India's central bank needs high-frequency data on jobs

With a new governor at the helm, the Reserve Bank of India's (RBI's) monetary policy stance will be watched very closely this time. If RBI signals a shift to an easy-money policy, it will ease concerns relating to the growth slowdown.

- PRAMIT BHATTACHARYA

But it will raise concerns about inflation at a time when a weak rupee is expected to raise import prices.

In other large economies, central banks often rely on labour-market indicators to help resolve such policy dilemmas. In some countries, central banks are mandated to maximize employment opportunities. In others, central bankers take into account jobs data to decide the policy stance.

RBI doesn't have an explicit employment mandate. Nor does it seem to place much weight on the labour-market impact of its policy decisions. The last policy statement in December did not mention jobs' or 'employment' even once. One external member of the Monetary Policy Committee drew attention to the jobs issue. But he did not provide any figures on the likely job gains or losses that could arise from alternate policy choices.

In fact, we don't have reliable estimates of how monetary policy impacts job creation.

Indian policymakers have long been content with once-in-five-year updates of workforce numbers provided by the quinquennial rounds of the National Sample Survey (NSS).

Economists held that most Indians were too poor to be unemployed. In other words, the informal labour market was considered to be a residual sector, always offering 'work' to those who lacked regular jobs'. The Indian definition of employment included informal work arrangements. Official unemployment rates remained low and stable, even as 'disguised unemployment' levels stayed high.