India has been hit hard by the COVID-19 pandemic, particularly during the second wave of infections in the spring of 2021. The overall rate of contraction in India was (in real terms) 7.3% for the whole 2020-21 financial year. The sharp drop in GDP is the largest in the country’s history, but this may still underestimate the social, psychological, and economic damage experienced by the poorest households.
Comparing national unemployment rates in 2020, India’s rate of 7.1% indicates that it has performed relatively poorly, both in terms of the world average and compared with a set of reference group lower-middle and upper-middle economies with similar per capita incomes. Unemployment rates were more muted within the reference group economies and were also kept low by generous labour market policies to keep people at work.
After two years of lost economic growth, it is imperative for the Indian economy to “revitalise, reboot and re-engineer” its employment structure and undergo a complete transformation in terms of the degree of formality, industrial concentration, and skill intensity of the labour force.