Home >Economy >Unemployment rate falls as states unlock

NEW DELHI : India’s unemployment rate improved to a six-week low of 8.7% as falling coronavirus infections lead states to relax lockdown curbs and monsoon rains cover some parts of the country.

Economists, however, said that the recovery is mainly due to easing of restrictions on operations in the informal sector as well as withdrawal of people from the workforce in the absence of decent jobs.

The urban unemployment dropped to 9.7% in the week ended 13 June against a monthly unemployment rate of 14.7% in May, according to data available with the Centre for Monitoring Indian Economy (CMIE).

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Turning point

The drop is more prominent if the fresh weekly numbers are compared with previous weeks. The urban unemployment rate in the just-ended week is 8.18 percentage points less than the 17.88% rate in the week ended 30 May, and 3.6 percentage points less than the week ended 6 June.

Similarly, in rural India, the job loss rate improved 2.4 percentage points in the week ended 13 June to 8.23%, compared with the monthly figures of May of 10.63%.

India had a national unemployment rate of almost 12% in May, according to CMIE.

The fresh joblessness is still higher than any of the monthly unemployment rates recorded between January and April when the rate hovered between 6.52% and 7.97%.

To put things in perspective, a 7.97% unemployment rate in April erased some 7.35 million jobs, including 3.4 million salaried jobs.

The national unemployment rate had reached a record high of 23.52% in April 2020 during the national lockdown. It improved to 6.52% in January 2021, in line with an economic recovery. But the second wave delivered another hit to the jobs market in April and May. The two months, which were the biggest witness to the ferocity of the second wave of the pandemic, saw about 23 million job losses—both salaried and non-salaried.

Experts and economists said the gradual easing of covid-related restrictions by several states has helped workers in the informal sector and small businessmen resume work. But the formal sector is still struggling and its recovery will hinge upon a revival in demand, return to optimal production at factories and a rebound in the overall economy.

“It’s too early to take solace in these numbers. What has happened in the past week to 10 days is the arrival of the monsoon and gradual unlocking of some economic activities. The monsoon has very little impact on the urban labour market but in the rural market it may have aided cultivation activities which generally absorb a lot of people and more so during pandemic time even though their productivity is low," said Arup Mitra, a professor of economics at Delhi University.

In the formal sector, the regular or permanent workers faced fewer problems during the second wave but temporary formal workers had to contend with job losses.

“What is happening right now is these categories of workers have either gone back to rural homes or have withdrawn from the labour market due to lack of decent opportunities. This is also contributing to the lowering of the unemployment rate," explained Mitra.

“But the formal sector will take a long time to recover and it depends on optimal production in the labour-intensive manufacturing sector, revival in market demand and overall economic environment. The economy is still struggling and consumer sentiment is still negative. For formal sector job revival, both these indicators are key," said Mitra.

Icra Ltd last week reiterated its forecast of a prolonged negative impact of the second wave on consumer sentiment and demand, with healthcare and fuel expenses eating into disposable incomes and less pent-up demand in FY22 relative to FY21. The rating firm, however, hopes that if vaccine coverage is accelerated following the re-centralized procurement policy, GDP growth in FY22 may be as high as 9.5%.

The CMIE data showed that the national labour force participation rate of 39.75% in the week ended 13 June is 80 basis points more than the week ended 30 May. Similarly, the employment rate of 36.29% is almost two percentage points more than the week ended 30 May.

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