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Insights into Editorial: More job-loss ahead, raise govt spending



Introduction: Situation of unemployment in India:

  1. The biggest casualty of the pandemic and the painstakingly slow vaccination rollout will be joblessness.
  2. The country’s unemployment rate has risen through much of April, having hit 7.4%, and threatens to climb further to around 8% significantly higher than the 6.5% in March, according to CMIE.
  3. Approximately 10 million salaried jobs have been lost, across urban and rural India, and one is not sure how many people will get back their livelihoods.
  4. And demand for MGNREGA work is already outstripping supply; data for April shows 2.6 crore households and 3.7 persons were looking for work, higher by 91% and 85%, respectively, over April 2020.

That these are the highest levels seen in seven years indicates how bad things are.


India’s Jobless Growth Hurdle:

  1. Five months into the lockdown, India has witnessed a sharp decline in the number of jobs in the formal sector the largest source of salaried employment in the country.
  2. Even after unlocking the economy, there has been no improvement in the salaried jobs space.
  3. The government has cited the unprecedented economic crisis behind the job situation in the country.
  4. However, the coronavirus pandemic may not be the only reason why salaried jobs one of the most secure forms of employment are losing prominence in India.
  5. Unemployment in the country had been a problem since 2017-18.
  6. A government job survey, whose publication was delayed just ahead of 2019 Lok Sabha election, showed how the country’s unemployment reached a four-decade high of 6.1 per cent in 2017-18.


COVID-19 impact on unemployment rate in India 2020-2021:

  1. In January 2021, India saw an unemployment rate of over six percent. This was a significant improvement from the previous month.
  2. A damaging impact on an economy as large as India’s caused due a total lockdown was imminent. Unemployment went up to nearly 24 percent in April 2020.
  3. This was possibly a result of a decrease in demand as well as the disruption of workforce faced by companies.
  4. Furthermore, this caused a GVA loss of more than nine percent for the Indian economy that month.


The trickle-down effect:

  1. Between February and April 2020, the share of households that experienced a fall in income shot up to nearly 46 percent.
  2. Inflation rates on goods and services including food products and fuel were expected to rise later this year.
  3. Social distancing resulted in the job losses, specifically those Indian society’s lower economic strata. Several households terminated domestic help services – essentially an unorganized monthly-paying job.
  4. Most Indians spent a large amount of time engaging in household chores themselves, making it the most widely practiced lockdown activity.


Aid from the Pradhan Mantri Garib Kalyan Yojana:

  1. The most devastating impact of the virus and the lockdown had been on the economically backward classes, with limited access to proper healthcare and other resources.
  2. This resulted the government has launched various programs and campaigns to help sustain these households.
  3. Under the Pradhan Mantri Garib Kalyan Yojana, 312 billion Indian rupees were accrued and provided to around 331 million beneficiaries that included women, construction workers, farmers, and senior citizens.
  4. More aid was announced in mid-May, to mainly support small businesses through the crisis.
  5. According to labour ministry data, around 16.5 lakh people have benefited from the Aatmanirbhar Bharat Rozgar Yojana (ABRY) which was launched in October to encourage hiring in the country amid the COVID-19 pandemic till March 9, 2021.
  6. The scheme was introduced on October 1, 2020, to incentivise the creation of new employment along with social security benefits and restoration of loss of employment during the pandemic.
  7. This scheme, being implemented through the Employees Provident Fund Organisation (EPFO), reduces the financial burden of the employers of various sectors/ industries and encourages them to hire more workers.
  8. Under the ABRY, Government of India is crediting for a period of two years both the employees’ share (12 per cent of wages) and employers’ share (12 per cent of wages) of contribution payable.


Way Ahead:

There is now a real danger of structural damage to the economy with the weaker sections, across industry, enterprise and households, becoming even weaker.

This would hold true for the vulnerable sections of the population in both urban and rural India, with the situation probably worse for the urban poor.

The government needs to address this distress with a new package of relief measures.

  1. Following the outbreak of the pandemic and the consequent lockdown in March 2020, the government had rolled out a series of measures; it upped the allocations for MGNREGA, distributed free food-grains and also transferred cash.
  2. In the absence of meaningful relief measures, the situation could deteriorate.
  3. While there are expectations that normalcy would be restored in a month or two, there is no clear visibility.
  4. One reason for this is the complete lack of clarity on the pace at which the vaccination drive will progress.
  5. As of now, it appears just about 50% of the population would be inoculated by December this year.
  6. While there is every possibility of the key affected sectors hospitality, retail, restaurants, aviation getting back on track by September or so, the fact is many of the smaller enterprises and units have been debilitated over the past year.
  7. It is possible many of the smaller businesses can’t be revived, which, in turn, means the loss of livelihoods.
  8. Interest rates might be at their lowest levels in decades, but most of these units will be unable to access formal credit because banks are turning even more risk-averse.
  9. In June 2020, CRISIL had observed that MSMEs were facing an existential crisis and suggested lenders use new credit assessment paradigms;
  10. The ratings agency had pointed out that their finances could slip badly and they would struggle to manage working capital challenges.
  11. Given these small and micro units collectively employ in large numbers, the government needs to follow up its earlier credit guarantee scheme with another one to help them.



In 2020, although the economy was in a very poor state following the deleterious effects of demonetisation, the rural economy was faring reasonably well on the back of two good monsoons.

However, after a year of distress, and with some part of the workforce still not having returned to their work places, rural incomes are expected to be under pressure.

Economists say they are already seeing signs of sluggishness in rural consumption.

The Reserve Bank of India (RBI) has done much of the heavy lifting, it is now the turn of the government to step up spending.

The economy needs a punchy fiscal stimulus, a big booster dose, targeted at the small and unorganised sectors.