How Reliable Is Labour  Market Data in India?

Public perception about the pattern of shock on the employment rate during COVID-19 is based on the Centre for Monitoring Indian Economy data, which is widely referred to in public debates, corporate policy-making, and banking sector. The question that crops up then is how reliable is the CMIE data on the labour market? Here, the examination of the employment ratio indicator of the Periodic Labour Force Survey and CMIE is extended to two another very important labour market indicators, that are, labour force participation rate and unemployment rate, and a comparison of the PLFS and CMIE is carried out to look at their trends and association.

Data is the new oil for the modern economy and a must for evidence-based policy-making. However, it is the quality of the data that matters the most, along with other features, such as frequency and granularity. Here, we examine the quality of labour market data from two sources, the Periodic Labour Force Survey (PLFS) and the Centre for Monitoring Indian Economy (CMIE).

The labour market probably witnessed its biggest shock during the COVID-19 pandemic. While the scope of the jolt was universal, its actual scale in India remained debatable. One reason for the debate on the scale of job losses is the lack of reliable high-frequency official data on labour market. The monthly official labour statistics are not compiled; hence, not available. Although the quarterly PLFS; hence, data is available, it exists with a time lag of eight months and the latest is available for April–June 2020. The other source of data available on employment at a relatively higher frequency and at a granular level is the data provided by the CMIE. Current public perception about the scale and pattern of shock on employment during COVID-19 or before that is based on the CMIE data. The CMIE data is currently widely referred to in public debates, corporate policy-making, banking sector, and even widely reported by media. The question that therefore arises is: How reliable is the CMIE data on labour market? We had examined the “employment ratio” indicator of the PLFS and CMIE in our piece published in the Economic Times dated 27 February 2021. Here, we extend it further to two another very important labour market indicators—labour force participation rate (LFPR) and unemployment rate. Here, we compare these two indicators using the PLFS (urban) and CMIE (urban) to see their trends and association, and using simple tests, we examine which source, the PLFS or CMIE, is more reliable for these indicators.