India’s falling jobless rate and risks to employment

In News

• India’s unemployment rate touched a four-month high of 7.9 per cent in data from the Centre for Monitoring Indian Economy (CMIE).

About the latest trend

• Declining trend: The numbers show a significant declining trend even before economic activity was affected due to the fresh Covid-19 restrictions imposed in many states.
• Latest unemployment rate
  • The unemployment rate rose to 7.9 percent. It stood at 7 percent last year.
  • Urban unemployment rate rose to 9.3 percent from 8.2 per cent.
  • Rural unemployment rate increased to 7.3 per cent from 6.4 per cent.
• India’s labour participation rate (LPR): This has been on a downward slide, falling from over 46% in 2016 to just over 40% in 2021.
  • The LPR is a measure of how many employable people in the economy have jobs or are looking for work.
  • This means that 60% of the employable population is not part of the workforce or even looking to join and have fallen off the job market.
  • India’s LPR is lowest in South Asia in 2020. While Pakistan, Sri Lanka, Bangladesh walked past, India fared even worse than Afghanistan, even though it was marginal.
• The World Inequality report 2022: called India as a “poor and very unequal country, with an affluent elite”, where the bottom 50% holds just 13% of national income in 2021.

Issues

• Impact on organized sector’s jobs: Urban employment is a proxy for better paying jobs and a decline in these numbers reflects impact on better-paying organized sector’s jobs.
• Low consumption levels: With Covid-19 cases on the rise amid the threat posed by the Omicron variant and many states imposing fresh curbs, economic activity and consumption levels have been affected.
• $5-trillion target: None of this portends well for the economy or the $5-trillion target set by the government, unless it can course-correct and creates more jobs.
• Job security: Indians, however, worry about unemployment with concerns around job security topping their list.
• Ripple effect: The impact of unemployment can be felt by both the workers and the national economy and can cause a ripple effect.
• Suffer financial hardship: Unemployment causes workers to suffer financial hardship that impacts families, relationships, and communities. When it happens, consumer spending, which is one of an economy’s key drivers of growth, goes down, leading to a recession or even a depression when left unaddressed.

Way forward

• Demographic dividend: There was a time when India’s demographic dividend was being touted as its biggest strength.
• Positive feedback: Around 70% urban Indians also believe the country is moving in the right direction.
• A Change in the pattern of investment: The planning process in the initial stages gave importance to an investment-allocation pattern with a high capital-labour ratio. Therefore, a shift in the emphasis to mass consumer goods industries would generate more employment to absorb the unemployed labour force.
• Encouragement to small enterprises as against big enterprises: The employment objective and the output objective can be achieved, if greater investment is directed to small enterprises rather than to large enterprises.
• Underemployment in Rural Areas: It is necessary to organize the Rural works Programme. Failure of implementation of the Rural Works Programme underlines the relatively low importance given to the rural sector to provide additional employment to millions of landless labourers and small and marginal farmers.

Source: IE