Unemployment situation in India remains grim, exposing Modi govt’s claims of economic revival

Employment in June fell by about 14 million, reducing number of employed people to 390 million from 404 million in May. If we exclude lockdown, it’s the biggest monthly fall in last two years

Representative Photo (Getty images)
Representative Photo (Getty images)

Dr Gyan Pathak

The unemployment situation in India remains grim, despite some increase in employment in rural areas with the beginning of the monsoon session and agricultural and allied activities. As on July 13, 2022, the unemployment rate on 30 days moving average was 7.5 per cent according to CMIE, a little improvement from 7.8 per cent in June, when employment rate had registered a fall to 35.8 per cent, the worst in two years.

Urban unemployment has worsened to 7.6 per cent on July 13, from 7.30 per cent in June, while rural unemployment rate fell from 8.03 per cent in June to 7.39, which is still higher than 6.34 per cent registered in July 2021.

Employment in June had fallen by about 14 million, reducing the number of employed people in the country to 390 million from 404 million in May. If we exclude lockdown months, it is the biggest fall for any non-lockdown month in the last two years, which betrayed all claims of the Modi government regarding revival of the economy with corresponding employment generation.

It has frustrated all hopes of rise in employment that the increase of 8 million jobs had created in the earlier two months in April and May. It clearly shows that India is on the path of economic recovery with fall in employment and rise in unemployment, a labour market distortion that needs urgent redressal.

There was an increase in unemployment by about 3 million in June, which, along with exit of workers from the labour force, caused a shrinkage of over 10 million in the total workforce. Mass exit of labour force has distorted the labour force participation rate (LPR) and caused it to shrink to the lowest level at 38.8 per cent from around 40 per cent in April and May.

If we exclude the lockdown period from March 24 to May 31, 2020, the LPR has been hovering in the range of 39.5 to 41 per cent, which has gone down to 38.8 per cent, a ‘sharp decline’ as rightly commented by CMIE’s Mahesh Vyas.

This shrinkage in the LPR to its worst in the last two years has held back the unemployment rate from rising sharply. But it is simply a distortion in the labour market, bringing more tribulations to the unemployed, though mathematically it may seem to many a good thing that unemployment rate did not rise sharply.

This mathematical fallacy does not represent the social reality at its worst, especially at a time when price rise and inflation have been creating havoc among the jobless with no earning.

It goes without saying that the fall in employment was really sharp on the one hand and deterioration in the principal labour market was equally sharp.

The ratio between the two is alarming. Labour market ratios worsened across rural and urban regions in June. It was more pronounced in the rural areas, where LPR fell from 41.3 per cent in May to 39.9 per cent in June. For urban areas it fell from 37.1 per cent to 36.7 per cent.

Unemployment rate had shot up by 1.4 per cent to 8 per cent in rural areas in June. Unemployment in urban areas had improved a little, falling by 0.9 per cent to 7.3 per cent, the lowest in the past 16 months. That the employment rate remains almost unchanged in urban areas reveals that joblessness remains a serious concern in the urban areas, further deteriorating in the first 13 days of July.

The agriculture sector had shed nearly 8 million jobs in June, perhaps because rains were 32 per cent below normal during the first fortnight, which prevented deployment of rural workforce in the agriculture fields. Crop cultivation could add only 4 million jobs, which was lower than the previous two years.

In July, the monsoon has improved but rural sector unemployment at 7.39 per cent is still too high. It is still unexplained how the number of farmers increased by 1.8 million in June, at a time when rains were 32 per cent below normal, and the rural areas witnessed considerable loss of agriculture jobs. With monsoon picking up in the coming weeks, employment in rural areas, particularly in agriculture, may revive in July.

It shows the dependence of a large number of the Indian labour force on the vagaries of monsoon. It is a worrisome scenario as far as rural workforce in concerned.

However, there are other troublesome data revelations from June when 2.5 million salaried employees lost jobs. Existing vulnerabilities of the rural workforce and the growing vulnerabilities of the salaried employees are a serious cause of concern.

An even more serious concern is that the government has caused shrinkage in demand for armed personnel, apart from shrinking opportunities in private equity funded new-world jobs.

Quite obviously, India urgently needs an economic revival with revival in job market with employment generation.

(IPA Service)

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