Unemployment rate elevated in November

by Mahesh Vyas

India’s unemployment rate inched up to 8 per cent in November 2022 from 7.8 per cent in October. It was 7 per cent a year ago, in November 2021. Over the past 12 months, the unemployment rate has averaged at about 7.4 per cent within a 6.4 - 8.3 per cent range. The 8 per cent unemployment rate in November is therefore on the higher side of the recent levels of the unemployment rate.

The labour participation rate (LPR) settled at 39.6 per cent in November 2022. This is close to the average LPR during the past 12 months. The LPR had reached a low of 38.8 per cent in June and it has been improving since then. But, it is still lower than the 40 per cent it averaged during 2020-21 and 2021-22.

An elevated unemployment rate and a somewhat subdued LPR kept the employment rate correspondingly muted. The employment rate improved from 36 per cent in October to 36.4 per cent in November. But, it was much lower than the average of 36.7 per cent clocked in the preceding 12 months or the 37 per cent pencilled in 2021-22.

Nevertheless, the improvement in the employment rate in November (from 36 per cent to 36.4 per cent) translated into an additional 5.45 million jobs. And, the increase in the unemployment rate (from 7.8 per cent to 8 per cent) translated into 1.55 million additional unemployed persons. The labour force therefore increased by 7 million in November.

The labour force in November is estimated at 436.8 million. This is higher than the 435.2 million labour force of 2021-22 and the 424.3 million labour force in 2020-21. It is, however, still lower than the 441.8 million labour force of the pre-pandemic year 2019-20.

Most of the jobs added in November were in rural India and the increase in the unemployed in the month was essentially in urban India.

Employment increased in rural India by a substantial 4.3 million. This helped improve the employment rate in the hinterlands from 37 per cent in October to 37.5 per cent in November. Unemployment, on the other hand, declined in rural India by 1.2 million. This in turn helped improve the unemployment rate as it fell from 8 per cent to 7.6 per cent. The increase in employment in rural India is largely in the form of farmers and agricultural labourers. The increase is concentrated in crop cultivation implying a large incremental deployment of labour into rabi crop sowing activities.

Employment increased in urban India by 1.1 million. This implies a 0.9 per cent increase over the previous month. Growth in employment in rural India in comparison was 1.6 per cent. Rural India employs more and grew more than urban India and therefore was the bigger contributor to the increase in employment during November. Its contribution was 79 per cent.

Urban employment rate has been rising steadily. It rose to 34.4 per cent in November from 34.2 per cent in October. The November urban employment rate was higher than the 12-month average of 34.1 per cent and close to the 12-month max of 34.46 per cent.

Urban India saw a substantial increase in people seeking jobs the unemployed in November. Urban unemployed increased from 9.9 million in October to 12.7 million an increase of nearly 2.8 million. This led to the urban unemployment rising to 9 per cent in November from 7.2 per cent in October. The urban unemployment rate often crosses 9 per cent. It also does not fall below 7 per cent. The 7-9 per cent urban unemployment rate is quite high.

The average unemployment rate in urban India is a little over 8 per cent. In comparison, the average rural unemployment rate is around 7 per cent with a broader range of less than 6 per cent to over 8 per cent. The unemployment rate in rural India remains slightly more volatile than in urban India in spite of the MGNREGA scheme that provides jobs to the rural unemployed.

India’s unemployment rate has not crossed 8 per cent too often during non-lockdown times. In the past 17 months, the unemployment rate has crossed 8 per cent on four occasions. The max unemployment rate was 8.3 per cent. It seems unlikely that the unemployment rate will rise beyond these levels. But, an eight per cent unemployment rate is high given that inflation in India is also quite high at close to 7 per cent.

An estimated 35 million people were looking for employment and were unable to find any during November. Another 18.6 million who were unemployed were willing to work but were unable to get any work although they were not actively looking for work. The challenge India faces is that well over 50 million people are willing to work if work can become available to them. Of this, about 35 million are in rural India and rest are in urban India.