Rising unemployment

That the unemployment rate in India surged to 8.3% in December 2022, the highest in 16 months, should be a cause for concern among the economic policy-makers. According to data published by the Mumbai-based Centre for Monitoring Indian Economy (CMIE), the unemployment rate had fallen to 6.4% in September — which was attributed to hiring around the holiday and festive season — but it rose steadily after that, to 7.8% in October and 8% in November. Among the states, Haryana’s unemployment rate stands at a staggering 37.4%, while it is 28.5% in Rajasthan and 20.8% in Delhi. This news, coupled with the warning by the International Monetary Fund (IMF) that a third of the world would be hit by recession in 2023, presents a sobering prognosis for the immediate future.

According to the CMIE data, the urban unemployment rate rose from 8.96% in November to 10.09% in December, while the rural unemployment rate fell marginally during this period, from 7.55% to 7.44%. Experts say that the rise in unemployment cannot be explained by the seasonal movement of labour in and out of agriculture. One factor that has contributed to the rise is the increase in the labour participation rate — which takes into account people who are working or looking for work — to 40.48% in December. The agriculture sector had absorbed a large number of workers who lost their jobs during the Covid pandemic, but experts say that people who returned to the cities and towns still are either looking for jobs or are underemployed.

While India remains one of the fastest-growing economies in the world, the fact remains that jobs have not been created at a steady pace and exports have fallen. The MSMEs have been struggling since 2016, as is borne out by the fact that the unemployment rate was about 5% five years ago as compared to 8.3% now. Overall, the picture does not look good — the country’s current account deficit reached an all-time high of $36.4 billion in the July-September quarter, the trade deficit with China has risen to record levels, and the rupee had a terrible year, falling from Rs 74.33 to Rs 82.72 to the US dollar in 2022, a decline of 10.14%. All this, along with the IMF warning, suggests that we are in for another difficult year.