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Joblessness has soared for the week ending 30 May, with urban India hitting a high, according to the Centre for Monitoring Indian Economy (CMIE). The labour force participation rate too has fallen, signalling the need to revive economic activities. Mint explains:

What is India’s unemployment rate?

Regional lockdowns imposed to curb the spread of the second wave of covid-19 infections have seen unemployment rate in the country soar to 11.9% in May as against 7.97% in April and 6.5% in March 2021. In the week ended 30 May, the rate rose to 12.15%, even as it touched a high of 17.88% in urban India. However, as CMIE estimates are based on a small sample size, which might give a macro picture of the latest unemployment trends, data given by the National Sample Survey Office (NSSO)—based on door-to-door collection—might be considered for an in-depth analysis.

What is labour force participation rate?

The labour force participation rate (LFPR) is a measure of the proportion of a country’s working-age population that is actively engaged in the labour market. It is calculated by expressing the number of persons in the labour force as a percentage of the working-age population. LFPR dropped to 35.69% and 40.61% in the week ended 30 May for urban and rural India, respectively, from 37% and 42.33% in the week ended 16 May. Declining LFPR is indicative of the fact that individuals are withdrawing from the labour market and not looking for jobs. This can be worrisome for an economy.

Job losses
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Job losses

How does India compare to the rest of the world?

According to the International Labour Organization, India’s unemployment in 2020 was 7.11% while the global average was 6.47%. Neighbours China, Bangladesh, Sri Lanka, Pakistan, Nepal and Bhutan had unemployment rates of 5.0%, 5.3%, 4.48%, 4.65%, 4.44% and 3.74%, respectively. The US had an unemployment rate of 8.31%, higher than India.

How has the second wave impacted jobs?

With the Indian economy growing at 1.6% in Q4FY21, net payroll data of the Employees’ Provident Fund Organization showed the number of new subscribers stayed flat at 1.12 million in February and March. But localized lockdowns led to a spurt in joblessness in April and May 2021. Low business sentiment, curtailed economic activities and the fear of contracting the virus resulted in people migrating from urban India to villages. But rural areas were unable to offer employment, other than manual work under the MGNREGS.

What measures can be adopted?

Quick short- and medium-term steps include resuming economic activities in a graded manner and aiming for universal vaccination at the earliest. Jabs will help improve consumer confidence and lead to increase in demand and availability of labour which in turn will have a positive impact on production and business sentiment. Improved business confidence will result in increased job opportunities, thereby setting the cycle of demand and supply in motion.

Jagadish Shettigar and Pooja Misra are faculty members at BIMTECH.

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