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Hobbled by lockdowns and curtailed economic activity, India’s urban unemployment rate has soared to almost 18%, the highest in a year.

The urban joblessness rate was 17.88% in the week ended 30 May, three percentage points more than a fortnight ago, when it was 14.71%, the Centre for Monitoring Indian Economy (CMIE) data showed. Urban unemployment was 10.08% in the week ended 2 May.

The labour force participation rate (LFPR) and employment rate also fell in urban India. LFPR dropped to 35.69% in the week ended 30 May, against 37% in the week ended 16 May, the CMIE data showed. However, rural unemployment fell nearly five percentage points in the week ended 30 May, from a fortnight ago, to 9.58%.

National joblessness dropped a little over two percentage points during the same period. As per the latest weekly data, the national unemployment rate stands at 12.15%.

Experts and economists said urban joblessness has a direct co-relation with restricted economic activity and lockdowns. Besides, there is no alternative to the rural national employment guarantee scheme for urban workers. They said that in rural India, more people are engaged in family professions such as agriculture, horticulture, and small businesses, leading to disguised unemployment and lower productivity.

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“Urban unemployment will stay high for at least three to six months because of three reasons–lack of employment opportunities, employers’ hesitation to hire more, and an increased risk-aversion among workers due to the scientific study that has established that the coronavirus is spreading through air," K.R. Shyam Sundar, a labour economist, said.

“Other than IT and allied sectors, employment opportunity is limited everywhere else. Look at fast-moving consumer goods, retail trade, automobile, informal sectors, including urban markets, the hospitality or tourism sectors, you would realize that it’s no time to stand and clap in joy. The business sentiment is down, consumption is down, and we are facing a circular crisis. Lack of consumption is hitting employment creation, and lack of employment is adversely impacting consumption," he added.

The Federation of Indian Chambers of Commerce and Industries (Ficci) on Monday said business confidence has dipped to a three-quarter low and 70% of participants reported weak demand as a matter of concern, compared to 56% in the previous quarterly survey round.

The fall in demand is due to declining income, and job and business losses, and their impact on the overall economy, said Arup Mitra, a professor of economics at Delhi University. “Because there is a stretch in the labour market, people are earning less, and job losses are massive, market demand and economic revival is taking time. I think the improvement in job market and business sentiment will depend on how we as a system manage the current crisis."

Rural unemployment is as bad as urban but the difference is that there is mass disguised unemployment which gives a false sense of employment, said Mitra.

In its annual report released on 27 May, the RBI said: “2020 was ravaged by output and employment losses unprecedented in history, globally and in India" and the pandemic presents painful trade-offs between protecting lives through restrictive measures and protecting livelihoods by not resorting to them. This is the dilemma confronting all, and India is not immune to this “razor’s edge dilemma", it added.

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