Rural services help partially offset job market losses in Aug

Key employment generators manufacturing, mining, food processing, and construction shed millions of jobs in August in both urban and rural pockets. Only the service sector in rural India offset the carnage by adding over eight million jobs.

The addition of services jobs in rural India indicates an uptick in economic activity and movement of workers from farm to largely informal non-farm jobs. This is mostly driven by retail trade and non-professional services, according to fresh monthly data from the Centre for Monitoring Indian Economy (CMIE).

While at the national level, the manufacturing sector shed some 940,000 employees, in mining, the number of people employed in August went down by at least 1 million when compared with July. Like several other segments, real estate and construction, too, cut the headcount by 599,000. Agriculture shed some 7.5 million jobs in August.

However, services in rural India added 8.4 million jobs to salvage the situation, followed by employers in utilities, where the number of people employed went up by a marginal 80,000 across India.

Even in services, the job creation is not evenly spread across sub-segments. While the urban service sector jobs remained static in August, the rural headcount went up.

A sliced view of the rural service sector shows that of the 8.4 million job additions, at least 5.5 million were in retail trade; followed by 3.5 million additions in personal, non-professional services or support services; 438,000 in wholesale trade; and a marginal uptick of around 100,000 in software services and back-office outsourcing jobs.

But again in rural service sectors, jobs were lost in financial employment (over 300,000), communication and logistics (over 200,000), healthcare (almost 370,000), education and hotel industries.

Experts and economists argued that sectoral and sub-sectoral employment numbers show that job creation is happening in the periphery, with core sectors failing to deliver. Such jobs, they warned, will not spur private consumption.

“We are losing jobs in financial establishments, rural logistics and healthcare and education, but the additions are in personal, non-professional service and retail trade. So employment generation is happening in peripheral and unorganized space,” said K.R. Shyam Sundar, a labour economist and professor at XLRI Jamshedpur.

“For years, India’s non-farm formal sector growth outside the cities and urban centres have been poor. The absorption of people in non-farm jobs means informal retail trade. Besides, the EPFO payroll data also indicate the growth of expert service like small contractual and gig work is gaining ground, and these are not formal jobs. These are part-time contractual works and would not drive private consumption,” Sundar added.

Arup Mitra, a professor of economics at Delhi University, said data shows that post the sowing season in rural India, people are moving from agriculture to retail trade and non-professional service work. “They are not decent jobs but low productive work—better than staying unemployed. They are in a way disguised unemployment as core sector jobs are not available,” Mitra explained.

“The monsoon may have partially impacted some of the sectors like mining and construction, but it’s a fact that manufacturing as an umbrella sector is still away from its pre-pandemic situation, and again the companies are adopting technology to suit to the situation as the pandemic threat is still on,” Sundar said.