India’s unemployment rate has quickened to historic highs despite a fleeting sign of recovery, costing well over 114 million jobs, mostly of small traders and daily wagers, data from the Centre for Monitoring Indian Economy (CMIE) shows.
The country’s unemployment rate touched 27.1 per cent in the week ended May 3 – the highest ever – indicating a bloodbath in the wake of the coronavirus pandemic and the lockdown.
Not surprisingly, India’s factory output, a key measure of economic activity, shrunk by 16.7 per cent, data from the Central Statistics Office showed on May 12, signalling that a widespread shutdown had bit the economy hard.
The lockdown imposed on March 24 has shuttered shops, factories and services, such as tourism, eateries and public transport, devastating jobs. Millions of displaced migrant labourers continue to flee major cities for their home states, as they fight a survival battle.
Mounting unemployment will pile more pressure to ease pandemic restrictions, with Prime Minister Narendra Modi saying on May 12 that new lockdown rules would be announced on May 18.
“It (unemployment rate) seems to have risen because of a surge in the labour participation rate from 35.4% in the week of April 21 to 36.2% in the week ended May 3,” said the CMIE’s Mahesh Vyas.
In any job survey, people with jobs are categorised as employed. People without jobs but looking for work are considered unemployed. However, the labour force participation rate is simply equal to people who are employed plus people who are not employed.
In a rough-and-ready sense, the unemployment rate is then simply the number of unemployed divided by the total labour force times 100.
According to Vyas, the spike in the unemployment rate indicates that “this surge in job seekers was highly disappointed. They could not find jobs. Their addition to the labour force merely raised the unemployment rate”.
Manufacturing output shrank 20.6 per cent, electricity production dropped 6.8 per cent and mining remained flat, according to the official data released on May 12. The figures are likely to be revised as the lockdown has impacted data flow, the statistics ministry said.
In the week ended April 26, the country’s unemployment rate was 21.1 per cent, substantially lower than the 26.2 per cent rate recorded in the preceding week, according to the CMIE’s data. The latest weekly unemployment rate, which showed an improvement, is more because of a technical reason: a fall in the labour participation rate.
Previously, the country’s unemployment rate stood at 6.1 per cent for July 2017-June 2018, according to the last periodic labour force survey (PLFS), the only official survey, released in June 2019 showed. This rate then was at a 45-year high.
“It is not surprising that small traders and wage labourers account for most of these losses. They have been the most severely hit during the lockdown,” a CMIE report said.
Employment in fact has been rolling steeply downhill. “I have no work, no savings and no money,” a Big Bazaar floor staffer requesting anonymity said, adding he had not got his salary for last month.
The Consumer Pyramids Household Survey, a proprietary tool of CMIE, estimates that employment fell by a massive 114 million in April, 2020. In March 2020, employment had already dropped to 396 million. This was the lowest employment since we started measuring it over four years ago. Even this low level dropped dramatically by 29 per cent to 282 million in April this year.
When the economy hobbles, analysts say vulnerable jobs without safety nets take the first hit. Unemployment then spreads to more secure sectors.
“The picture for April would be worse with virtual nil growth in most sectors which will mean a very large dip in growth rate in manufacturing. Only some segments like food and pharma could show positive growth,” Madan Sabnavis, chief economist at Care Ratings said.
