The job scenario in India is set to worsen a great deal as the nation once again is faced with double-digit unemployment rate. May is going to see unemployment rate in India deteriorate even with limited restrictions in place on account of the second wave of COVID-19 infection, much lenient in comparison to the nationwide lockdown seen during the first wave. The 30-day moving average employment rate as on May 23 has fallen by 100 basis points, marking a loss of 10 million jobs, said Centre for Monitoring Indian Economy (CMIE).
"The only time the unemployment rate lurched into double-digits was when India was shut down by a stringent nationwide lockdown during April and May 2020. There is no similarly draconian lockdown now although there are several local restrictions that restrain mobility in varying but distinctly milder degrees. The double-digit unemployment rate seen in recent times indicates that even these restrictions are taking a toll on the economy," said Mahesh Vyas, CEO of CMIE.
While the estimated fall in employment may ease or worsen in the last week of May, the losses will remain, Vyas said. India will close May with double-digit unemployment rate, falling employment rate and substantial loss of employment, he cautioned.
In the weeks ended May 16 and May 23, unemployment rate had reached 14.5 per cent and 14.7 per cent, way higher than 8.7 per cent seen in the week ended May 8. "Gleaning the weekly rates during the current month, it seems that May 2021 could end with an unemployment rate of over 10 per cent," Vyas said.
The signs are already there. The 30-day moving average for unemployment rate on May 21 was 10.3 per cent, which has grown to 10.6 per cent by May 23, Vyas pointed out. Worryingly, unemployment rate has been growing in both urban as well as rural regions, as opposed to the usual trend where urban unemployment rate is much higher that the rural unemployment rate.
"Urban unemployment entered the double-digit zone on May 6 when its 30-day moving average rate was 10.2 per cent. It has risen steadily since then. By May 20 it touched 12 per cent and as of May 23 it was 12.7 per cent," Vyas said.
Maintaining its upwards trend since April, urban unemployment rate will definitely end in double-digits in May, a first since April-June 2020 period.
In contrast, rise in rural unemployment rate is a more recent phenomenon that began in May. "During April, the unemployment rate rose from 6.2 per cent as of April 1 to 7.1 per cent by May 1. Then, it fell to 6.7 per cent by May 7 before it began its steep rise. By May 23 it reached 9.7 per cent," Vyas wrote in his report.
These unprecedented numbers for rural unemployment warrants greater deployment of MGNREGS, he added.
This steady rise in unemployment across the board is likely to result in loss of employment during May. We say this because there is no increase in the labour participation rate (LPR) that could have also caused an increase in the unemployment rate, the report said.
The LPR was 39.98 per cent in April 2021. By May 23, it was 40.01 per cent. And so, the rise in the unemployment rate reflects a fall in employment during the month.
"If the unemployment rate were to rise along with an increase in the LPR, then it could be inferred that an increase in the unemployment rate is because there is an increase in the number of people who are seeking employment but are failing to find work. But, this is not the case. The LPR has not risen perceptibly," it further added.
The loss of employment is also evident in the steady fall in the employment rate during May 2021, Vyas stated. The employment rate was 36.8 per cent in April 2021, whereas the 30-day moving average employment rate on May 23 was 35.8 per cent. This 100 basis point fall in the employment rate translates into a fall in employment of the order of 10 million, he said.
Employment has been falling since January 2021 and has seen a 10 million decline between January and April 2021. May 2021 could see a similar fall, Vyas warned.