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Saturday, June 22, 2013

India Whining: Poll-bound UPA government creates record unemployment

NEW DELHI: It's not good news for the poll-bound UPA government that had been hoping to hard sell its high growth record by commissioning a special unemploymentsurvey in 2011-12, after the regular five-yearly survey carried out in 2009-10 showed adramatic dip in job creation. 

India's employment rate has slipped to 38.6% in 2011-12, from 39.2% in 2009-10, as per latest data from the central statistical office. In 2004-05, when the UPA took charge for the first time, the employment rate was 42%.

The number of unemployed rose to 10.8 million in January 2012, from 9.8 million in January 2010. Official data released in 2011 had showed that just 2.7 million new jobs were created in the five years between 2004-05 and 2009-10 — sharply lower than the 60 million jobs created in the previous five years.

The government had proposed conducting the one-off special survey in 2011-12, blaming the post-Lehman global slowdown for the poor numbers in the 2009-10 survey. Maybe it shouldn't have — as the numbers have got worse.

Employment Falls in Step with Slump

The employment rate has fallen further in 2011-12 in tandem with the slide in the economy's growth rate from 9.3% in 2009-10 to 6.2% in 2011-12. Worse, the number of unemployed Indians has gone up by 10.2% in the intervening two-year period between the two surveys, adding fresh fuel to the charge of jobless growth levelled against the government in recent years.

There are only two silver linings to the survey's largely glum findings. About 14 million jobs were added between 2009-10 and 2011-12, nearly five times the number of jobs added in the previous five years. A more critical structural shift in India's labour market comes from the agriculture sector, with the number of workers engaged in farm-related activities dipping below 50% of the overall workforce for the first time ever.

The farm sector now accounts for 49% of the workers usually employed while manufacturing accounts for 24% and services 27%. However, the continuing decline in the labour force participation rate, which refers to the number of people in working age actively seeking jobs, is a worry.

The labour force participation rate, or LFPR, declined to 39.5% in 2011-12 from 40% in 2009-10, suggesting the lack of job opportunities may be forcing people to study longer or simply drop out of the job market.

The International Labour Organisation, in a May 2013 research note on how the slowdown is threatening India's employment situation, has noted that any decline in unemployment rate must be assessed alongside the workforce participation rate. "...Because young people andwomen have withdrawn from the labour force, net employment growth has been low," said senior employment specialist Sher Verick. The latest numbers seem to back that argument.

"There is a concern related to the job market. The slowdown has impacted addition to the employment. The trend is only getting more pronounced with the latest data," said Soumya Kanti Ghosh, chief economic advisor at the country's largest lender, State Bank of India.

"I would be very careful in calling it a jobless growth because the unemployment rate in the current daily status has gone down significantly, which indicates that more people are fully employed. More people have stable jobs," said Pronab Sen, chairman of the National Statistical Commission.

The current daily status indicates the activity on each day during the reference week. Theunemployment rate as per the current daily status declined from 6.6% to 5.6% in the period between July 2011 and June 2012 when the survey was conducted.

"This is a case of rural-urban migration. Since agriculture provides seasonal employment, more and more rural men are moving out for more stable wages," said Madan Sabnavis, chief economist, CARE Ratings. "The youth are moving to the cities to seek high-wage employment in construction-related jobs, for instance," he said.

The bigger decline was seen in rural females. The workers' population ratio among rural females fell from 26.1% to 24.8% and the number of them employed declined by 2.4%, from 106 million to 103 million.

India's labour force grew by just 3.1% between 2009-10 and 2011-12, from 468.8 million to 483.7 million. But the number of rural females in the workforce fell by 2.5%, though the percentage of women taking up self-employment rose to 59% in 2011-12, from 56% in 2009-10.

"This shows that women are going the self-employment way. A shift seems to be happening, but we need to see what they are doing," said Sen.

Overall, the number of self-employed workers grew to 52% from 51% of the employed workforce, another indicator that formal jobs are getting harder to come by. This rise was equally pronounced among urban females and males.

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