By Nageshwar Patnaik in Bhubaneswar, January 22, 2022: India is all set to celebrate its 73rd Republic Day on Wednesday marking ‘Azaadi ka Amrit Mahotsav’. It is going to be a muted event this year due to strict Covid-19 protocol in place. Despite the glimmer of hope painted by experts and industry bodies about the economy turning around quickly, the momentum has not yet picked up. It is matter of real worry for the Narendra Modi-led government at the centre.

The pandemic has hurt income and household livelihood since the pandemic broke out in early 2020. The proportion of households where more than one person is employed has fallen to about 24 percent in 2021 from nearly 35 per cent in 2016. At the same time, a household where only one person is employed has risen to 68 percent in the first 11 months of 2021, from 59 percent in 2016.

India’s joblessness rate hit a four-month high of 7.9 per cent in December 2021, with urban unemployment rising to 9.3 per cent — a reflection of how Indians have been hit hard by a dismal economy and the pandemic. Contrary to the dominant narrative that much of the persisting economic distress is concentrated in the informal or unorganised parts of the economy, there are signs that the distress not only envelops the informal economy, but also that large parts of the formal economy continue to face considerable financial hardship.

The Employees’ Provident Fund Organisation (EPFO) has allowed members to avail of an advance to deal with expenses arising from Covid-19 and between April 2020 to September 2021, 1.5 crore such claims were received. This means that at least 23 per cent of India’s formal labour force has availed of this facility.

Of these 1.5 crore claims, 87.2 lakh were received in 2020-21. This works out to an average of 7.26 lakh claims per month. In comparison, in just the first six months of 2021-22 (April-September), 63.4 lakh such claims were received, at an average of 10.5 lakh per month. This suggests that the formal labour force continued to face economic hardship.

India’s unemployment rate has been soaring like never before. It went up to 7.91 per cent in December 2021 from 6.3 per cent in 2018-2019 and 4.7 per cent in 2017-18. In urban areas, this has gone up to 9.30 per cent in December 2021 from 8.09 per cent in January 2021. In rural areas, it has gone up to 7.28 per cent against 5.81 per cent.

Unemployment is more pronounced in the urban areas as compared to the rural areas. Between 2019-20 and December 2021, the manufacturing sector has lost 9.8 million jobs; by contrast, agricultural jobs jumped by 7.4 million. Workers are back in their villages even though urban jobs provide better wages.

The quality of jobs is also at stake. The percentage of salaried people has dropped from 21.2 per cent in 2019-2020 to 19 per cent in 2021, which means that 9.5 million people have left the salaried jobs and become jobless or part of the informal sector. But the informal sector itself has shrunk, so much so that — to return to aggregate figures — the employed population, over the same period, has decreased from 408.9 million people to 406 million, at a time about 10 million young Indians were entering the job market. The age pyramid does not help, despite the belief in the so-called demographic dividend.

India’s Labour Force Participation (LPR) does not compare favourably with other emerging countries — a category that is vanishing quickly. According to the World Bank, it stood at 46 per cent in 2020 (it has not improved since then), while that of Brazil stood at 59 per cent, Chile’s at 57 per cent, China’s at 67 per cent, Ethiopia’s at 76, Ghana’s at 66, per cent, Indonesia’s at 66 per cent and Malaysia’s at 64 per cent.

Prime minster Narendra Modi and the ruling Bharatiya Janata Party face acid test as polls are scheduled in five state Assemblies, namely Uttar Pradesh, Uttarakhand, Punjab, Goa and Manipur. Notwithstanding lakhs of people joining the working-age group, be it UP, Punjab, Goa or Uttarakhand, the total number of employed people in each state today is less than what it was five years ago.

In these poll-bound Uttar Pradesh, the labour force has risen from 149.5 million to 170.7 million in the past five years, while the percentage of those employed (as a share of the working-age population) has actually fallen, from 38.5 per cent to 32.8 per cent during the same period, according to CMIE data.

Unemployment among women is higher than men, both in urban as well as rural areas. For women, the average unemployment was 14.28 per cent and for men, it was 7.88 per cent. Further, of the women willing to seek work in urban areas, 92.1 per cent don’t get any work. This count for rural women stands at 54.8 per cent.

The employment scene will improve only if private investment picks up. But ironically, the investment rate is declining — almost in a linear manner — since 2011. It has dropped from 34.3 per cent then to 27 per cent in 2020. One of the reasons why companies do not invest is weak demand – which is partly due to joblessness — that dissuades enterprises from hiring more. This vicious circle is also fostered by growing inequalities, resulting in the shrinking of the middle class.

Unemployment in India has indisputably reached a critical stage and perhaps, raises serious questions on the quality of the economic recovery, which the third wave of the pandemic may affect anyway, making joblessness an even more acute problem.