Welcome update to PLFS, the Indian labour force survey

India’s Periodic Labour Force Survey (PLFS), conducted by the National Statistical Office (NSO), has undergone a significant transformation with the release of its first quarterly report for urban areas based on a revamped methodology. This update, covering July-September 2024, marks a pivotal shift in how India tracks its labour market dynamics, addressing long-standing concerns about data reliability and timeliness. The revised approach offers a more granular, responsive, and accurate picture of employment trends, which is crucial for policymakers, economists, and businesses navigating India’s complex economic landscape.

The PLFS, launched in 2017, was designed to provide regular updates on India’s labour market, replacing the quinquennial employment-unemployment surveys by the National Sample Survey Organisation (NSSO). However, the survey has faced criticism for its delayed data releases and methodological inconsistencies, particularly in capturing the nuances of India’s informal economy. The recent overhaul introduces several key improvements, making the data more relevant in a rapidly changing economic environment.

New approach: Continuous survey

One of the most significant changes is the adoption of a “continuous survey” approach. Unlike the earlier method, which collected data over a year and released it with a considerable lag, the new system conducts surveys throughout the year, with quarterly reports for urban areas and annual reports for both rural and urban regions.

This ensures timelier data, allowing policymakers to respond more swiftly to labour market shifts. For instance, the July-September 2024 urban quarterly report provides insights into employment trends just months after the data collection, a marked improvement over previous delays.

CWS method

Another critical update is the shift to a “current weekly status” (CWS) approach for measuring employment. Previously, the PLFS relied heavily on the “usual status” metric, which classified individuals based on their employment status over the past year. This often failed to capture short-term fluctuations, particularly in urban areas where gig work and informal employment are prevalent.

The CWS method, which assesses employment based on the week preceding the survey, offers a more dynamic snapshot of the labour market. This is particularly relevant in India, where seasonal and informal work significantly influences employment patterns.

Methodology refined

The updated PLFS also refines its sampling methodology. By increasing the sample size and improving the stratification of urban areas, the survey ensures better representation of diverse socio-economic groups. This is vital in a country as heterogeneous as India, where urban labour markets vary widely across regions, industries, and demographic profiles. The enhanced sampling framework reduces errors and provides more reliable estimates of key indicators like the labour force participation rate (LFPR), worker-population ratio (WPR), and unemployment rate.

The July-September 2024 data reveals encouraging trends. The urban unemployment rate dropped to 6.4%, down from 6.6% in the previous quarter, signalling a gradual recovery in job creation. The LFPR in urban areas rose to 50.1%, reflecting increased participation, particularly among women, whose LFPR climbed to 25.3%. The WPR also improved, reaching 46.9%, suggesting more individuals are finding work. These figures, while modest, indicate a positive trajectory for India’s urban labour market, bolstered by sectors like services and manufacturing.

Challenges

However, challenges remain. The informal sector, which employs a significant portion of India’s workforce, continues to be underrepresented in official data. While the CWS approach captures short-term employment better, it may still miss the complexities of seasonal or gig work. Additionally, rural labour market data, which will be released annually, is critical for a comprehensive understanding of India’s economy, given that rural areas account for a substantial share of the workforce.

The revamped PLFS is a step in the right direction, offering policymakers a sharper tool to address unemployment and underemployment. Timely and accurate data can guide targeted interventions, such as skill development programs or incentives for job creation in high-growth sectors. As India aims to harness its demographic dividend, the improved PLFS framework provides a foundation for evidence-based policymaking, ensuring that economic growth translates into meaningful employment opportunities for millions.