According to the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate in October stood at 6.98 percent in both the urban and rural areas.
This is an increase from the September 2020 figures, which stood at 6.67 percent.
Even as there is a gradual economic recovery after lifting the lockdown due to the Covid-19 pandemic, India’s problems seem far from over.
Despite ‘new shoots’ in the business revival and robustness in the agricultural sector, the unemployment rate in the urban and rural sectors is a cause for concern.
While the rural sector saw an increase in the unemployment rate, the urban areas’ unemployment rates saw a dip in October 2020.
Data shows the urban unemployment rate at 7.15 percent in October, whereas it stood at 8.45 percent in September.
The state that saw the highest unemployment rate is Haryana at 27.3 percent, followed by Rajasthan at 24.1 percent, Jammu & amp; Kashmir at 16.1 percent.
The recent havoc due to the Covid -19 pandemic has resulted in the exit of a large number of people from the job market.
While hiring picked up speed in October, many organizations are now encouraging their employees to work – from – home and are considering adopting this as a permanent feature.
In September, the weeks saw an unusual trend wherein people prefer to sit out rather than participate in the jobs market due to the deteriorating labor market.
September saw an average labour participation rate of 40.7 percent.
According to CMIE, the employment rate may further fall due to government predilections and private sector disincentives. CMIE further said that the recent labour statistics suggest that India could slip further from this incomplete recovery instead of continuing on a recovery path unless the government comes up with a well – thought recovery plan.
The Indian economy, in the last two years, has been on a downward spiral regardless of claims that the growth figures in the previous few quarters were better than in 2013. However, the truth is that the Indian economy has been facing stagnation, and the reason cited for the same was the shortage of demand in the market.
Private investors were holding back from new ventures. At the same time, the existing players were careful not to expand due to low demand indicators.
While unemployment remains a cause of concern, India faces another challenge: the rising bad debt at the country’s banks, according to Bloomberg’s report.
The RBI had recently cited that India’s banks’ bad debt problem could worsen as Credit card loans worth Rs 1 lakh crore are at risk.
Meanwhile, according to Blomberg’s report, problem loans could rise to 12.5 percent by March next year, which incidentally will be the highest level in two decades.
Given the Covid -19 pandemic, the economic slowdown and the future wave of defaults could severely affect the economy and the country’s progress.
The job market is already stressed and flooded with job seekers who have been given the pink slip by their respective companies due to weak business.
This is one of the major stress points both in the urban and semi-urban areas.
The unemployment rate is highest among youth with education until diploma (37%), graduate (36%) while postgraduate and above stands at (36%)
The situation needs to be tackled urgently as it stands as a block to economic recovery.
As the country was mostly under lockdown, the first quarter from April to June, the economy shrunk at an alarming 23.9% pace.
Both Private consumption and investment demand collapsed as most nonessential activities came to a halt, leading to tremendous job and income losses and uncertainty that curtailed spending.
Even as the lockdown has been lifted, the job market sentiments remain low, with many uncertain about how to tackle the loss of income while still looking to secure the future with limited job openings.
In its statement, India’s central bank said that the economy is expected to further decline by 9.5% with downside risks.
One of the critical points that the government needs to look into is to restore purchasing power both in the rural and urban areas for growth to pick up. To do this, New Delhi has to revive jobs and work on both rural employment guarantee scheme and introduce a similar program in urban areas.
While India seems to be on a slow path to recovery from the pandemic’s economic impact, the banking sector needs additional and quick focus.
The bad debt problem has been lurking in the banking sector even before the pandemic. The country’s financial industry has been witnessing a tough patch due to non – performing assets for some time now and needed government intervention via a change in government policies.
Therefore, in the current economic scenario, demand in the economy needs to be induced even though the industries have re-opened. Unless demand is generated into the economy, growth will not happen.
India’s festive season is marked with demand as sales across sectors shoot up; however, the festive season has also not marked a significant demand pattern due to the pandemic.
While industries across different sectors are offering quick, easy purchase schemes, the market sentiment still remains dull, with sales at an all-time low.
The population is wary of spending due to job losses, cuts in salary and unemployment, and uncertainty even as the lockdown has been lifted.
India’s fiscal position continues to weaken with bleak revenue growth. Thus, the government has very little spending room to spur growth.
India’s chief economic advisor had previously mentioned that the government would not rule out short–term fiscal stimulus; however, nothing significant has been announced yet.
Both the urban and the rural sector face challenging market conditions with low demand, the unemployment rate could climb making it a difficult scenario for job opportunities and sustainability.
As unemployment rates may get higher and demand is low, the economic revival will be challenging unless the government focuses on job creation, the overstepped banking sector, and additional fiscal stimulus.