GST data gives a better picture of formal sector employment: Economic Survey

NEW DELHI: India’s formal sector workforce is 5.2 crore more when estimated on the basis of the filings under the goods and services tax regime than the so far prevalent definition based on the social security, the Economic Survey has said.

The government’s fresh and higher than expected estimate of the country’s workforce has come at a time when there has been pressure from all sides on the jobless growth in the country.

“Formal non-farm payroll from a social security perspective is estimated at about 7.5 crore or 31% of the non-agricultural workforce. The formal non-farm payroll from a tax definition is estimated at 12.7 crore or nearly 53% of the non-agricultural workforce in the formal sector,” the Survey has said.


According to the Survey, these estimates are enterprise-based and not householdbased definitions of employment and exclude the agriculture sector. “These estimates for formal non-farm payroll, ranging from 31% in case of social security-defined formality and 53% in case of tax-defined formality, are considerably greater than current beliefs about the size of formal sector non-farm payrolls,” the Survey said.

The pace of job creation fell to a six-year low in 2015 with 1.35 lakh new jobs created compared with 4.21 lakh new jobs in 2014 and 4.19 lakh in 2013, according to a quarterly survey of industries conducted by the labour bureau, under the ministry of labour and employment.

Another survey – Fifth Annual
Employment-Unemployment Survey – of households conducted by the labour bureau showed the unemployment rate rising to a five-year high of 5% in 2015-16 compared with 4.9% in 2013-14 and 4.7% in 2012-13.

Before GST came into operation, the formal sector was defined based on the employees’ contribution to the Employees Provident Fund Organisation (EPFO) for pension and provident fund and the Employees’ State Insurance Corporation (ESIC) for medical benefits.

However, registration under EPFO included firms with 20 or more employees with monthly wage/salary below Rs 15,000 while those under ESIC included firms with 10 or more employees with monthly wage/salary below Rs 21,000.

As per the Survey, the second definition of formality is when firms are part of the tax net. “Since new data on the GST is available, one can define tax formality as firms having registered under the GST,” it said.

Recognising that the employment sector in India poses a great challenge in terms of its structure, which is dominated by informal workers, high levels of under employment, skill shortages and labour markets with rigid labour laws and institutions, the Survey pointed out that the government is in the process of rationalising the 38 Labour Acts by framing relevant provisions of existing laws into four codes—Code on Wages, Code on Industrial Relations, Code on Social Security & Welfare, and Code on Safety & Working conditions.