Unemployment rising, spl assistance package needed to address the situation

55.5% households report fall in their incomes, while 41.5% say there's no rise in their income compared to a year ago. Unemployment rate in Jan was 6.52% which rose to 7.97% in April and 8.2% on May 9

Unemployment rising, spl assistance package needed to address the situation

Gyan Pathak

We must not be misled by the figures of economic growth and revival being reported in the media nowadays. Rather, we need to analyse them carefully, because they are being compared with a low base of the pandemic year 2020, to present a rosy picture of the economic revival which is yet fragile and uncertain due to the second wave of Covid-19 causing great loss to lives and livelihoods.

Jobs and household incomes have been nosediving for weeks, which should make people and the government beware of the consequences. The new additions to the jobless and the households with only a little or without income also need special assistance immediately for survival.

Fall in household incomes is being witnessed due to many reasons, of which loss of jobs is one of the major reasons, and both have adversely impacted the demand in the market, which in turn has endangered the economic recovery. People don’t have money in their hand to buy other than what is absolutely necessary for them. The consumer sentiment has therefore declined holding up the economic recovery.

The week ended May 16, 2021 recorded a 1.5 per cent decline in the Index of Consumer Sentiment, according to the latest CMIE data. It was the fifth consecutive weekly fall which began the week ended on April 11. Such a fall is akin to the fall that India had recorded last year after implementation of the lockdown of the country on March 24, 2020 to May 31, 2020. Unlocking began slowly from June 1, 2021, after which the situation had improved a little.

The reason for fall of consumer sentiment is the same between the first wave then and the second wave now, that is, fall in household income and people’s increased level of despair and pessimism regarding their future well-being.

We should be careful about some statistical aberrations too, which do not represent the real picture on the ground level. Let us take the example of the reported data on household income for the week ended May 16, 2021. It was reported that more people have reported that their incomes were higher than they were a year ago. Then it should be noted that the percentage of such household was still very low at only 3.1 per cent. Additionally, it is worth noting that the proportion of the household reporting such increase in their income compared to last year has in reality been falling steadily since the week ended on March 21, 2021. Since around the same time larger proportions of households have been reporting that their incomes turning worse compared to a year ago.

The percentage of the households reporting fall in their income is well over 55.5 per cent, while 41.5 per cent have stated no change in their income compared to a year ago. It means a total of 97 per cent of the household have been suffering from the hardship created due to fall in income in real time – that is, a fall in real income at current prices.

The major reason of the fall in household incomes and dampening of the consumer sentiment is the loss of jobs in the labour market due to containment measures and lockdowns to tackle the second wave of Covid-19. As many as 10 states have imposed some sort of lockdown, and these states are those which have been providing a large number of jobs. The containment measures since first week of February 2021 have put the economy and the labour market in perilous situations. The labour participation rate has fallen and unemployment rate has risen to an unprecedented level during April 2021. The week ending May 16, 2021, the employment rate has further shot up to 14.5 per cent from 8 per cent in April 2021. Obviously, in May, the unemployment rate is going to be in double digit.

Unemployment in the country in the last one year since May 2020 has been fluctuating on a month-on-month basis until January 2021. It means, one month people are getting employed and the next month they lose their jobs. However, since beginning of the year 2021, it has been worsening. Unemployment rate in January was 6.52 per cent which rose to 7.97 per cent in April, and 8.2 per cent on May 9. The increase in unemployment rate within one week to 14.5 per cent is indeed alarming. In absolute terms India had lost 7.35 million jobs in April.

Such a high level of job loss and fall in household incomes remind us of the situation prevailing during April-May 2020, when the economy was put to grinding halt by the nationwide lockdown. Both the labour market and the consumer sentiment had collapsed. Labour participation had fallen sharply and unemployment rate had shot up to over 20 per cent in two months.

During that period employment had also fallen sharply, by 29 per cent in April and 9 per cent in May 2020. Employment recovered 11 per cent in May and continued improving through the whole year 2020-21, though slowly in later months.

However, in April 2021 employment fell to 390 million, from 398.14 million a month ago in March, which was the third consecutive month of fall in jobs from January’s figure of 400.7 million. The fall in employment has been recorded both in salaried and non-salaried classes of workers. The monthly average unemployment rate as on May 22, 2021, is 10.3 per cent as per the CMIE data, which is an increase of 2.8 per cent.

Given this scenario, the unemployment rate is most likely to shoot up further in May and June, which would result in further loss in household incomes and more dampened consumer sentiment making the economic recovery more uncertain. India therefore needs a proactive intervention with a comprehensive special assistance plan.

(IPA Service

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