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28% of 7.06 million jobs formalized between 2015 and 2018 were due to GST and demonetization : Report

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The last four years saw an unprecedented momentum in formalization of jobs, a process that enhances the legally enforceable rights of workers as well as their prestige, emoluments and social protection.

The demonetization and goods and services tax (GST), these two steps by the Modi government 1.0 have played a big role in the formalization of jobs — cumulatively over 28% of 7.06 million jobs formalized between 2015 and 2018 were due to them, according to a study commissioned by Indian Staffing Federation (ISF). Only about 16% of India’s estimated 500 million workforces is in the formal sector. The rest are in the informal sector.

The report, “Impact of Key Reforms on Job Formalization and Flexi Staffing”, says that a total of 1.08 million jobs were formalized with the introduction of GST. Note ban contributed around 0.87 million into the formalization of jobs. Reform initiatives in Employees’ Provident Fund (EPF) and Employees’ State Insurance (ESI) contributed the most in the formalization of jobs at 1.28 million and 1.25 million, respectively, during 2015-2018. Initiatives like Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), under which the government shouldered employers’ burden for mandatory EPF contribution for an employee earning up to Rs 15,000 a month, paid off.

Braving industry’s opposition, the government had in 2016 raised monthly wage threshold for enrollment under ESIC at Rs 21,000 from Rs 15,000 earlier. The introduction of fixed-term employment, initially for the textile and garment sectors and later for all sectors, also contributed significantly.

The study further said around 11.03 million jobs will be formalized in 2018-2021 as a result of current and imminent policies and reforms. Reforms in EPF and ESIC will drive formalization of jobs the most. The report revealed that flexi staffing industry has witnessed acceleration due to government’s reforms since 2016. It said flexi workforce is expected to go up to 6.1 million by 20121 from 4.1 million in 2019. In 2015 and in 2018, the number of flexi workforce in the country stood at 2.1 million and 3.3 million, respectively.