Mumbai/New Delhi: As the 2019 election approaches and the debate on job creation intensifies, it is worth asking how India has fared in terms of job growth since the Narendra Modi-led National Democratic Alliance (NDA) swept to power in 2014. While credible data on overall job creation in the economy over the past four years is not available, jobs data reported by companies gives us some clues about the pace of job creation in the formal sector.
A Mint analysis of corporate data sourced from the ProwessIQ database of the Centre for Monitoring Indian Economy (CMIE) and from annual reports of companies suggests that the pace of job creation over the past two fiscal years has been much sharper than in the first half of the Modi government.
The analysis shows that after barely registering any growth in fiscal 2015 and 2016, year-on-year growth in corporate jobs rose to 4% in fiscal 2017 before declining to 3% in fiscal 2018.
However, despite the acceleration in the pace of job creation over the past two fiscal years, the average pace of job creation in the past four years at 1.9% is significantly lower than that in the last boom phase between fiscal 2006 and 2009, when annual job growth averaged 3.5%.
Even during the second term of the United Progressive Alliance (UPA) government (FY10 to FY14), the average pace of job creation, at 2.6% was higher than the average growth over the past four fiscal years.
The analysis is based on data culled from the ProwessIQ database and company annual reports.
The ProwessIQ database consists of records of nearly 50,000 Indian firms (listed and unlisted) but the number of firms for which consistent employee data is available over the past few years is very small. To get around this problem, we consider a two-year rolling sample of firms for which records are available for two successive years.
The average sample size for the past decade, based on this methodology, is 1,463 firms. For the latest year—fiscal year 2018—our sample includes more than 1,581 firms, which together have roughly 5.6 million employees.
For companies which reported a sharp year-on-year (YoY) volatility in employment figures, figures were cross-checked using company annual reports and adjusted for discrepancies (or changes in reporting).
The analysis shows that employment growth as well as wage growth have slowed down the most in mid-sized firms.
A quartile-based division of companies based on net sales shows that companies in the bottom quartile have expanded the most in terms of both job-creation and wage growth, followed by companies in the top quartile.
Firms in the middle two quartiles have languished, and pulled down overall job growth and wage growth numbers.
The fall in overall wages has been far more dramatic than the drop in headcount numbers.
Between FY06 and FY09, annual growth in wages averaged a whopping 21%. This has declined to a measly 8% over the past four years. Even after accounting for the change in inflation between the two periods, this is still a drastic fall.
Inflation averaged 6.6% between FY06 and FY09; it averaged 4.8% over the past four years, Bloomberg data shows.
Among sectors, the share of manufacturing in the overall employment pie has increased over the past decade while the share of mining has fallen significantly.
The share of construction has grown over the past decade while that services has remained broadly unchanged.
Overall, the figures on employment and compensation present a mixed picture of corporate India.
Even as job growth has picked up pace over the past couple of years, wage growth remains tepid.