Stimulus to key sectors will help create new jobs
Over 22 mn jobs lost in last 3 months, of which 15 mn in May alone
The urban jobless rate rose to 18% in the week ending May 30, the highest in the past year. The rural unemployment rate for the week, on the other hand, was lower at 9.6%. The CMIE survey shows that employment levels fell from 390.8 million in April to 375.5 million in May
The spectre of huge job losses has arisen yet again after the second Covid surge over the last two months. In February this year, the unemployment rate was on the upswing at 6.89 per cent and it was expected the revival of commerce and industry would lead to more job openings. Quite the reverse has happened owing to the unexpected steep rise of infections many parts of the country from the end of March onwards. April and May have been virtual lockdown months in key industrialised regions like Maharashtra, Gujarat, Karnataka and Delhi.
The result has been the laying off of contract labour in large numbers while many migrant workers again moved back to their homes in rural areas. These phenomena led to factories and establishments in the national capital region either remaining closed or opening only partially now that factories and construction sites have been allowed to resume operations.
Latest data on unemployment shows the worsening scenario on the jobs front. According to the Centre for Monitoring the Indian Economy (CMIE) the situation has been deteriorating during April and May this year. It found that job loss numbers have risen to over 22 million during this period, of which 15 million were lost in May alone.
The urban jobless rate also rose to 18 per cent in the week ending May 30, the highest in the past year. The rural unemployment rate for the week, on the other hand, was lower at 9.6 per cent. The CMIE survey shows that employment levels fell from 390.8 million in April to 375. 5 million in May. The consumer pyramid household survey also showed that the impact of job loss was largely on daily wage workers.
In more bad news for the jobs outlook, traders' associations are warning there could be large scale retrenchments if retail markets are not allowed to open soon and function normally. The Confederation of All India Traders (CAIT) says small and large retailers have suffered losses up to Rs 15 lakh crore over the past two months. It estimates that traders could possibly affect 30 per cent job cuts if the existing curbs continue without providing any financial assistance to the retail community. This can be the only recourse, it says, as traders have been forced to cut back on establishment expenses and overheads to meet recurring monthly expenditure. This would, in turn, lead to even more job losses in the economy.
The prediction assumes even greater significance since the trader's organization estimates that there are eight crore small businesses engaged in trading activities in the country. These provide direct employment to nearly 60 crore people, it states.
The issue of job losses thus needs to be taken seriously by the government as it formulates policies in the wake of mobility curbs being relaxed over the next two months. There is no doubt that many of the workers who had retreated to villages, will be returning as commercial and industrial activities get back to normal. Even so, there are innumerable persons who have faced salary cuts or are working without pay temporarily. These employees may not have technically lost jobs, but they have lost income which is even more difficult at a time when medical expenses have gone up drastically.
In this backdrop, it seems strange that Finance Minister Nirmala Sitharaman has recently stated there is no need for a stimulus right now since the budget measures have not yet kicked in. It is strange simply because it must be recognized that the situation has changed radically since the time of budget presentation in February. The pandemic had then appeared to be winding down, numbers of daily infections were extremely low.
Vaccinations had also started and there was optimism that this would enable a final end to the scourge of the Covid virus. The scenario, however, changed rapidly in April as the second wave hit the country. Regional lockdowns in many states have once again affected trade and industry adversely as well as employment levels. In this changed scenario, the government needs to revisit earlier policies and provide a further stimulus to the economy.
Just last week there were welcome reports that Sitharaman was considering a special package for sectors hit the hardest over the past year. These included travel and tourism, hospitality and aviation. But it now appears the government is waiting for more time before providing any further financial support to industries in distress. The chief economic advisor has, in fact, suggested that the overall economic impact of the second wave is not likely to be very large. This seems to be a rather upbeat assessment at a time when all investment and rating agencies have downgraded India's growth projections for 2021-22. Even the State-owned SBI has lowered its prediction from 11 per cent to 7.9 per cent. Barclays and ICRA have downgraded their estimates from 11 and 10.5 per cent to 9.2 and 9 per cent respectively.
It is thus time for the government to take a more realistic view of the economic outlook for the current fiscal. Even if growth picks up, people at the bottom of the pyramid are facing acute deprivation due to job losses. Some support must be given in the form of direct benefit transfers to alleviate their suffering. In addition, some well formulated packages must be provided to key sectors in order to revive job growth. This is the least the government can do to bolster the economy at this time of extreme crisis.
