Daily News Analysis

A bigger pandemic  

30th March, 2021 Economy

Background:

  • The pandemic is far from over despite the availability of vaccines. However, unlike last year, the response this time has been muted with no nationwide lockdown.
  • While aggregate estimates on the growth rate of GDP showed a sharp contraction in economic activity (the economy shrunk by 24 per cent in the April-June quarter of 2020) the impact on lives and livelihoods is still unfolding even though the sharp contractionary phase seems behind us.
  • The extent of the loss of lives and livelihoods is becoming clear only now, with detailed data from the Periodic Labour Force Surveys (PLFS) — the latest round of which is for the April-June quarter of 2020.

 

PLFS Data:

  • According to the PLFS April-June 2020 round, the urban unemployment rate for the population above the age of 15 was 20.8 per cent, which is close to the monthly average for the same quarter from CMIE at 19.9 per cent.
  • The CMIE data, however, does suggest a sharp decline in June compared to April and May.
  • The PLFS data also shows a sharp rise in the unemployment rate which more than doubled compared to the unemployment rate in the preceding quarter of January-March 2020 at 9.1 per cent and 8.8 per cent in the same quarter (April-June) of 2019.
  • While one in five persons above the age of 15 was unemployed during April-June 2020, the unemployment rate among the 15-29-year-olds was 34.7 percent — every third person in the 15-29 age group was unemployed during the same period.

 

Economic Slowdown:

  • Between 2016-17 and 2019-20, growth decelerated to 4 per cent, less than half the 8.3 per cent rate in 2016-17.
  • The fact that the economy has not been creating jobs predates the economic shocks of demonetisation and the hasty roll-out of GST.
  • The PLFS data from earlier rounds have already shown the extent of the rise in unemployment compared to the employment-unemployment surveys of 2011-12.
  • The unemployment rates in urban areas for all categories increased by almost three times between 2011-12 and 2017-18.
  • On an internationally comparable basis, the unemployment rate among the 15-24-year-olds in 2017-18 was 28.5 per cent, which makes the youth unemployment rate in India amongst the highest in the world, excluding small countries and conflict-ridden countries. Since then, it has only worsened or remained at that level.

 

Reason:

  • The worsening situation is partly a result of the long-term neglect of the employment issue in policy circles.
  • It is also a result of policy decisions such as demonetisation and GST implementation, which affected the informal/unorganised sector adversely.
  • It is these enterprises in the unorganised sector that are the drivers of employment creation.
  • The decline in the number of workers by 15 million between 2011-12 and 2017-18 is only a partial reflection of the jobs crisis.
  • The decline in jobs was accompanied by a decline in the quality of employment, with an increase in precarious jobs and a decline in access to social security for a majority of workers.
  • The deceleration in the growth rate of economic activities also meant that real wages of casual workers in rural areas by January 2021 have declined compared to two years ago.
  • Regular salaried workers were already suffering from a decline in real wages at 1.7 per cent per annum between 2011-12 and 2017-18.

 

Conclusion:

  • More recent data from the PLFS is awaited, but estimates from the CMIE data suggest that the unemployment rate has fallen 7 per cent for the 15 and above age population in recent months.
  • While this may suggest that the economy is returning to the pre-pandemic levels, the rate is still very high.
  • This level of unemployment is not just a symptom of the “jobless” model of economic growth that has been followed in the last two decades, but is also a recipe for political and social instability.
  • The pandemic and the subsequent crisis in the employment-unemployment situation has only highlighted the fragile situation of the labour market.
  • The real crisis of unemployment and jobless growth is a bigger pandemic that is unlikely to be resolved with the current model of economic growth which prioritises capital over labour.

 

https://indianexpress.com/article/opinion/columns/india-unemployment-crisis-economic-growth-covid-pandemic-7249627/