India’s unemployment rate is improving but still a fair distance from pre-lockdown level

• According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India stood at 11.63% during the week ending June 14.
• However, it does not indicate growth in the formal sector jobs, yet.
• The urban unemployment rate at 13.1% remained higher than the rural and overall unemployment recorded during the same period.
  
• According to Dun & Bradstreet (D&B), the job loss and salary cuts will slow down the recovery even after the pandemic.

India’s unemployment rate shrunk significantly as the government eased lockdown norms — showing signs of revival. According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India stood at 11.63% during the week ending June 14.

This brings the unemployment rate closer to the pre-lockdown level. The rate of unemployment was recorded as 8.41% in the week ending March 22.

After May 31, the centre and state governments allowed the private offices, commercial establishments and shops to reopen in most areas — leaving the containment zones.

Urban unemployment rate higher than the overall unemployment

However, the improvement is largely due to the casual activities and among self employed people. It does not indicate growth in the formal sector jobs, yet. The urban unemployment rate at 13.1% remained higher than the rural and overall unemployment recorded during the same period.

Companies aggressively downsized employees and implemented salary cuts to keep up with the running costs.

“If we analyse the available data points and the ground-level interactions with people and corporates, we can say non-wage work is coming back. At least 75% of people in the labour market are in non-wage work, earning a livelihood through self-employment, including agricultural work and casual jobs. The decent formal sector jobs will take over a year to recover from the Covid-19 pain,” Muralidharan Thyagarajan, chairman of TMI Group told Mint.

But it has improved compared to that of the lockdown period. The urban unemployment rate stood at nearly 27% during the week ending May 17, implying that less than 25% of the urban working age population was employed.

This was after the government allowed the tech companies to work with 33% staff in offices — after which several IT majors like Infosys, SAP Labs, TCS and Wipro resumed operations across offices in a phased manner, sending a few employees to work from office locations.

Slow recovery even after the pandemic

The impact of the pandemic is such that experts believe that the economy is likely to slip into recession in the third quarter of 2020-21. According to Dun & Bradstreet (D&B), the job loss and salary cuts will slow down the recovery even after the pandemic.

“The D&B India Chief Economist Arun Singh stated that the multiplier effect of the stimulus measures on the economy will depend on three key aspects, the time taken for effecting the withdrawal of the lockdown, the efficacy of implementation and duration of execution of the measures announced,” the CMIE report said.

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