The Modi government’s demonetisation decision may have resulted in the loss of roughly 1.5 million jobs, according to new survey data put out by the Centre for Monitoring Indian Economy (CMIE).
CMIE’s data is based on the result of consecutive waves of household surveys performed from January 2016 to April 2017 (sample size: 161,617 households across India). Surveys states that the estimated total employment fell to 405 million in January-April 2017 from 406.5 million in September-December 2016.
This slide is believed to be an after-effect of demonetisation. In November 2016, the Narendra Modi-led government decided to render two high-value currency notes invalid. The Rs 500 and Rs 1,000 notes accounted for about 86% of the currency in circulation by value and, therefore, the ban led to a severe cash crunch in the economy.
"In November 2016, it was still the festive season but, the labour participation rate fell to a new low of 44.8%. It is apparent that this was an immediate impact of demonetisation,” said Mahesh Vyas, managing director & CEO of CMIE, in his report.
The Labour participation rate refers to the share of the population employed or willing to work and seeking jobs. A drop indicates an economic slowdown. These estimates are based on a survey with a sample size of 161,167 households that included 519,285 adults
While the average labour participation rate was 46.9 percent from January through October 2016, the rate fell to 44.5 percent in February this year, then to 44 percent in March and finally to 43.5 percent in April. This is much lower than the percentage recorded in the corresponding months a year ago.
Demonetisation’s effect kicked in with a lag, as the period from September-December is a busy season for agrarian India and that could have had kept the employment levels high, explains the report.
The survey concludes by highlighting the direct relation between the drop in labour participation with that to a fall in new investments which it sees as a sign of an economic slowdown for a developing country like India.