India’s unemployment rate soared to an unprecedented 27.11% for the week ending 3 May, according to data released by Mumbai-based think tank Centre for Monitoring Indian Economy (CMIE).
The unemployment rate in urban areas was marginally higher at 29.22% while rural unemployment rate was at 26.16%. The unemployment rate for the month of April saw a gigantic rise to 23.52% from 8.74% at the end of March, just two weeks into the national lockdown due to coronavirus. The month of February had registered an unemployment rate of 7.78% that jumped to nearly 9% for March.
Stating that the worsening of the unemployment rate should be expected as the lockdown continues, Mahesh Vyas, CEO of CMIE said that while the more vulnerable sections of the population are at risk (daily wagers and those employed informally in unorganised sectors), the more secure, formal jobs would be hit next.
According to CMIE data, 91% of those who reported job losses in April were small traders and labourers, followed by entrepreneurs (18.2%) and salaried employees (17.8%).
Calling the job loss ‘mind boggling’, Vyas noted that 122 million people lost jobs in the month of April – a 30% fall from the 2019-20 average employment of 404 million. In small traders and labourers, an estimated 91 million people or 70% of this category, reported loss of livelihood.”It is a human tragedy because these are perhaps, the most vulnerable parts of society,” he said.
While the unemployment rate at present is far greater than what was recorded during the demonetisation period and its aftermath at 9.6% in August 2016, economists and researchers said that the scale of unemployment seen now is unprecedented and different from previous years.
‘Different From Unemployment Seen During Demonetisation’
Amit Basole, from the Centre for Sustainable Employment at Azim Premji University in Bengaluru, said that such a steep hike in the unemployment rate was expected, considering the downward trend of unemployment from last year.
He added that there was a difference in the employment rate versus the unemployment rate, that gives a scope of the scale of job loss.
“The percent of Indians working can be seen as the total number of people with jobs divided by the population of people of working age. However, women don’t report themselves as unemployed, so they report out of the labour force completely while still adding to the country’s growth,” he said.
Basole said 2 factors need to be considered while figuring out the best way to provide relief: the relation between the rise in unemployment, and the fall in earnings with the extent of relief accorded.
“We could foresee that this was going to happen when the government decided to shut all non-essential activity considering the structure of employment in India. For a large proportion, about 75%, they were badly affected within 1-2 weeks of the shutdown. The job crisis could have been anticipated and handled better,” he said.
How the pain is distributed remains to be seen. Currently, the distribution of ‘pain’ is disproportionate, and the most vulnerable have borne the brunt of it.Amit Basole
‘One-time COVID-19 Cess for the Rich’
Basole said that there were also talks of a one-time COVID cess.
“There is nothing stopping us from implementing a one-time Covid cess; it won’t compress demand so much. These could be done on those earning upwards of Rs 20 lakh per year, we could easily tax them a bit. It would generate a few lakh crores which still isn’t much. Alternately, the government could do away with meeting the fiscal deficit target and just pump money into the economy,” he said.
‘Unemployment Rate Inadequate Measure to Assess Impact’
According to Radhicka Kapoor, Senior Fellow at Indian Council for Research on International Economic Relations (ICRIER) in New Delhi, the rate of unemployment is an inadequate metric to assess the impact on the labour market.
‘Huge Need for Direct Account Transfers’
Adding that it is imperative for the government to provide relief in the form of direct transfers, Kapoor said that at present the targeting of communities for relief is very narrow.
“When you see the composition of India’s workforce, many of them are really vulnerable. You need to make the transfer much more widespread. The government needs to come up with creative ways of reaching these communities apart from mobilising funds through Jan Dhan accounts, MGNREGA jobs etc. There are those who have no social security benefits, who would otherwise be doing fine but are reeling under the current crisis. The amount of transfers also has to be enhanced.”
Kapoor said that as the crisis continues, there will be a big problem of ‘aggregate demand’. “As people lost their jobs, they lost purchasing power, which means firms will produce less, and thus invest less causing the cycle of unemployment to continue,” she said.