Rural revival recedes

by Mahesh Vyas

CMIE has completed the 20th Wave of its Consumer Pyramids Household Survey. This Wave was conducted entirely during the lockdown. Wave 20 of the CPHS chronicled the impact of the lockdown on India’s labour markets and in doing so provided the earliest indications of its impact on the Indian economy. It has almost diarised the loss of jobs and their return during this period. August 2020, the last month of Wave 20 reveals one more twist in the saga.

The employment story of an initially smart and then a gradual recovery from the fall of April 2020 did a U-turn in August. The recovery in employment stopped, or at least halted in August. Compared to the level in July, employment in August was 0.2 million lower.

Employment stopped growing in August although it still remains 11 million short of the average employment during 2019-20. Employment in August 2020 was also 10.7 million lower than it was in August 2019. It continued to remain lower than in any month in the pre-lockdown period since at least January 2016 when CMIE started measuring labour statistics directly.

Labour participation rate inched up from 40.7 per cent in July to 41 per cent in August. The LPR has continued to rise since the fall of April 2020 albeit at a progressively slowing pace. But, the unemployment rate, which has been falling so far after April, increased from 7.4 per cent in July to 8.4 per cent in August. This is a significant jump. As a result, the employment rate fell from 37.6 per cent to 37.5 per cent in the same period.

The labour force increased from 424 million in July 2020 to 428 million in August. But, this increase only added to the count of unemployed which increased from 32 million to 36 million. On a net basis, none of the increase in the labour force could translate into an increase in employment. It just showed up in an increase in the count of the unemployed.

This deterioration in labour market conditions in August was essentially located in rural India. The labour force expanded in urban India but shrunk in rural India. Employment and employment rate expanded in towns and shrunk in the country-side. While the unemployment rate rose in both regions, it rose more in rural India.

The labour force expanded by 4.8 million in urban India in August, and it shrunk by nearly 0.8 million in rural India. Of the 4.8 million who entered the labour markets in urban India, 3.4 million got jobs and the remaining 1.4 million were left unemployed. This implies that the marginal unemployment rate was 29 per cent in urban India in August. But, this isn’t bad at all compared to what happened in rural India.

In rural India, employment declined by 3.6 million. Most of these joined the ranks of the unemployed. The count of the unemployed in rural India increased by 2.8 million. The rest of those who lost jobs simply quit the labour market. And so, the labour force shrunk by 0.8 million in rural India. This shrinking of the labour force in rural India along with a sharp fall in employment is a sign of growing stress in the hinterlands.

Rural India, that led the recovery story till July has pulled back hard. The fall in rural employment in August seen in CMIE’s CPHS ties very well with the employment trends seen in the government’s MGNREGS intervention. In June and July this year, the person-days of employment created under the scheme were twice the levels in the same months of 2019. This contributed hugely to the rural-centric revival story we’ve seen unfold so far. But, in August, the growth in MGNREGS person-days of employment was up by a mere 14 per cent. This is likely to be revised upwards but it is unlikely to come anywhere close to the more than 100 per cent growth seen in the preceding two months.

This is not all that is hurting rural India. The fall in MGNREGS employment coincides with a fall in farming activities in August. By July-end, 83 per cent of the kharif sowing was complete. Evidently, that left very little work for August. 40 per cent of the sowing was done in each of the months of June and July 2020. In comparison, only 20 per cent of the sowing was done in August. Therefore, August could have absorbed a much lower quantum of labour compared to June and July.

Thus, rural India faced a double whammy in August 2020. It saw a fall in MGNREGS employment, which is non-farming related employment, and it saw a fall in kharif-sowing related employment. As a result, the fall in employment in rural India is across farming and non-farming activities. This is exactly what CMIE’s CPHS shows. It shows that employment in farming declined by 0.5 million in August and job losses in the rural non-farming sectors were of the order of 3.2 million.

The return of the migrants to urban labour markets reported by the media is possibly a reflection of a decline in rural jobs as much as a possible lure of some better jobs in urban India.

References
1. https://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&tabcode=001041005005000000&repnum=112880&frequency=M&colno=1