The bane of unemployment
NEW DELHI: India Inc which was looking forward to 2023 with hopes of good tidings has settled for some downbeat developments over the past few days. The Centre for Monitoring Indian Economy (CMIE) recently released data that showed our unemployment rate had risen to 8.3% in December, the highest in 16 months, from 8% in the previous month. The urban unemployment rate had spiked to 10.09% in December from 8.96% in November, while rural unemployment slipped to 7.44% from 7.55%. The labour participation rate shot up to 40.48% in December, which is the highest in 12 months.
The numbers don’t bode well for India’s workforce, already bogged down by the impact of a surge in fuel prices and inflation. Lower middle income households had been compelled by the COVID crisis to sell their property and opt to borrow in order to meet their consumption needs. On the other end of the spectrum, India’s sunshine sector has been beset by news of retrenchments too.
A few days ago, a major e-tailer sent shockwaves throughout the industry when it announced its plans to drop 18,000 employees off its roster, of which 1,000 are employed in India. As many as 16,000 employees working in about 44 start-ups in the country had lost their jobs over the past one year. Hiring in the Indian tech space had also dropped by about 18% in October last year, as compared to a year ago. The metrics are in sync with the CEDA-CMIE bulletin which said 1.4 cr fewer individuals were employed in October 2022 as compared to January 2020.
One could probe whether the high levels of urban unemployment is due to the en-masse migration of people from rural India to metropolises in search of a better life. Stakeholders opine this could not be the case as labour share in agriculture has increased over the last few years in comparison to the steadily shrinking share prior to that. As per official data, the demand for MGNREGA jobs, literally the last resort for many job seekers, had spiked from 1.64 crore in 2015 to 3.07 crore in 2022.
It must be placed on record that India is not generating adequate jobs in manufacturing and services. The irony of this is not lost on the services sector, which employs over 147 million people and remains India’s largest employer. A loss in economic momentum is being seen in the three main engines of global economic growth — the US, Europe and China, and a cascade effect is being witnessed in India. The aforementioned three regions had contributed to 56% of the global GDP in 2021, which stood at $87 trillion.
In the backdrop of the IMF estimating that India’s growth in 2023-24 will slow down to 6.1%, our economic performance can be turned around by the nature of spending. The government must prioritise capital expenditure to create a milieu that prompts investment from the hesitant private sector. As global supply chains begin scouting for alternative suppliers outside China, India could plug that gap. Our reliance on domestic demand will continue to surge, and the government will need to amp up its infrastructure spending. We also need bold reforms on the business and tariff front to boost foreign and domestic investment, which will lead to creation of new jobs. High-quality jobs must make a landfall in India, in the absence of which our vision for a $5 trillion economy would remain a pipe dream.