A partial recovery in July

by Mahesh Vyas

We had expected employment to recover in July from its dramatic fall of 13 million in June. We expected the recovery to be situated essentially in rural India, which is where employment had shrunk drastically in June. We had described the extraordinary fall in employment in June as transitory in response to a delay in the progress of the southwest monsoon and correspondingly the delay in employing people for the seasonal kharif sowing activities.

Labour statistics for July show that a recovery did indeed take place in rural India. But, this has turned out to be grossly inadequate. Compared to the 13 million fall in June, employment grew by only 6.3 million in July. All the fall in employment in June was in rural India and in particular in agriculture. All the recovery in July is in rural India and particularly in agriculture. The transitory nature of the fall in employment in June turns out to be true. Yet, the expectations of a recovery turned out to be only partly true.

It is apparent that as the southwest monsoon progressed and kharif sowing activities picked up pace, employment of labour as agricultural labourers increased. Agriculture absorbed an additional 9.4 million in July. It had shed 8 million in June. Within the agricultural sector, crop cultivation employed 4.7 million additional persons in July after having employed an additional 3.4 million in June. This reflects the gradual absorption of temporary labour for kharif preparations and sowing.

The shift of labour to agriculture, i.e. the direction, is along expected lines. But, the quantum is lower than expectations. About 147.5 million were employed in agriculture in July 2022 compared to 163.8 million in July 2021 and in July 2020 as well. It is also lower than the average 154 million employment in agriculture in the twelve months ended June 2022.

This lower-than-expected absorption of labour into agriculture in July reflects the patchy progress of the southwest monsoon and the correspondingly poor kharif sowing this year. Rains this year so far have been very poor in Uttar Pradesh and Bihar. This seems to have hurt sowing of the kharif crop in the Gangetic plains. The rice crop is likely to have suffered lower acreage because of this. As per data available till July-end, rice cultivation was down 13 per cent and most of the fall was in Bihar, Uttar Pradesh and West Bengal.

Erratic rains can be blamed for the incomplete recovery of employment in July 2022. But, it can be assigned the blame only partly. Employment fell in industry and in services as well. It fell among salaried employees and also among business persons. These falls cannot be linked to rains.

The industrial sector lost 0.2 million jobs in July after having lost 4.3 million in June. The services sector lost 2.8 million jobs in July after having lost 0.8 million in June. The industrial and services sectors have been losing jobs for two months.

Employment in the industrial sector had shot up to 108 million in May 2022. This was among the higher levels of employment in the sector. It has since declined to 104 million in June and July. Even at these levels employment in industry is a tad higher than the average employment in the pre-pandemic year 2019-20, when it was a shade below 104 million. The recovery in industrial jobs is essentially in the construction industry and not in manufacturing. Manufacturing jobs are better quality jobs compared to the quality of employment in construction.

The manufacturing sector has not recovered from the loss of employment it suffered during the pandemic. Employment hovers around 30-34 million while it was over 40 million before the pandemic. This is a significant fall in employment by the manufacturing sector. The fall in manufacturing employment in the past two months is concentrated in large organised industries like chemicals and metals.

Over 8 million non-farm jobs were lost during June and July 2022. This loss is equally divided between industry and services.

Labour markets in urban India were particularly stressed during July. Thanks to the increased intake of labour in agriculture, employment in rural India increased by 6.9 million, from 265.2 million in June to 272.1 million in July. However, employment in urban India fell by 0.6 million, from 125.7 million to 125.1 million. This may not be a case of labour migrating from urban to rural regions. Labour participation rate in urban India increased a bit in July and the unemployment rate increased as well. If labour was migrating then the LPR would have dropped. But, this is not the case.

The unemployment rate in urban India shot up significantly, from 7.3 per cent in June to 8.2 per cent in July. The average urban unemployment rate has been well over 8 per cent in the past 12 months. At the same time, the employment rate has been declining gradually. Urban employment rate fell from 34 per cent in June to 33.8 per cent in July. This is the lowest urban employment rate in a year.

The lacklustre performance of the non-farm sectors and the urban regions leaves labour seriously vulnerable to any failure of the monsoon.