Modi govt’s claim of improvement in employment opportunities not based on ground reality

February 2022 data on unemployment is even more frustrating amidst the Modi government’s claim that the employment opportunities are on the rise in India.

The unemployment rate actually rose to 8.1 per cent from 6.57 per cent in January, showing worsening the condition by 1.53 per cent just in a month. Rural unemployment rose more sharply by 2.51 per cent in a month to 8.35 per cent in February as against 5.84 per cent in January, while urban unemployment situation improved a little by 0.61 per cent and ended at 7.55 per cent, still higher than 7.27 per cent a year ago in March 2021.

CMIE data shows that the unemployment rate for February 2022 was worst in the last six months when it was 6.86 per cent in September 2021.

Continued fluctuation in unemployment reveals the volatility of the job market condition and lack of good quality regular jobs. It is due to bad quality or temporary jobs; millions of people join in the workforce in a month, but lose their jobs in the next.

Such fluctuation witnessed in the last six months is indeed worrisome. Unemployment rate in April 2021, when the second wave of COVID-19 was just beginning, was 7.97 per cent, which rose sharply to 11.84 per cent in May, fell to 9.17 per cent in June, fell again to 6.96 per cent in July, rose sharply to 8.32 per cent in August, fell to 6.86 per cent in September, rose to 7.74 per cent in October, fell to 6.97 per cent in November, and rose to 7.91 per cent in December.

In such a frustrating situation, about 6.6 million people just moved out of the job market in January 2022 because they were too disappointed to search for a job. The real reason was that there were no jobs in the market.

However, their going out from the job market created a false rosy picture of unemployment rate that fell from 7.91 per cent in December 2021 to 6.57 per cent in January 2022, because the frustrated unemployed going out of job market were no longer counted as unemployed, as per the system of counting jobless people.

Unemployed people cease to be counted as such if they stop searching for a job, whatsoever may be their reason.

Unemployment rate of 8.1 per cent in February should be interpreted in this backdrop taking into account how the January unemployment rate of 6.57 per cent actually concealed the real frightening level of unemployment.

Rising of unemployment rate to 8.1 per cent in February was not because the frustrated unemployed who had lately left the job market out of frustration after not finding a job in the job market have returned to search for one, but because employment conditions in the rural areas deteriorated sharply.

Rise in rural joblessness to a 251 basis points (bps) pushed up the rural unemployment rate to 8.35 per cent in February, which is worst in the last eight months, according to the CMIE data. The time of such a rise in unemployment in rural areas should be a matter of great concern because kharif season is just ending and rabi season is in progress during which the rural folks should have found jobs in agricultural activities.

However, a large number of rural people count neither get jobs in agricultural activities or other non-farm sectors, nor in the rural job guarantee scheme MNREGA due to lack of funds in several states.

The situation is likely to get even worse in coming days because the Union Budget 2022-23 has cut MNREGA fund by 25 per cent at a time where there was still demand for jobs.

Marginal improvement in employment in urban areas was due to opening up of the urban activities. It has marginally improved the unemployment rate to 7.55 per cent which is lower than 8.16 per cent in January 2022, but is still higher than 7.27 per cent a year ago, or even than 7.37 per cent in October 2021.

Moreover, this marginal improvement from last month is not able to generate great hope because fluctuations continue and the conditions have again started worsening since February 28 when it was 7.5 per cent.

The employment rate position remained weak in February despite business confidence has strengthened in February. While the rate of expansion quickened in both manufacturing and services, the overall degree of optimism seems to be muted, i.e. not reflected in substantial improvement in employment opportunities in urban areas. On the other hand, job opportunities in rural areas have substantially eroded.

The latest IHS Markit report has said that India’s services sector output increased to 51.8 from 51.5 in January, and the composite PMI output rose 53.5 in February from 53 per cent in January, but it is nonetheless below its long-run average.

Growth in service sector has failed to rebound as meaningfully as was expected, and new business and services activity expanded only at the second-slowest rate since last July. Though the report mentions about an uptick in business sentiment, it pointed out job shedding too in both manufacturing and services economies, and decline in private sector employment.

The Modi government thus needs a fresh look at rising unemployment and declining employment opportunities rather than going on claiming that employment opportunities are on the rise merely on the basis of some formal sector data, while 90-94 per cent of the total workforce are in the informal sector.

(IPA Service)

Views are personal