More embarrassment for Modi: Latest data shows how GST hit jobs

The latest data on jobs released by the government has confirmed what has been long been suspected about the impact of the Goods and Services Tax (GST) on the labour market. Jobs in the manufacturing sector fell by 87,000 in April-June 2017, the first quarter of last fiscal, the sixth round of Quarterly Employment Survey released by Labour Bureau has showed.

GST was implemented from 1 July 2017 and this data covers the preceding quarter. Government data (CSO estimates) released last year had shown that growth rate had also fallen to 5.7% in the same quarter, as compared with 7.9% in the same period a year ago.

Growth in the manufacturing sector had also gone down to 1.6% in that quarter, from over 3% growth in the previous quarter. Defending these numbers, Finance Minister Arun Jaitley had said last year that this fall was the result of the de-stocking of inventories “in anticipation of the GST”.

Jaitley's reference was to the large volume of pre-GST stock that manufacturers as well as retailers had to get rid of before the roll-out of GST from July. This huge de-stocking exercise forced manufacturers to freeze production in that quarter.

It was conclusively proved last year that this gave the economy a shock in terms of production and overall growth. What QES has proved that this forced de-stocking also had a cascading impact on jobs. The survey has revealed that overall job creation in the organised sector slowed down to 64,000 in April-June 2017.

This is the slowest rate of increase in three quarters, across eight sectors - manufacturing, construction, trade, transport, accommodation and restaurant, IT/BPO, education and health. Apart from manufacturing, transport sector also showed a fall, with loss of 3,000 jobs.

Positive change was seen among jobs in construction, health, education, trade, restaurant and IT/BPO. The biggest such change was seen in the education sector, which saw the creation of 99,000 more jobs.

The new data will come in as an embarrassment for the Narendra Modi-government, already facing flak for its failure to uphold its electoral promise of generating 1 crore jobs a year. Survey after survey has indicated in last one year that that the ill though-out moved of demonetisation and the ill-planned implementation of GST have hit the economy in more ways than one.