Formal job creation in India declines for second consecutive year
What's the story
India's formal job creation has witnessed a major decline under the Employees's Provident Fund Organisation (EPFO) for two consecutive years until FY25. The number of net formal jobs created under EPFO stood at 12.9 million in the last fiscal year, down from 13.1 million in FY24 and a record high of 13.8 million in FY23, revised annual payroll data shows. The data indicates a year-on-year decline of 1.3% in FY25 and a sharper fall of 5.1% in FY24.
Yearly decline
Establishments filing first ECR also fell
The number of establishments filing their first Electronic Challan cum Return (ECR) for a month also fell to 52,309 in FY25, down from last year's count of 56,023 by nearly 6.6%. ECR is an electronic monthly return that employers in India must submit to the EPFO. It's a single, consolidated document that includes both the detailed employee-wise contributions (the "return") and the payment form (the "challan") for those contributions.
Scheme impact
Low job creation attributed to high base effect
Officials have attributed the low net formal job creation in the last fiscal year to a high base effect from FY23, when additional enrollment took place under Atmanirbhar Bharat Rojgar Yojana (ABRY) between 2020 and 2022. The government launched ABRY in October 2020 to incentivize employers for creating new jobs and restoring lost employment during the pandemic.
Financial overview
ABRY scheme disbursed ₹10,188.50 crore to beneficiaries
As of March 31, 2024, ₹10,188.50 crore was disbursed under the ABRY scheme to 6.05 million beneficiaries through 152,000 establishments. This is against an original budgetary allocation of ₹23,000 crore. Despite this shortfall and the slowdown in formal job creation under EPFO, experts say it doesn't match India's recent high economic growth rates (7.6% in FY23; 9.2% in FY24; and 6.5% in FY25).
Economic response
Private sector in wait-and-watch mode due to geopolitical uncertainty
An industry expert said the formal job creation in India isn't matching up with economic growth because "the private sector is in a wait-and-watch mode due to geopolitical uncertainty." The same person also noted that the launch of Employment Linked Incentive (ELI) scheme is another attempt to incentivize the private sector into creating more formal jobs for social security purposes.