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7 states with high informal labour see steepest jump in unemployment rate

Niti Kiran     May 20, 2020

Seven states -- Tamil Nadu, Jharkhand, Bihar, Karnataka, Haryana, Maharashtra and Andhra Pradesh -- with a high share of informal workforce reported a substantial spike in unemployment rate in April compared to overall unemployment growth in the country.  The unemployment rate over the last two months surged up to 43.5 percentage points across states due to the coronavirus lockdown. It surged the maximum (43.5 percentage points) in Tamil Nadu, followed by an over 30 percentage points rise in the twin states of Jharkhand and Bihar. The hike in Karnataka, Haryana and Maharashtra was confined within the range of 15 to 26 percentage points while in Andhra Pradesh it jumped from 5.7 per cent to 20.5 per cent.

For the first time ever, CMIE's monthly unemployment rate has hit double digits in April 2020, at 23.5 per cent, as labour market conditions worsened following a lockdown imposed by the coronavirus outbreak. The job loss rate jumped nearly 15 percentage points from 8.7 per cent in the previous month.

India has entered the fourth phase of the lockdown. The first two phases between March 25 and May 3 were the most stringent and pummelled the economic activity.

Further, these seven states also have a high share of informal workforce compared to the national average. Some of them have either high share of workforce employed as casual labour or greater percentage of regular wage or salaried employees who are without a written job contract, social security benefit and are not eligible for paid leave.  Nearly 25 per cent of India's workforce is employed as casual labour, as per the Periodic Labour Force Survey, 2017-18 and in states such as Andhra Pradesh, Tamil Nadu, Bihar and Karnataka, more than 26 per cent of the workforce is employed as casual labour. Again, states such as Andhra Pradesh, Haryana and Jharkhand have a higher proportion of over 40 per cent regular wage or salaried employees without a valid job contract compared to the all India average of 38 per cent, leaving behind Maharashtra with a share of 24.1 per cent and 29.5 per cent in the above two parameters, respectively.

Depicting a similar trend, a CRISIL report analysed states that were most vulnerable to output losses and job losses and fiscally more vulnerable due to relatively higher debt ratios. Eight states having red zone classified districts higher than the national average of 17.7 per cent (as per Lockdown 3.0) account for over 60 per cent of India's GDP and 58 per cent of the workforce, highlighted the report.  Further, among the most pandemic-hit states (having red zone classified districts higher than national average) higher proportion of informal workforce in West Bengal, Andhra Pradesh, Tamil Nadu and Rajasthan make them susceptible to job losses, the report added.

The unemployment rate, however, remained stable at 24 per cent during the week ended May 17.

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