As per the latest data, there are more people joining the workforce compared to available jobs in India and the unemployment rate climbed to a four-month high.
The job creation for the burgeoning population of Asia’s third largest economy is quite a menace, especially for Prime Minister Narendra Modi’s government, especially as he looks to a third term in office in national elections due next summer.
Unemployment in India
The nationwide joblessness rate rose to 8.11% in April from 7.8% in March, the highest since December.
As per the data research firm Centre for Monitoring India Economy, during the same period, urban unemployment climbed to 9.81% from 8.51% in whereas in the rural areas, it fell marginally to 7.34% in April from 7.47% a month ago, according to data from research firm Centre for Monitoring India Economy.
Mahesh Vyas, head of CMIE, wrote in a column for the Business Standard newspaper said that “The unemployment rate increased owing to a rise in the labor participation rate”.
Labor Force Expansion Despite Job Crunch
He added that India’s labor force increased by 25.5 million people to 467.6 million in April, possibly due to “increase in optimism about finding employment,” taking the labour participation rate to 41.98% in April, the highest in three years.
About 87% of this expanded labor force were able to secure employment as an additional 22.1 million jobs were created in the month. The employment rate rose to 38.57% in April, highest since March 2020.
“The notable rise in LPR and employment rate in India in the month of April reflects an increase in willingness among people to seek employment,” Vyas said.
As per the CMIE data, more jobs were created in rural areas than in urban areas. Around 94.6% of the people who joined the rural labor force became employed, while only 54.8% of seekers in urban areas found new jobs. CMIE’s finding corroborates with the fact that demand for government’s job guarantee program is falling in rural areas.
In its April bulletin, the Reserve Bank of India said demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act has been moderating since January on the back of better winter crop sowing and a recovery in informal sector employment.
As per the Chief Economist of IndusInd Bank, Gaurav Kapur, the rising labor force participation is the last leg of economic normalization since the pandemic.
He added that “It is a sign that normalization is happening, or has already gone through”.
