Workforce is crushed between inflation and unemployment

by dr. Gyan Pathak

The workforce in India is crushed between inflation and unemployment mainly because of the misguided policy stance of Narendra Modi’s government and the pandemic can be just another excuse. Retail inflation (CPI) rose to an eight-year high in April, i.e. the entire Modi Raj period, reaching 7.79 percent from 8.3 percent in May 2014, which he had criticized fiercely during his election campaign. Rather than pledge to provide one crore job each year, his administration has fueled unprecedented levels of unemployment for decades, exacerbated by the pandemic.

High taxes on petrol and diesel, high administered prices and high GST rates have always fueled the rise in inflation, aside from rising food prices, the downturn in the labor market, which began with the policy experiment of demonetization in November 2016 , can never be stopped. The work situation has never been this bad. Both unemployment and employment rates suffered historical declines during Modi Raj. The pandemic and other domestic and external factors did have an impact and the government appeared stunned. The old wrong priorities had to be rethought, but the center went ahead and followed them vigorously in several cases.

The deteriorating market conditions with price increases and inflation and deterioration of the labor market with a large number of job losses, diminishing job opportunities and rising unemployment have become the hallmark features of the entire Modi line. No money in hand and few job opportunities have made the lives of our workforce miserable.

Although the month of April 2022 witnessed significantly increased activity in the labor market, the additional jobs that became available were insufficient compared to demand. A large number of frustrated people who have left the labor market and were not even looking for a job have resumed their search, although the search has become costly, the unemployment rate has risen from 7.88 percent in April compared to 7 .57 percent in March, according to the latest CMIE assessment.

The labor force increased by 8.8 million from 428.4 million in March to 437.2 million in April. It was a sharp 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 grew by just 7 million in April, down with a 1.8 million increase in the labor force. The increase in employment also came after three consecutive months of employment decline, according to CMIE data, which also shows that employment fell by 10 million from 406 million in December 2021 to 396 million in March 2022. In April, it reached 403 million, just to get some of the decline back.

For example, the number of unemployed rose to 34.2 million, including the increase of 1.8 million (increase of the labor force minus expansion of employment) in the census of the unemployed in April 2022.

In April 2022, there was also a 2.3 million increase in the number of people who declared to be unemployed and willing to work if work was available to them, but who were not actively looking for work. The number rose to 19.5 million in April 2022.

The agricultural sector lost 5.2 million jobs in April. Part of this decline in the labor force was due to the end of the rabi harvest season, the shrunken wheat crop and the resulting decline in wheat production. Wheat production is expected to fall by 10 to 20 percent this year as a result of the intense heat wave. It is a very serious concern and the Center has already banned wheat exports to avoid food insecurity in the country. Since the recent rise in CPI inflation was mainly due to the rise in food prices, the decline in wheat production indicates that its prices will rise in the near future, which may push up rice prices, also due to a shift in demand. A further rise in inflation cannot therefore be ruled out.

The employment growth in April mainly occurred in manufacturing and services. Industry added 5.5 million jobs, while the service sector added another 6.7 million. Within manufacturing, 3 million jobs were created in manufacturing and nearly 4 million in construction. However, mining and utilities reported a sharp drop in employment, coinciding with the coal shortage and ensuing crisis in the energy sector, which again impacted the overall performance of business, industry and agriculture. Within the industry, it was the heavy industries such as metals, chemicals and cement that provided jobs. Within the service sector, increases were in retail, hotels and restaurants.

A point of greater concern is that the increase in employment in manufacturing and service sectors has been low-quality jobs. The CMIE says it has indicated that much of the increase in employment has been among day-wage workers and small traders. This type of occupation created an increase of 7.9 million jobs. Entrepreneurs increase by 4 million and farmers by 5.1 million. There was almost no change in paid jobs, which stood at nearly 79 million in March and April 2020, much less than 87 million before the 2019-20 pandemic. A large increase of 12 million was reported in non-farm jobs, two-thirds of which were daily wage labor and small traders.

In this scenario, Modi’s government urgently needs to remedy the dual evils of inflation and unemployment by overhauling its entire set of policies that fueled both. Alibi is a bad defense and bad politics. Good governance with better policies can help reverse the trend. Relying solely on RBI intervention, such as raising interest rates, is not enough. With factory production remaining subdued in IIP terms, a further rate hike could actually slow economic growth, which in turn will worsen inflation and the labor market. The jump from food price inflation to 17-month highs to 8.38 percent is too serious a matter given the worrying levels of unemployment and unemployment. (IPA service)

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