An Indian factory worker. As the country faces a power crisis, some firms may have to close. Photo: Twitter

India’s unemployment surged in December and it is now the highest since the Covid-19 lockdown was eased in June, according to a think-tank report.

It rose to 9.1% in December as against 6.5% in November, despite a rise in economic activity across most sectors, says Centre for Monitoring Indian Economy. The unemployment rate rose to 8.4% in the first week ended December 6, and then to 9.9% and 10.1% in the following two weeks before moderating to 9.5% in the last week, the data showed.

The report says that the rise in the unemployment rate was due to a significant number of workers returning to the labor market in search of jobs. The labor force increased from an estimated 421 million in November to 427 million in December. But the labor markets were not ready to absorb the additional six million job seekers, which left them largely unemployed.

During the month of November, the labor participation rate was down to 40%, from 40.7% in the preceding two months, but in December it rose to 40.6%. The lower rate in November reduced pressure in the labor market as it implied that fewer people were looking for jobs, the think-tank observed.

The country’s unemployment rate had reached a record high of 23.52% in April 2020, after the Narendra Modi government announced a countrywide lockdown on March 25 to contain the spread of Covid-19.

According to Mahesh Vyas, founder and MD of the think-tank, “Farming is the last resort of many who are rendered jobless. But, December is not the month in which it can absorb labor. This is the month when it sheds jobs. In each of the past five years since 2016, labor employed in farming in December has shrunk compared to November. In December 2019, the job loss from farming was 10 million.” The story in December 2020 was no different as the sector shed 9.8 million jobs, he added.

The number of unemployed individuals has surged to 38.7 million in December from 27.4 million in November, an increase of around 40%. Vyas noted that this has now placed the number of unemployed higher than pre-Covid lockdown days. The average count of unemployed in 2019-20 was 33.3 million.

The think-tank observed that this across-the-board deterioration in labor market raises concerns about recovery process. On the other hand the prices of household items are also rising at a faster rate, with the inflation hovering around 7% in recent months.