India’s unemployment rate fell to 7.4% for the week ended July 12, from 8.9% in the previous week and a high of 23.5% in May, the Centre for Monitoring of Indian Economy (CMIE) said in its latest weekly report.
The CMIE, however, termed as ‘debilitating’ the fall in labour participation rate that stood at 40.4% for the week ended July 12 from its recent peak of 42% in the week ended June 21. In the whole of 2019-20, the average labour participation rate was 42.7%.
“The fall in the labour participation rate was 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. It increased from 36.9% in the week ended July 5 to 37.4% in the week ended July 12,” CMIE said in its weekly report.
The 11% unemployment rate of June was still quite high compared to the less than 8% rate witnessed before the lockdown began. The unemployment rate had been rising steadily since 2017-18 when it averaged 4.6%. In 2018-19, it rose to 6.3% and further to 7.6% in 2019-20.
The thinktank said labour participation rate fell in urban areas to 37% by the week ended July 12. With this, all the gains made in improving the labour participation rate in June in urban India were nullified. But, the urban unemployment rate dropped significantly to 9.9% while employment rate marginally improved to 33.3% from 33.2% in the week ended July 5.
However, rural India continues to deliver a much better performance. Rural labour participation rate increased, albeit by a whisker, from 42% to 42.1% in the first two weeks of July. The unemployment rate also declined from 7.8% to 6.3%. As a result, the employment rate rose from 38.7% to 39.4%.
“The government continues its aggressive spending on MGNREGS and sowing activities for the kharif crop remain brisk. This has helped to keep rural India better employed. It may also keep rural India better employed in the coming months. However, the reluctant recovery of labour markets in urban India is an indication of the limits of the current recovery. The sudden imposition and relaxation of the lockdown in many parts of urban India is making a smooth recovery difficult,” CMIE said.
Data of the first two weeks of July suggest that the recovery in the recovery of the labour market has stopped progressing beyond its level of the last two weeks of June.