The unemployment rate in India has been through rocky terrain in recent times and the state of turmoil is not over yet. On the 2nd of November this year CMIE (Centre for Monitoring Indian Economy) has come out with some numbers suggesting that the unemployment rate has spiked in October to 6.98% from 6.67% in September. This happened contrary to the popular narrative put forth by the Government that with “Unlock” there will be a recovery in the economy and job market.
The immediate crisis can be safely blamed on corona but holding corona responsible for the entire job crisis will not be a judgment of a sane and prudent mind. The fact remains that the country was going through a slowdown even before Covid-19 knocked on the door and the job crisis has followed the slowdown. We entered in corona period with a slow economy with quarterly growth of just 3.1% in the last quarter of 2019-20.
The automobile sector was suffering due to a severe slowdown due to a dip in demand. More than a lakh contractual and non-contractual employee were laid off in this sector. Part of the problem was cyclical but the major part was contributed by the rumors of bulldozing of policy for electric vehicles by the Union Government and party the reason was the announcement of Bharat VI fuel. One can very easily deduce from this that the inorganic push towards cleaner vehicles was the major reason for the slowdown in the industry.
The manufacturing sector has grown merely by 0.03 percent in FY 2019-20 compared to 5.7 percent in the previous year. The growth of the construction sector, which is responsible for a spillover effect on several other industries, too declined to 1.3 percent.
Gross capital formation has also remained low in FY 2019-20, while the growth of deposits in banks declined to 7.9 percent, compared to 10 percent in the previous fiscal — hinting at low-level savings. Bank credit growth more than halved to 6.1 percent, compared to the previous fiscal’s 13.3 percent, that shows people’s consumption too will be lower.
In the middle of this already growing crisis, the country was hit by the devastating pandemic of corona which drove the already struggling economy into a deep crisis. The country in its history for the first time saw a shrinking of the economy of (-)23.9% in the first quarter of 2020-21. The unemployment level went as high as around 23% in urban areas and 25% in rural areas according to CMIE. Since then we have seen constant recovery which gives a hopeful picture that the things are improving constantly but the recovery is not uniform in every sector as we can see that on one side manufacturing and few services in the service sector might have recovered up to pre Covid levels but traveling and hospitality and many such other industries are still struggling.
In such a scenario the figures of GDP output, industrial production, and even a few service sector might show us a glowing picture but the fact remains that till time we don’t have a complete solution of corona either through a vaccine or through herd immunity, it is highly unlikely that unemployment rate will go below satisfactory levels anytime soon.