As per the latest data published by Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India was 11.9% (10.18%) in May 2021 (June 2020). The urban unemployment was much higher at 14.73% (11.68%), while the rural unemployment stood at 10.63% (9.49%). As per CMIE data, India’s unemployment rate was 6.5% in March 2021, just before the second wave of Covid19 pandemic hit India. It is therefore possible that the rate of unemployment normalize back to 6-7% range when the economy opens up in next 2-3months, as the intensity of pandemic has already subsided materially.
The more worrisome trends highlighted by CMOE data however are-
(a) The labour
participation rate is beginning to fall sharply after 55yrs o age. It is below
25% for the 60-64 age group –
(b) Unemployment rate
is 35% in 20-24 age group. For youth in 20-29yr age group it is above 10%.
(c) The employment
rate is 19.3% for the persons who have college degree. It is just 0.2% for the
uneducated; and 9.3% for persons who have studied upto 10-12th
standard.
(d) Labour
participation rate is below 50% in most of the states. Amongst the most
populous states, it is 36.3% in Bihar; 35.2% in UP and 38.5% in MP.
(e) Haryana and
Rajasthan have the highest unemployment rates of 26.4% and 22.4% respectively.
The rise in life expectancy is not reflecting in higher labour
participation rate for above 60yr of age. Even in most populous and most poor
states like UP and Bihar labour participation rate is close to 35%, implying
high dependency ratio. Female labour participation rate is even worse in these
states. This also reflects on the cultural and traditional impediments. High
income states like Haryana and Goa have much higher unemployment rates as
compared to national income.
The worst part is the highest unemployment rate amongst workers
with college degree. This could imply two things, among another, i.e., – (i) the
skill level afforded with a college degree is quite poor to get employment;
and/or (ii) the economy is not adding enough white collar jobs. Most of the
incremental employment is happening in low paying low skill jobs.
Further, if I factor in anecdotal evidence collected during my
frequent travels to states and hinterlands, I do not feel comfortable with this
data of unemployment. In my view, the real unemployment is much higher and
wider. There are plenty of youth who are underemployed and unemployed in disguise.
There are numerous cases where, two sons work in father’s shop even if the
father alone is sufficient to manage it; or a full family of 5 people works on
a 3 bigha farm, whereas it needs only two people.
In my view, the better way to estimate the level of unemployment
would be assess how many workers are earning at least the minimum wage
prescribed for their respective category, e.g., skilled, unskilled, industrial,
agriculture etc. On this parameter, my crude guess is that the unemployment rate
might be in excess of 20%.
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