The sudden imposition and relaxation of the lockdown in many parts of urban India is making a smooth recovery in employment rate difficult, the Centre for Monitoring Indian Economy said.
“Data of the first two weeks of July suggest that the recovery has stopped progressing beyond its level of the last two weeks of June,” it said in its weekly report.
“It is possible that July may see very little gain in terms of jobs returning,” CMIE said, adding there there will be a limit to the immediate recovery that we witnessed in June as the lockdown has its long-term impact.
According to CMIE data, the week ended July 12 was the third consecutive week to record a fall in the labour participation rate which stood at 40.4% after falling from a peak of 42% in the week ended June 21. “This is debilitating. From an economic growth point of view it is important that the labour participation rate does not fall,” it said.
The fall in the labour participation rate was, however, compensated by a sharp fall in the unemployment rate in the week ended July 12, to 7.4%. This enabled a small recovery in the employment rate which increased from 36.9% in the week ended July 5 to 37.4% per cent in the week ended July 12.
“This is still significantly lower than its level during the last two weeks of June,” it said, adding that the third week shows less fatigue but, there still seems to be some resistance to making further gains.
CMIE said the main stress is in urban India where the labour participation rate has fallen to 37%by the week ended July 12, nullifying all the gains made in improving the labour participation rate in June in urban India.
However, the urban unemployment rate also dropped significantly to 9.9%, thus helping improve the employment rate marginally from 33.2% in the week ended July 5 to 33.3% in the week ended July 12. “That is too small a gain to repose much faith in,” it added.
Rural India continues to deliver a much better performance with rural labour participation rate increasing marginally from 42% to 42.1% in the first two weeks of July. The unemployment rate declined from 7.8% to 6.3% in rural India resulting in improvement in the employment rate from 38.7% to 39.4%.
“At this level it is still shy of its pre-lockdown period. But, the overall recovery has been impressive,” it said, adding that the aggressive spending on MGNREGS by the government and brisk sowing activities for the kharif crop has helped keep rural India better employed. “However, the reluctant recovery of labour markets in urban India is an indication of the limits of the current recovery,” CMIE reiterated.