Other View

Covid-19 and unemployment crisis

Decrease Font Size Increase Font Size Text Size Print This Page

By: Fahid Fayaz Darangay

Pre- Covid-19:  India was experiencing one of the worst economic phases as per the unemployment rate is concerned. A report of 2017-18 which was termed by the Government of India only a draft report was revealed by National Sample Survey Office’s (NSSO) which had shown a spike in the unemployment rate of over 6 per cent, a 45-year high. The annual report (July 2017-June 2018) of the Periodic Labour Force Survey (PLFS) pegs the all India unemployment rate at 6.1 per cent in the given year. Unemployment was higher in the urban areas as compared to the rural. For the rural areas, the unemployment rate was 5.3 per cent, while in the urban areas it was 7.8 per cent.

Among the rural men, the unemployment rate was 5.8 per cent while among the women it was 3.8 per cent. While among the urban men it was 7.8 per cent and 5.7 per cent among urban women. MoSPI officials said that the number of households surveyed was 433339 (246809 in rural areas and 46006 in urban areas).  The unemployment rate was at its highest level since 1972-73.

The main cause of of unemployment rate was Declining Labor Force Participation Rate (LFPR) which decreased to 49.8% in 2017-18 from 55.9% from 2011-12. Labor force participation rate is calculated by dividing the working age population (16-64 years) by the total number of employed people actively looking for employment. Demonetization too added to the crisis.

The manufacturing sector which accounts a major share of the Indian workforce slumped to a 15-month low in August 2019 due to reduced sales. Manufacturing sector growth fell down to 1.2% in June 2019 compared to 6.9% in June 2018. A continued slowdown in the manufacturing sector is also one of the reasons for India’s increasing unemployment rate. In India the unemployment rate was 5.33% and 5.6% in 2018 and 2019 respectively.

Post- Covid-19: As many as 41 lakh youth in the country lost jobs due to the COVID-19 pandemic. The construction and farm sector workers lost the majority of jobs. “For India, the report estimates job loss for 4.1 million youth. Construction and agriculture have witnessed the major job losses among seven key sectors,” said the joint report by the International Labour Organization (ILO) and the Asian Development Bank (ADB) which was titled as ‘Tackling the COVID-19 youth employment crisis in Asia and the Pacific”. The report also specified that the youth (15-24 years) will be hit harder than adults (25 and older) in the immediate crisis and risk bearing higher longer-term economic and social costs.

As per CMIE’s data, the monthly unemployment rate in April stood at 23.52%, up from March’s 8.74% to 27.11% for the week ended May 3, up from the under 7% level before the start of the pandemic in mid-March. The Mumbai-based think tank said the rate of unemployment was the highest in the urban areas, which constitute the most number of the red zones due to the coronavirus cases, at 29.22%, as against 26.69% for the rural areas.

By the end of April, Puducherry in South India had the highest number of unemployment at 75.8%, followed by neighbouring Tamil Nadu 49.8%, Jharkhand 47.1% and Bihar 46.6%.Maharashtra’s unemployment rate was pegged at 20.9% by the CMIE, while the same for Haryana stood at 43.2%, Uttar Pradesh at 21.5% and Karnataka at 29.8%.

Hilly States had the lowest incidence of unemployment, the think tank said, pointing out that the rate in Himachal Pradesh stood at 2.2%, Sikkim at 2.3% and Uttarakhand at 6.5%. This was reported by The Hindu.

The following graph clearly depicts the situation.

Note: The source of the graph is Statista.

The hails from Bijbehara has done Honours in Economics from Aligarh Muslim University and is currently pursuing Masters in Financial Economics from Madras School of Economics, Chennai, Tamil Nadu. He can be reached at fe19fahid@mse.ac.in

Leave a Reply

Your email address will not be published. Required fields are marked *