Urban Unemployment Nears 12% as Covid-19 Lockdowns Bite

Urban unemployment in India is nearing 12%, the highest in more than 10 months, as the resurgence of the coronavirus and accompanying restrictions wipe out millions of jobs.

Urban unemployment touched 11.72% in the week to 9 May from 9.55% in the week ended 25 April, Centre for Monitoring Indian Economy (CMIE) data showed. This is almost two percentage points more than the April monthly figure of 9.78% as well.

Similarly, the national unemployment rate rose to 8.67% in the week ended 9 May from 7.4% a fortnight ago. Rural unemployment during the same period also rose from 6.37% to 7.29%. Like urban, the national and rural unemployment rates for the latest period are also higher than the April monthly jobless rate.

Economists believe continued lockdowns in cities will further put pressure on the job market as they restrict economic activity. They also argue that the increase in unemployment should not only be attributed to lockdowns but should also be seen along with the overall economic scenario.

“The curbs and lockdowns this year are not like last year, but they’re quite well-spread. The labour and employment market has a direct correlation with how our overall economy functions. Several brokerage and financial organizations have downgraded the GDP forecast, and the economic revival will depend on how fast we as a country manage to tame the coronavirus pandemic," said Sunil Kumar Sinha, principal economist at Indian Ratings and Research Pvt. Ltd, part of the Fitch Group.

Rating agency Moody’s Investors Service slashed its FY22 growth forecast for India to 9.3% from 13.7% estimated earlier, joining others, including Nomura, which also cut its projection from 12.6% to 10.8% on Tuesday; JP Morgan (from 13% to 11%), and UBS (from 11.5% to 10%).

Labour economist K.R. Shyam Sundar said 2020 was worse because of the national lockdown and closure of all economic activities, but a 12% unemployment rate without a national lockdown is worrisome. During the same period last year, the national unemployment rate was almost 24% in the week ended 10 May 2020, and the urban unemployment last year during the same period was 27.83%, CMIE data shows.

Sundar said while economic sentiment has a role in the jobs market, “an aggregated micro lockdown by states is equal to a quasi-national lockdown, and it’s the casual, the temporary, contractual and gig workers in a formal set-up who are falling victim to job cuts".

“Besides, the urban informal sector and urban service support system have almost collapsed. Urban trading set-ups like markets are almost non-functional, and that’s why you see a heightened urban unemployment rate. But relatively less rural unemployment does not mean that the situation is better in rural pockets. Rural India is witnessing an intensification of underemployment, low productivity and income loss," Sundar said.

CMIE chief Mahesh Vyas said: “The second wave of covid-19 has stalled economic recovery. Professional forecasting agencies have been scaling back their projections for the year. New investments that could create jobs in large numbers are unlikely to be made during the year".

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Courtesy: Mint | 13.05.2021