Image courtesy: moneycontrol.com

In the 2000s, India was well on her economic growth trajectory. A burgeoning young population, adequate supply of low-cost labor, fast-growing global IT and pharma sectors complimented India’s robust economic growth choices. But India had witnessed a turnaround since 2018 when contractions in labor markets, historically high rates of unemployment & over-reliance on the services sector started to plague GDP growth.

Covid-19 exacerbated these contractions to the point that India’s demographic dividend might have already turned into a demographic disaster due to persistent unemployment & underemployment. While these are overly pessimistic statements, unemployment is a serious issue which no country can afford to ignore for a long period.

TRENDS IN UNEMPLOYMENT

India saw one of the stringent & largest lockdowns globally beginning March 2020, with heavy restrictions on mobility and economic activities. According to CMIE and ILO data, during 2015-2019, India’s unemployment rates hovered between a manageable 5-6%, which jumped to 8.7% in March 2020 to 23.5% in April 2020. In absolute numbers, the number of unemployed multiplied from 86.8 million in April 2020 to 93.1 million in May 2020. More than 6 million people seem to have been out of work in a single month making India’s cumulative unemployment load twice the population size of Malaysia or Saudi Arabia.

Source : CMIE

The Unlock 1.0 in June 2020 cut unemployment to half at 11%. With a partial lockdown in April 2021, the unemployment rates have been on an upward trend again.

LOCKDOWNS – AN UNAFFORDABLE LUXURY?

Urban unemployment during Covid-19 has mostly been higher than the national & rural rates. The lockdown, which shut most of India’s industries & services (primarily concentrated in cities), contributed substantially to these statistics.

Fig.1 shows the dramatic impact lockdown had on unemployment rates. Since urban employment contributes the lion’s share to India’s GDP, it cannot withstand disruptions such as lockdowns due to its relative labor intensiveness.

Simply, when a country houses the second largest population in the world and the quarter of the world’s poorest, it cannot afford the luxury of complete lockdowns.

India, as mentioned, has been the hub for cheap IT labor while the high-skilled R&D intensive jobs are still restricted to Silicon Valley & the likes. As Covid led to protectionism & automation, these low-skilled jobs were the first to bear the brunt of pay cuts & job losses, aggravating urban unemployment.

CONCLUSION – A QUESTION OF LIVES VS LIVES

For countries like India, with their large proportion of population living on subsistence levels, lockdowns in urban centres become a Catch-22 situation of “death-by-virus or death-by-starvation” for the poor, unlike the “Lives vs Economy” conundrum the developed world faces. The migrants are forced to go back to an already overburdened agricultural sector or take up MGNREGA jobs – transforming a large part of the urban unemployment into underemployment.

Policymakers need to seriously consider introducing a social-security net for Indians now. Long-run measures to tackle systematic unemployment requires policymakers to tap into newer technologies like cybersecurity & AI to maintain India’s competitive advantage in the IT world & at the same time, diversify its employment with a focus on non-IT, industrial & agrarian jobs.

(This blog is written by Anushka Dwivedi and Rakshikha P under guidance of Dr. R P Pradhan, CPPR Distinguished Fellow)

Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.

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