The unemployment rate has climbed despite a fall in the number of job seekers, Mahesh Vyas, Head of Centre for Monitoring Indian Economy (CMIE), said on March 5.
The fall in the number of job seekers, Vyas told Reuters, indicates a fall in the labour force participation rate. The labour participation rate fell to 42.7 percent in February from 43.2 percent in January. In February 2018, the labour force participation rate was 43.8 percent.
The labour participation rate is the proportion of the working age population (15-64) that is either employed or is unemployed but actively looking for a job.
The number of employed persons in India was estimated at 400 million in February compared with 406 million a year ago, he said.
As per the CMIE data, the monthly labour participation rate series has been systematically lower than the corresponding levels a year ago. “The continued YoY fall in the labour participation rate even in 2018 and 2019 indicates a deeper or a more sustained problem ailing India’s labour market,” Vyas said.
The falling labour participation rate implies an increasingly lower proportion of the working age population is willing to work.
The slowing labour participation rate clubbed with an increasing unemployment rate is the rising problem in India’s labour market as this combination leads to a falling employment rate, Vyas said.
India’s unemployment rate rose to 7.2 percent in February, the highest since September 2016, and up from 5.9 percent in February 2018, according to the latest data compiled by the CMIE.
The unemployment rate is the proportion of the labour force that is unemployed.
As per the Periodic Labour Force Survey (PLFS) undertaken by the National Sample Survey Office (NSSO), unemployment in India stood at 6.1 percent in 2017-18, the highest in 45 years, Business Standard reported.
The report, which is yet to be made public, states that this level of unemployment was last seen in 1972-73. The government has withheld the data because officials said they needed to check its veracity.
According to CMIE, the labour force participation rate and unemployment rate were high till October 2016, however, they both fell after demonetisation a month later. From July 2017, unemployment started to rise but the labour participation rate did not go up after a small initial recovery. Since February 2018, the labour participation rate has been declining.
A CMIE report released in January said nearly 11 million people lost their job in 2018 after the demonetisation of high value notes in late 2016 and the chaotic launch of the new Goods & Services Tax in 2017 hit millions of small businesses.
The government told Parliament last month that it did not have data on the impact of demonetisation on jobs in small businesses.
The rise in unemployment figures may raise concerns for the ruling BJP to come into power again in the upcoming 2019 Lok Sabha elections as weak farm prices and low jobs growth are often brought up as election issues by opposition parties.
India’s working age population grows at an estimated 23 million a year, according to CMIE. If we assume that 42-43 percent of these will join the labour force, we are looking at an addition 9.6-9.9 million people to the labour force in a year. CMIE’s rough estimate suggests that India would require to find new jobs on a net basis (i.e. net of those who exit the labour force because of retirement or any other reason) of the order of 0.8 million every month.