Workforce Being Crushed Between Inflation And Joblessness

By Dr. Gyan Pathak

Workforce in India is being crushed between inflation and joblessness chiefly on account of wrong policy stance of the Narendra Modi government and the pandemic may be just an additional excuse. Retail inflation (CPI) in April soared to a 8-year high, ie the entire period of Modi Raj, and touched 7.79 per cent as against 8.3 per cent in May 2014, which he had strongly criticized during his election campaign. In place of the promise of providing one crore job every year, his government actually delivered unprecedented level of joblessness in decades, further exacerbated by the pandemic.

High taxes on petrol and diesel, high administered prices, and high GST rates have all along fuelling the rise of inflation, apart from the rising food prices, the downturn in labour market started with the policy experiment of demonetization in November 2016, could never been stopped. Job situation has never been worse. Both unemployment and labour force participation suffered historical decline during Modi Raj. The pandemic and other domestic and external factors did have it impact and the government seemed to be stupefied. Rethinking on its old wrong priorities was required but the centre continued with them, and in several cases vigorously followed them.

The worsening market condition with price rise and inflation and labour market deterioration with large number of job loss, declining opportunity of jobs, and rising unemployment hast become the characteristic features of the entire Modi rule. No money in hand and little opportunity of getting jobs have made the life of our workforce miserable.

The month of April 2022 though witnessed substantially increased activities in the labour market, the additional jobs that became available were inadequate compared to the demand. A large number of the frustrated people who have left the labour market and had stopped even searching for jobs resumed their search, though the search has become costly, the unemployment rate has increased compared to 7.88 per cent in April compared to 7.57 per cent in March, according to the latest CMIE assessment.

The labour force increased by 8.8 million from 428.4 million in March to 437.2 million in April. It was a substantial increase in the recent months, especially after a fall of 12 million in the preceding three months. This increase was far below the loss which should be taken into consideration.

Employment expanded by only 7 million in April, which was less by 1.8 million increase in the labour force. The increase in employment had also come after three consecutive months of decline in employment, according to CMIE data, which also reveals that employment had fallen by 10 million from 406 million in December 2021 to 396 million in March 2022. In April, it reached to 403 million, only to recover a part of the fall.

Thus the number of unemployed persons rose to 34.2 million, which includes the 1.8 million increase (increase in labour force minus expansion in employment) in the count of the unemployed in April 2022.

April 2022 also saw a 2.3 million increase in the count of those who stated that they were unemployed and were willing to work if work was made available to them but were not actively looking for employment. The count of these rose to 19.5 million in April 2022.

The agriculture sector shed 5.2 million jobs in April. Part of this decline in labour force was due to winding of rabi harvesting season, shrivelling of the wheat crop, and the consequent decline in wheat production. Wheat production is expected to have fallen by between 10 and 20 per cent this year because of intense heat wave. It is a very serious concern, and the Centre has already banned exports of wheat to avoid food insecurity of the country. Since the recent rise in CPI inflation was chiefly due to rise in prices of food articles, the wheat production fall indicates that its prices will increase in near future which may push up the prices of rice also due to shift in demand. The further rise in inflation can thus not be ruled out.

Increase in employment in April was chiefly in industry and services. Industry added 5.5 million jobs while services added another 6.7 million. Within industry, 3 million jobs were added in manufacturing and nearly 4 million in construction. However, mining and utilities reported sharp decline in employment which coincided with the coal shortage and the consequent power sector crisis, which again impacting overall performance of the business, industry and agriculture. Within manufacturing, it was heavy industries such as metals, chemicals and cement that added jobs. Within services sector, the increases were in the retail trade, hotels and restaurants industries.

A matter of more serious concern is that the increase in employment in industry and services was of low quality jobs. The CMIE says that it indicated the fact that the increase in employment was largely among daily wage labours and small traders. This type of occupation saw an increase of 7.9 million jobs. Entrepreneurs increase by 4 million and farmers fell by 5.1 million. There was almost no change in salaried jobs which were close to 79 million during March and April 2020, much below 87 million before the pandemic in 2019-20. Big increase of 12 million was reported in non-farm jobs, two-thirds of which were daily wage labours and small traders.

In this scenario, Modi government needs to urgently redress the twin evil of inflation and joblessness by reviewing its entire set of policies that have been fuelling both. Alibi is a bad defence, and bad politics. Good governance with better policies may help reverse the trend. Relying solely on RBI intervention, such as raising interest rates, will not be sufficient. With factory output in terms of IIP remaining subdued, further interest rate hike may slow even economic growth which in turn will deteriorate inflation and labour market. The jumping of food price inflation to 17 months high to 8.38 per cent is too serious a matter in the face of disquieting levels of joblessness and unemployment. (IPA Service)