Job creation is a paradox, joblessness the truth; Industry survey does not stand the test of facts

Paradox is a situation when a mathematician proves a thing true which is otherwise untrue. The latest CII report on net job creation in the MSME sector probably falls in this category of paradox as against all gloom over joblessness in the country. The report was a surprise because only a few weeks ago NSSO’s leaked survey said unemployment rate was worst in 45 years. The chairman of PM’s Economic Advisory Council had said, “We will have a new round of the NSS which will… show …substantial employment and substantiated job creation”. Now CII has come up with a survey that proves his claim. Everything seems to have a pattern in this election season.

The CII report claimed that MSME sector in India has shown a 13.9 per cent net increase in jobs in the last four years, ie a 3.3 per cent growth per year. It was the result of surveying 1.05 lakh selected MSME firms based in 350 industrial centres across 28 states of the country. CII research scholars, let us assume they are bonafied, seem to have forgotten to verify the survey results they landed at with other tools available. A little common sense will convince that the level of growth in job creation should have been reflected in the growth pattern of everything of or related to MSMEs, such as investment, credits, production, electricity consumption, deployment of machineries, and the status of their being operational or closure etc on the one hand, and savings, consumption, and well-being of the employees on the other on the other. Since MSME is the second largest sector in providing employment in the country giving employment to about 12 crore people, such level of net job creation should have not been gone unnoticed by common people as well as experts.

One cannot understand as to why there is no explanation on the fact that out of about 63.4 million registered units few millions remained non-starter, and some another few millions shut down. As per a report published by SIDBI in association with TransUnion Cibil only 51 million MSME units were operational at the end of the period under consideration. Shutting down or closure of about 12.4 million units does not reflect the growth. Every document, the government’s and the institutions’ mentioned the adverse impact of demonetization and implementation of GST, from which the MSMEs are now recovering, albeit slowly. Even RBI mentioned the dual economic disruption for the corresponding period in connection with the credit off-take by MSMEs which remained very poor along with overall NPA rate for the sector hovering around 8 to 11 per cent. One of the SIDBI-Cibil report mentioned that default rate among the MSME borrowers taking multiple loans for a period of 60 days have increased from 2.5 per cent to 4 per cent during September 2015 to September 2018. Even Industry people claim that MSMEs are in crisis and therefore they are not able to earn that much amount even to pay their debt. Had there been growth in jobs, it would have been translated into earning of the MSMEs with less number of defaulters.

One cannot also ignore the fact that the growth of MSME GVA has been sharply declining since 2012-13 when it was 15.27 per cent. The latest data available with the Central Statistics Office (CSO) shows that the growth rate declined to 7.62 per cent at the end of March 2016 per cent of the GDP. When we consider it in the backdrop of the widening of the domain of this sector across sectors of the economy producing diverse range of products and services the relative growth of each individual sector, it is clear that all of them are declining. The trend aggravated more sharply after demonetization and introduction of GST.

In the backdrop of the recent controversy over ‘jobs’ and ‘joblessness’ in India, the CII survey itself has become a suspect. First, because the report lauds certain Union Government’s programs such as a beneficiary does. Secondly, the pragmatics of language reveals that its language is not that much neutral as a research work or survey requires. Thirdly, it has its limitation too obvious, because the data on which the report is compiled is provided by the government’s Labour Bureaus. Fourthly, it has very small fresh empirical data set that cannot be treated as conclusive and quality of sampling and analyzing data is questionable. The sample is from the operating MSMEs while the job losses in about 12.4 million shutdown or closed units are not taken into consideration while calculating the net job creation. Moreover, the claim contradicts all available data provided by the government and other national and international institutions.

In the fag-end of January this year, the leaked NSSO’s report said that joblessness in India touched 6.1%, the worst since 1972-73, in July 2017-June 2018. The government was not ready to publish this report though it was scheduled to be released in December last year. Two of the senior members had to resign in protest. Niti Aayog clarified that the report was being processed, but not contradicted or approved the content. Aayog merely called it a draft report and promised to shared it by March, which is yet to happen. Niti Aayog CEO, however, had accepted lack of good quality jobs and the crisis of the large informal and MSME sector.

The Centre for Monitoring Indian Economy, a leading independent think-tank, said the country lost as many as 11 million jobs last year. Though the Govt of India claimed that MSMEs have created 11.10 crore jobs during 2014-18, we find discrepancies in the data. How such level of job creation is possible when even skilled persons are not getting jobs? For example, MSME technology centres skilled 6.42 lakh people but provided only 91.6 thousand jobs in four years. Under ATI, 2.07 lakh people were trained but only 43.7 thousand got wage employment, and 21.7 thousand could be self-employed.

A recent RBI report said that the core problem of MSMEs of lack of access to formal finance remains which means the sector is still suffering from financial crisis. How can they have contributed in job creation upto such an extent while struggling for their own survival? Most probably the CII survey has landed at wrong conclusion. There is no reason to believe it to be true and all other directly or indirectly contradicting official and non-official reports false.