EPFO: Subscribers Of Firms Down In October 2020
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Establishments registered with the Employees' Provident Fund Organisation (EPFO) fell by more than 30,800 in October from September, indicating companies may not be recovering as quickly as expected and are shedding jobs because of continued stress.
While there were 534,869 contributing establishments with retirement fund manager EPFO in September, the number fell to 504,044 in October, according to official data.
The fall is the first since May when the country was in lockdown. The situation improved gradually month on month until October's decline.
Alongside, there has also been a fall in the number of EPF members. The number of workers or members contributing to the pension fund fell by 1.8 million in October from the previous month, data accessed by Mint showed. While there were 47.68 million contributing members in September, this went down to 45.82 million last month.
"After a significant fall in April in the number of registered establishments, the number was recovering every month till end September, but in October, it has gone down. It's a tricky situation as the lockdown had eased by then. It could be due to economic contraction and a larger demand scarcity. In such a situation, they may simply be staying away from paying the EPF contribution as well as to save cost," said a government official who declined to be named.
"Similarly, the number of contributing members was going up since May after falling drastically in April but was still below the pre-lockdown period even in September when the retirement fund saw the highest contributing members in the current financial year," said the official.
Industry experts and economists argued that the fall in contributing establishments is a clear indication of the economic environment but said this could be part of the bigger crisis industries are facing.
"The number looks like an indication of how companies' recovery from the downturn is taking longer and how government support may not be proving enough to accelerate this recovery," said Santosh Mehrotra, a labour economist and retired professor of economics at Jawaharlal Nehru University.
"In the first quarter, GDP contracted by almost 24%; and in the second quarter, there has been a forecast that it will contract almost 9%. This shows companies are struggling and less than expected demand revival must have pushed companies to either cut headcount or close down. They are closing down permanently or for a short duration, only time will tell."
"The jobs crisis is real, graduate unemployment is high, and millions have lost regular jobs. It may have got registered in a particular period or month due to companies tabulating those data and sharing with EPFO. But remember that EPFO gives you the picture of a portion of the formal sector," Mehrotra added.
Agreed Nilesh Desai, vice president of Telangana state confederation of MSMEs, "Small companies are the worst sufferers, and no one is looking at them. At least 50% of the small-scale industries across the states will most probably fold. There is very little demand in the economy. The government should handhold them, and more so the smallest firms," he said, adding that an MSME entrepreneur told him Tuesday that of the 30 workers with iron and steel wire manufacturing company, 10-12 have left recently for their hometown in Bihar.
A Hyderabad-based steel sector MSME owner said he does not wish to be in the EPFO fold even though he deploys more than 20 workers and is eligible. "I don't want to increase my cost, face unwanted harassment from the government. Instead, I know how to manage," he added requesting anonymity.