15,000 per month. Government jobs, State Government jobs and Private jobs are not part of this ambit as such data have moved to NPS beginning 2004. Interestingly, even in the NPS category, State and Central Government are supposed to create close to 39,000 jobs less in FY20 as per current trends. Hence, the number of new payroll created in FY20 could be at least 16 lakh lower than in FY19, analysed a report by SBI Ecowrap.

The report also stated that there is evidence of lower labour remittances across system signifying lower payroll creation.

Using the KLEMS data, the report estimated productivity of various sectors during FY17-19. Our results show the overall productivity growth remains relatively stagnant (9.4 per cent to 9.9 per cent) in the last five years.

This slow growth in productivity clearly manifests in low wage growth.

“Our estimates show that wage growth has witnessed significant moderation, on yearly as well as sequential basis. This moderation in wages also implies important lessons that can be deciphered from policy setting. For example, if wage growth is slow, it implies that familiar wage-price nexus is not working and this could result in moderation of inflation expectations. In the absence of commensurate productivity and wage gains, we must strive to improve the quality of jobs offered,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI in the report.

“We would caution the policymakers of such a slower productivity growth. For example, persistent low productivity encourages over-borrowing by corporations and households, only to deleverage later. in turn, it represents a big risk to economies and fiscal systems. A similar logic applies to the social and political impact of low productivity growth,” he added.

Seasonal and circular migration is an integral livelihood strategy for poor people in India. In fact, over the years, migration has been an important livelihood option for both the poor and the non-poor in India. As a result of unequal growth, people from agriculturally and industrially less developed states migrate to more developed states in search of job opportunities.

These migrants have been making significant financial contributions to their families in their places of origin. There is no accurate data available on the volume of internal money transfers in India. Moreover, migrants make significant contributions to the national economy by providing human capital in sectors such as textiles, hospitality, construction, mining, brick-making and small industries.

“To look at such trend, we looked at a sample of data on remittances by migrant labourers to selected states in the last 1 year. The data shows a decline in remittances in states like Assam, Bihar, Rajasthan Odisha and UP. It is possible that the delay in resolution cases may have prompted companies to downsize their contractual labourers,” the report added.

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