The unemployment rate in India has risen to 6.90 per cent in the month of February slightly up from 6.53 per cent recorded in the month of January as per the recent report by the Centre for Monitoring Indian Economy or CMIE. The numbers fare well against the corona-induced unemployment rates which skyrocketed to a staggering 23 per cent in the month of April 2020 when Prime Minister Narendra Modi imposed a nationwide lockdown on March 24, 2020.
The unemployment rate for the country has begun to show signs of improvement after August 2020 when it stood at 8.35 per cent following the resumption of some manufacturing activities in crucial sectors like health and equipment manufacturing. However, the unemployment rates took a hit again in the month of December 2020, when the joblessness in the country again rose to over 9 per cent.
An increase in unemployment reduces aggregate spending power, slows down the economy and most importantly, it increases the vulnerability of households to deal with economic shocks.
The return of pre-corona levels of unemployment signals that the economy is entering the declining gradient of economic revival. This however does not mean that the worst is over for the economy which is predominantly driven by the growth in the primary sector and services sector.
“The unemployment rate has therefore, recovered to its pre-lockdown levels. However, other more important labour market parameters have worsened. The two other important labour market ratios are the labour force participation rate and the employment rate. Both remain significantly lower than their levels before the lockdown. A recovery in these two ratios to pre-lockdown levels is still a distant dream. More realistically it may not be misplaced pessimism to lament that given the secular decline in labour market indicators even before the lockdown, a recovery in the LPR and ER to pre-lockdown levels may not be just distant dream but, it could be an elusive dream,” said Mahesh Vyas, Managing Director and CEO of Centre for Monitoring Indian Economy in a release.
In February 2021, the labour participation rate was 40.5 per cent. This was slightly lower than the 40.6 per cent LPR recorded in January 2021 and 42.6 per cent it was in February 2020. This means that the proportion of working-age people who are employed or are unemployed and are actively seeking employment has declined.
Among states, Uttar Pradesh showed an improvement from 4.9 per cent in January to 4.1 per cent in February, while another big state Madhya Pradesh too provided jobs to its people as the unemployment rates fell from 6.2 per cent in January to 2.1 per cent in February. In the west, Gujarat and Maharashtra’s unemployment rates were stable at 3.2 per cent and 3.8 per cent in the January and February. The national capital region, on the other hand, showed improvement in providing jobs to its people as the unemployment rates declined from 12.8 percent in January to 8 per cent in February.