Adrift in April

by Mahesh Vyas

Fast frequency labour statistics indicate that labour market conditions have been deteriorating in April 2021. This is evident from the daily 30-day moving average estimates and the weekly estimates of three major labour market ratios during the month. The three ratios are the labour participation rate, the employment rate and the unemployment rate.

For reference, we note that in March 2021, the labour participation rate was 40.2 per cent, the employment rate was 37.6 per cent and the unemployment rate was 6.5 per cent. The labour participation rate was 2.5 percent points lower than the average of 2019-20 and the employment rate was 1.8 percentage points lower by a similar comparison. The unemployment rate was lower than the average of 7.6 per cent in 2019-20.

Now, the intra-month estimates for the month of April indicate deterioration in these parameters.

The labour participation rate looks unlikely to fall in April. The 30-day moving average LPR indicates that the ratio was rising till April 15 when it peaked at 40.8 per cent. Then it started falling, but it is unlikely to fall to a level lower than that of March 2021.

This is because the fall in LPR in March was quite steep. It seems likely that the ratio would stabilise at the fallen level and not recover in April. The LPR was in the 40.5 to 40.6 per cent range during December, January and February. Then, it fell to 40.2 per cent in March. It is unlikely to recover from here. The 30-day moving average as of April 25 was 40.3 per cent. But this includes the last week of March and also the week ended April 4 which had an LPR of 41.2 per cent. The subsequent three weeks those ended April 11, 18 and 25 show an average LPR of about 40.1 per cent. Therefore, unless there is an unusual bounce in the last week, the April LPR is likely to stabilise at its March level of 40.2 per cent.

But the April markets seem incapable of absorbing the supply of labour at an LPR of 40.2 per cent. While the LPR has declined in the last four weeks, the unemployment rate has increased. In the last week of March, ended 28th, the LPR was 41.2 per cent and the unemployment rate was 6.7 per cent. In the following week which ended on April 4, the LPR was stable at 41.2 but the unemployment rate shot up to 8.2 per cent. Labour retreated in the next week as the LPR stepped down to 40.1 per cent in the week ended April 11. Yet, the unemployment rate was unrelenting as it inched up to 8.6 per cent. In the following two weeks, the unemployment rate has dropped first to 8.4 per cent and then to 7.4 per cent. Nevertheless, the unemployment rate during the month of April is likely to be close to 8 per cent after closing March at 6.5 per cent.

April could be the third consecutive month of deterioration in terms of the most important fast-frequency labour statistic, the employment rate. The employment rate had reached its highest post-lockdown level of 37.97 per cent in September 2020. Then, it fell for three consecutive months but climbed back to 37.94 per cent in January 2020. Then, it declined in February and March. Now, it looks like it will fall in April as well, to a sub-37 per cent level. The inability of the labour markets to absorb labour at a steady 40.2 per cent translates into a lower employment rate.

Low employment rates and low labour participation rates leave adequate people free to participate in the endless political rallies and mammoth religious congregations. Millions have been attending political rallies in India’s extended poll season. The employed can ill-afford to attend such large rallies. It’s often not just an evening affair one can stroll into after work. Many find employment in these rallies. Many could be paid to attend these rallies. This would lead to income without any employment. There is business and employment in mega religious rituals as well. One can wager that the larger the size of political rallies, the greater the unemployment rate.

As of March 2021, there were 43.8 million people in India who were unemployed and were willing to work. This number will have gone up in April because the LPR (which is a measure of the people seeking work) is expected to remain stable (on a rising population) and the unemployment rate is going up. Of these nearly 44 million people, nearly 28 million were actively looking for work and were unable to find any. The remaining 16 million were available for work but were not actively looking for work. This is a large pool of unemployed labour. Most of them are young. Of the 44 million, 38 million are between 15 and 29 years of age. Half of them, around 22 million are in the early twenties. This is a large number at an impressionable age.

April 2021 has seen sharply rising Covid-cases, severe shortages in the health services, rising deaths and also rising unemployment. It is facile to say that it is not as bad as April 2020. India was adrift this April.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.7 -0.4
Consumer Sentiments Index
Base September-December 2015
54.8 -1.0
Consumer Expectations Index
Base September-December 2015
56.6 -0.5
Current Economic Conditions Index
Base September-December 2015
52.0 -1.7
Quarterly CapEx Aggregates
(Rs.trillion) Jun 20 Sep 20 Dec 20 Mar 21
New projects 0.96 1.41 1.16 1.52
Completed projects 0.28 0.73 0.83 0.88
Stalled projects 0.11 0.08 0.31 0.14
Revived projects 0.68 0.29 0.11 0.14
Implementation stalled projects 0.09 0.07 0.15 0.30
Updated on: 06 May 2021 9:28AM
Quarterly Financials of Listed Companies
(% change) Jun 20 Sep 20 Dec 20 Mar 21
All listed Companies
 Income -27.7 -6.3 1.6 11.7
 Expenses -27.9 -10.3 0.1 6.6
 Net profit -40.5 47.2 57.7 53.3
 PAT margin (%) 5.2 8.3 8.5 13.3
 Count of Cos. 4,401 4,402 4,376 274
Non-financial Companies
 Income -37.4 -10.5 0.2 16.2
 Expenses -37.7 -14.2 -0.7 12.8
 Net profit -56.0 31.5 54.3 34.1
 PAT margin (%) 4.5 8.1 8.9 13.4
 Net fixed assets 5.9 9.2
 Current assets 0.7 11.1
 Current liabilities -2.7 -15.8
 Borrowings 8.3 -11.0
 Reserves & surplus 4.2 21.4
 Count of Cos. 3,267 3,267 3,253 200
Numbers are net of P&E
Updated on: 06 May 2021 9:28AM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.4 0.0 -6.4
 Expenses 13.8 0.0 -7.3
 Net profit 15.2 -10.4 0.9
 PAT margin (%) 2.1 2.1 10.0
 Assets 9.8 8.1 0.7
 Net worth 8.4 4.4 -0.1
 RONW (%) 3.8 3.5 11.7
 Count of Cos. 30,871 29,514 44
Non-financial Companies
 Income 14.1 -1.9 -6.7
 Expenses 14.3 -1.6 -7.8
 Net profit 21.7 -20.6 1.3
 PAT margin (%) 2.9 2.4 10.6
 Net fixed assets 5.6 9.4 -0.2
 Net worth 8.0 2.1 -0.2
 RONW (%) 6.4 5.0 13.2
 Debt / Equity (times) 1.0 1.1 0.1
 Interest cover (times) 2.3 2.0 21.9
 Net working capital cycle (days) 73 80 37
 Count of Cos. 24,702 23,523 36
Numbers are net of P&E
Updated on: 04 May 2021 1:37PM