Dr .M.Suresh Babu, President, Praja Science Vedika
India’s unemployment rate, particularly in rural areas, as reported by the Centre for Monitoring Indian Economy India’s unemployment rate rose to 10.05% in October, marking the highest level in over two years. The October rate increased from 7.09% in September, indicating a significant month-on-month rise. The rural unemployment rate experienced a substantial increase, reaching 10.82% in October. This surge in rural joblessness could be attributed to factors such as the impact of weak monsoon rains on farm output. In urban areas, the unemployment rate eased slightly to 8.44% in October. Economic activity in urban regions has shown relative strength, with expansions in manufacturing and consumption. The weakest monsoon rains in five years have adversely affected farm output, particularly in a country where agriculture plays a crucial role. The impact of reduced agricultural productivity could be contributing to the rise in rural unemployment. Despite challenges in rural areas, economic activity in urban regions, including manufacturing and consumption, has shown resilience. The overall unemployment rate in October is noted to be the highest since May 2021, indicating a persistent challenge in the labour market. The data suggests a complex economic landscape where rural areas, dependent on agriculture, are facing challenges due to poor monsoon rains, while urban areas experience relatively stronger economic activities. Addressing the rural unemployment issue may require measures to mitigate the impact of adverse weather conditions on agriculture and explore avenues for rural job creation. Additionally, policymakers may need to consider strategies to ensure more inclusive and balanced economic growth across different regions.
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Accurate assessment of labour market
The reliance on CMIE data by economists for a more accurate assessment of the labour market underscores the importance of independent and timely information in understanding economic dynamics. The figures derived from monthly surveys of over 170,000 households provide a detailed and comprehensive view of the employment landscape in India.
Despite expectations of robust economic growth exceeding 6% in the current year and the next, the challenge lies in the ability of this growth to generate sufficient employment opportunities. The CMIE data indicates a substantial influx of nearly 10 million people into the job market in October alone, emphasizing the scale of the employment challenge faced by the country.
The decision by Indian tech-services outsourcing firms, such as Infosys Ltd. and Wipro Ltd., to halt hiring of college graduates is a noteworthy development. This move has the potential to leave thousands of fresh engineering students without job opportunities. The implications go beyond the immediate impact on individual job seekers; it could contribute to discontent among the youth population.
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The government’s decision to publish country-wide unemployment rates annually and urban rates quarterly may reflect their approach to monitoring and reporting on employment trends. This periodicity allows for a comprehensive assessment of the employment situation at both the national and urban levels.
Employment landscape
It would be interesting to compare this annual rate with historical data and trends to gain a deeper understanding of the employment landscape in the country. Additionally, considering the quarterly reporting for urban areas, it provides more frequent insights into the employment dynamics in urban settings, which are often characterized by faster economic changes.
Policymakers and analysts may use these reports to formulate strategies and interventions to address employment challenges, ensuring a more holistic approach to managing the labor market.
The youth’s discontent could pose challenges for Prime Minister Narendra Modi, particularly as he seeks a third term in office in the upcoming elections. High unemployment rates, especially among the educated youth, can be a source of social and political concern. Addressing youth unemployment and ensuring job creation will likely be a key focus for policymakers to maintain social stability and address the aspirations of the growing workforce.
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Government response
It will be interesting to observe how the government responds to these challenges and whether policies are implemented to align economic growth with job creation, particularly in sectors that cater to the skills and aspirations of the youth. The recent data from CMIE’s Consumer Pyramids Household Survey indicates a positive development in India’s unemployment situation. The unemployment rate in India decreased from 8.1% in August to 7.1% in September 2023. This suggests an improvement in the labour market conditions during this period. The decline in the unemployment rate was observed in both rural and urban areas. In rural India, the unemployment rate decreased, contributing to the overall reduction in the national rate. In urban India, the unemployment rate also saw a decline. The labor participation rate (LPR) decreased from 41.2% in August to 40.9% in September. The marginal increase in LPR for rural India contrasts with the decrease in urban LPR. The increase in LPR for rural India suggests a rise in the proportion of people participating in the labor force in rural areas. On the other hand, the decrease in urban LPR may indicate a reduction in labor force participation in urban regions during this period. These trends reflect the dynamic nature of the labour market, influenced by various factors such as economic activities, government policies, and seasonal variations. The decrease in the unemployment rate is generally a positive sign, as it suggests a higher proportion of the labour force finding employment.
Policymakers and economists will likely continue monitoring these trends to understand the broader implications for the economy and assess the effectiveness of policies aimed at improving employment conditions. Additionally, it would be important to observe if these positive trends are sustained over time and whether they contribute to long-term improvements in the labour market.
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