Labor is squeezed between inflation and unemployment

By Dr Gyan Pathak

India’s workforce is squeezed between inflation and unemployment mainly due to the bad policy of the Narendra Modi government and the pandemic might be just another excuse. Retail Price Inflation (CPI) in April hit an 8-year high, the entire Modi Raj period, and touched 7.79% from 8.3% in May 2014, which it had heavily criticized during his election campaign. Instead of promising to provide a crore of jobs every year, his government has actually created a level of unemployment not seen in decades, further exacerbated by the pandemic.

High gasoline and diesel taxes, high administered prices and high GST rates have historically fueled rising inflation, aside from rising food prices, the labor market slowdown that began with the political experiment of demonetization in November 2016, could never be stopped. The employment situation has never been worse. Unemployment and labor force participation both suffered historic declines during Modi Raj. The pandemic and other internal and external factors had an impact and the government seemed stunned. There was a need to rethink its old misguided priorities, but the center pursued them and, in several cases, pursued them vigorously.

The deterioration of the market condition with rising prices and inflation and the deterioration of the labor market with a large number of job losses, a decline in employment opportunities and an increase in unemployment have become the characteristics of the entire Modi rule. No cash on hand and few opportunities to get jobs have made the lives of our workforce miserable.

Although April 2022 saw a substantial increase in labor market activity, the additional jobs that became available were insufficient relative to demand. A large number of frustrated people who left the labor market and had even stopped looking for a job have resumed their search, although the search has become expensive, the unemployment rate has increased from 7.88% in April against 7.57% in March, according to the latest CMIE assessment.

The labor force increased by 8.8 million, from 428.4 million in March to 437.2 million in April. This was a substantial increase in recent months, especially after a drop of 12 million in the previous three months. This increase was well below the loss to be considered.

Employment increased by only 7 million in April, representing less than 1.8 million increase in the labor force. The employment increase also came after three consecutive months of declining employment, according to CMIE data, which also reveals that employment fell by 10 million, from 406 million in December 2021 to 396 million. in March 2022. In April, it hit 403 million, only to recover some of the fall.

Thus, the number of unemployed increased to 34.2 million, which includes the increase of 1.8 million (increase in the labor force minus expansion of employment) in the number of unemployed in April 2022.

April 2022 also saw a 2.3 million increase in the number of people who said they were unemployed and willing to work if work was made available to them, but were not actively looking for work. . Their number rose to 19.5 million in April 2022.

The agricultural sector lost 5.2 million jobs in April. Part of this decline in labor was due to the end of the rabi harvest season, the wilting wheat crop and the consequent decline in wheat production. Wheat production is expected to have fallen by 10-20% this year due to an intense heat wave. This is a very serious concern, and the Center has already banned wheat exports to avoid food insecurity in the country. Since the recent rise in CPI inflation was mainly due to higher food prices, the fall in wheat production indicates that its prices will increase in the near future, which could push prices higher. rice also due to a shift in demand. A further rise in inflation cannot therefore be ruled out.

The increase in employment in April was mainly in industry and services. Industry added 5.5 million jobs while services added 6.7 million. Within industry, 3 million jobs have been created in the manufacturing industry and nearly 4 million in construction. However, mining and utilities saw a sharp decline in employment which coincided with the coal shortage and resulting crisis in the power sector, again impacting the overall performance of business, industry and agriculture. In the manufacturing sector, it was heavy industries such as metals, chemicals and cement that created jobs. In the services sector, increases were recorded in the retail, hotel and restaurant industries.

A more serious area of ​​concern is that the increase in employment in industry and services was low quality jobs. The CMIE says it indicated the fact that the increase in employment largely concerned day laborers and small traders. This type of occupation experienced an increase of 7.9 million jobs. Entrepreneurs increase by 4 million and farmers decrease by 5.1 million. There was almost no change in salaried employment which was close to 79 million in March and April 2020, well below 87 million before the pandemic in 2019-20. A sharp increase of 12 million was reported in non-farm employment, two-thirds of which were daily wage laborers and petty traders.

In this scenario, the Modi government must urgently address the twin evils of inflation and unemployment by revising all of its policies that have fueled both. Alibi is bad defense and bad policy. Good governance with better policies can help reverse the trend. Relying on RBI intervention alone, such as raising interest rates, will not be enough. With manufacturing output in PEG terms remaining subdued, a further rise in interest rates could even slow economic growth, which would deteriorate inflation and the labor market. The jump in food price inflation to 8.38% for 17 months is too serious a problem in the face of worrying levels of unemployment and unemployment. (API Service)

The post Labor Force Crushed Between Inflation and Unemployment first appeared on IPA Newspack.

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