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India’s joblessness rate fell in November from the previous month with declines in both rural and urban unemployment, indicating an increase in economic activity during the festive season, according to unemployment data issued on Tuesday by the Centre for Monitoring Indian Economy (CMIE).

The overall unemployment rate dropped to 6.51% in November from 6.98% in October, the data showed. Rural unemployment rate fell to 6.26% from 6.9% in October. Urban joblessness was, however, higher than rural with an unemployment rate of 7.07% in November, declining marginally from 7.15% in October.

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The sequential fall in overall unemployment rate will cheer policymakers. However, economists and experts argue that the unemployment rate should be seen vis-a-vis the labour force participation rate (LPR), which is still lower than last year. Also, only blue-collar jobs have made a revival and not white-collar jobs.

Besides, half a dozen states, including some large and relatively industrialized ones, continue to report a double-digit joblessness rate. Some of these states also reported an increase in the unemployment rate in November despite an increase in economic activity. Among states, Haryana reported a 25.6% unemployment rate and Rajasthan 18.6%, while Goa reported a joblessness rate of 15.9% last month.

The low LPR means more people are neither employed nor looking for employment due to poor economic environment despite their eligibility to enter the labour market. Hence, the drop in the unemployment rate does not offer a true picture of the unemployment scenario as mentioned by the CMIE recently, economists argued.

“We had expressed concern that the recovery process had started showing signs of fatigue in July. This has turned out to be true. The LPR did not recover entirely before it started sliding again. The average LPR in 2019-20 was 42.7%. It had never fallen below 42% till the lockdown. Now, it seems to be heading towards a sub-40% level. The LPR was 39.5% in the week ended November 15 and was 39.3% in the week ended November 22," CMIE said in post on its website on 23 November.

“A falling LPR implies that an increasingly smaller proportion of the working age population is seeking employment…. If the LPR continues to fall sharply, the labour force shrinks. This is what happened in September 2020 after the recovery process lost steam. The labour force stagnated in October. It could be falling in November. This is worrisome," it had said.

The low LPR is a bigger crisis than the unemployment rate as it talks about the sentiment in the job market and as a reaction how people are staying away from the labour market, said K.R. Shyam Sundar, a labour economist, adding that how the “unemployment rate only gauges the proportion of the labour force that are in the labour market but fails to find employment. This does not count those who are out of it despite their eligibility to search jobs and get jobs". “The recovery is happening in low-end blue-collar space, and decent formal employment is far away," he said.

Employee cost fell by 0.9% in Q2FY21 from a 6.9% growth in the same quarter of FY20 “owing to job and pay cuts and nil or limited increments announced by the companies. This highlights the grim employment scenario in the private sector", Care Ratings Ltd said in its corporate performance analysis report on 26 November.

Jobs, especially blue-collar ones in e-commerce and logistics sectors, grew well in the last couple of months though there is a mismatch between what is available and what most people are looking for, said Madhav Krishna, founder of staffing startup Vahan.

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