Labor crushed between inflation and unemployment

By Dr Gyan Pathak

The workforce in India is being crushed between inflation and unemployment mainly due to the incorrect political stance of the Narendra Modi government and the pandemic may just be an additional excuse. Retail inflation (CPI) in April shot up to an 8-year high, that is, the entire period of Modi Raj, and touched 7.79% against 8.3% in May 2014, which he had heavily criticized during his election campaign. Instead of promising to provide a crore of rupees job every year, his rule actually generated a level of unemployment unprecedented in decades, further exacerbated by the pandemic.

High taxes on gasoline and diesel, high administered prices and high GST rates have all along fueled rising inflation, in addition to rising food prices, the labor market downturn that started with the demonetization policy experiment in November 2016, could never be stopped. The employment situation has never been worse. Both unemployment and labor force participation suffered historic declines during Modi Raj. The pandemic and other internal and external factors did have an impact and the government seemed stunned. It was necessary to rethink its old mistaken priorities, but the center continued with them and, in several cases, vigorously pursued them.

The worsening of market conditions with rising prices and inflation and the deterioration of the labor market with the loss of a large number of jobs, the decrease in job opportunities and the increase in unemployment have become the characteristic features of the entire Modi rule. The lack of money available and few opportunities to get a job have made life miserable for our workforce.

Although the month of April 2022 saw a substantial increase in labor market activities, the additional jobs that became available were inadequate compared to demand. A large number of the frustrated people who left the job market and had even stopped looking for work resumed their search, although the search has become costly, the unemployment rate has increased compared to 7.88 percent in April compared with 7.57 percent in March. , according to the latest CMIE assessment.

The active population increased by 8.8 million from 428.4 million in March to 437.2 million in April. It was a substantial increase in recent months, especially after a drop of 12 million in the previous three months. This increase was well below the loss to be taken into account.

Employment expanded by just 7 million in April, which was less than the 1.8 million increase in the labor force. The rise in employment also came after three consecutive months of falling employment, according to CMIE data, which also reveals that employment had fallen by 10 million from 406 million in December 2021 to 396 million in March 2022. In April, it reached 403 million, only to recover part of the drop.

Thus, the number of unemployed rose to 34.2 million, which includes the increase of 1.8 million (increase in the active population less expansion of employment) in the calculation of unemployed in April 2022.

April 2022 also saw a 2.3 million increase in the count of people who declared that they were unemployed and were willing to work if work was made available to them, but were not actively looking for work. The count of these amounted to 19.5 million in April 2022.

The agricultural sector shed 5.2 million jobs in April. Part of this decline in labor was due to the end of the rabi harvest season, the wilting of the wheat crop, and the resulting decline in wheat production. Wheat production is expected to have fallen by 10 to 20 percent this year due to the intense heat wave. It is a very serious concern, and the Center has already banned wheat exports to prevent food insecurity in the country. Since the recent rise in CPI inflation was mainly due to rising food item prices, the drop in wheat production indicates that its prices will rise in the near future, which may push rice prices higher as well. due to change in demand. Therefore, a further rise in inflation cannot be ruled out.

The increase in employment in April was mainly in industry and services. Industry added 5.5 million jobs, while services added another 6.7 million. Within industry, 3 million jobs were added in manufacturing and almost 4 million in construction. However, mining and utilities reported a sharp drop in employment that coincided with coal shortages and the ensuing power sector crisis, again weighing on the overall performance of business, industry and agriculture. Within manufacturing, it was heavy industries, such as metallurgy, chemicals, and cement, that added jobs. Within the services sector, the increases occurred in the retail trade, hotels and restaurants industries.

Of greater concern is that the increase in employment in industry and services was of low quality jobs. The CMIE says it pointed to the fact that the increase in employment was largely among day laborers and small shopkeepers. This type of occupation saw an increase of 7.9 million jobs. Entrepreneurs increased by 4 million and farmers decreased by 5.1 million. There was almost no change in salaried jobs which were close to 79 million during March and April 2020, well down from 87 million before the pandemic in 2019-20. A large increase of 12 million in nonagricultural jobs was reported, two-thirds of whom were day laborers and petty merchants.

In this scenario, the Modi government urgently needs to fix the evil twin of inflation and unemployment by overhauling its entire set of policies that have been fueling both. The alibi is a bad defense and a bad policy. Good governance with better policies can help reverse the trend. Relying solely on RBI intervention, such as raising interest rates, will not be enough. Given that factory output in IIP terms remains subdued, a further rise in interest rates may even slow down economic growth, which in turn will hurt inflation and the labor market. Food price inflation’s jump to a 17-month high of 8.38 percent is too serious a matter in the face of worrying levels of joblessness and unemployment. (IPA service)

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