According to the CMIE report, only 39.5% of the Indian adult population or 397 million people were employed in Oct 2018, 2.4% lower than the 407 million in Oct 2017.
Against Prime Minister Narendra Modi’s promise of creating 10 million jobs a year, India’s unemployment rate jumped to a high of 6.9% in October 2018, according to a report by the Centre for Monitoring Indian Economy (CMIE).
This is the highest in two years since January 2016 “when we began measuring labour statistics systematically,” according to Mahesh Vyas, CEO of CMIE.
The study comes at the second anniversary of India’s demonetisation exercise which, according to several reports, dealt a body blow to the country’s small and medium businesses as they struggled to sustain operations amid an acute cash crunch and resulted in massive layoffs.
According to the CMIE report, only 39.5% of the Indian adult population was employed as of October, the lowest employment percentage. An estimated 397 million people were employed in October 2018, 2.4 per cent lower than the 407 million persons employed in October 2017. This is a sharp year-on-year fall in employment.
In the months following demonetisation, over 1.5 million jobs were lost, according to CMIE.
The situation remains grim even now. There was zero growth in the job market in financial year 2018, the unemployment rate rising to a two-year high of 6.9% in October 2018, the CMIE report said.
Another worrying sign is the labour participation rate (LPR), which, in October, stood at a dismal 42.4%, the lowest level since January 2016. LPR, deemed a better indicator of employment, is the share of the population above 15 years of age that is employed or seeking jobs.
“Labour participation rate (LPR) was of the order of 47%-48% before demonetisation. But, it fell sharply after demonetisation and has still not recovered,” Mahesh Vyas said in the report.
Further, a sharp recovery in the situation is unlikely as private-sector investments have remained subdued.
While employment has been falling, the number of people unemployed who are actively looking for a job has been rising. As of October 2018, there were 29.5 million unemployed persons actively looking for jobs. This is much larger than the 21.6 million unemployed persons looking for jobs in October 2017.
The count of the unemployed persons actively looking for jobs has risen steadily since its low of 14 million in July 2017. In a little over a year, the number unemployed has more than doubled. This partly reflects the return of labour to the labour markets after their exodus post demonetisation.
The return of labour to the labour markets indicates possibly a return of hope, the CMIE report said, although there still isn’t any sign of a significant pick up in jobs on offer.
Given that investments continue to remain subdued, the economy does not seem to have the capacity to absorb much more labour.