Workers assemble Royal Enfield motorcycles inside a factory in Tamil Nadu. Photo: AFP / Arun Sankar

The localized lockdowns by various states in India have led to a spike in the unemployment rate, which touched a 49-week high according to the Center for Monitoring Indian Economy, a private think tank. For the week ending May 16, it had risen sharply to 14.45% from 8.67% on May 9.

Rural areas have been the worst hit with unemployment touching a 50-week high for the week ended May 16. It nearly doubled to 14.34% from 7.29% in the preceding week. In urban areas, unemployment climbed to 14.71%, an increase of three percentage points from the week ended May 9.

Correspondingly, the country’s employment rate and labor force participation rate have come down significantly. The employment rate fell to 34.67% in the week ended May 16 from 37.72% a week before.

The country’s weekly unemployment rate has been rising steadily since March after the state governments started imposing curbs on the movement of people to contain the second wave of Covid-19. According to the think tank, the lockdowns could have stopped people from seeking employment and caused a fall in labor participation. It said the economy was not in a position to provide jobs to a large number of people.

The current high infection rate and lack of employment opportunities in urban clusters due to lockdowns have forced people to leave for their villages. But in rural pockets, there aren’t enough jobs.

On a monthly basis, the unemployment rate shot up from 6.5% in March to 7.97% in April, while the employment rate fell from 37.6% in March to 36.8% in April, according to the think tank’s data. During April, nearly 7.35 million people lost their jobs as the count of the employed fell from 398 million in March to 390.79 million in April. Out of the newly jobless, six million were from the agricultural sector as it is a lean month for farm employment.

India’s unemployment rose to a record 21.73% in May last year, when the government imposed a strict countrywide lockdown to tackle the first wave of Covid-19.

Demand shock

Earlier the central bank had observed that the second wave of the Covid-19 has had a bigger impact on aggregate demand than on aggregate supply. “The biggest toll of the second wave is in terms of a demand shock – loss of mobility, discretionary spending and employment, besides inventory accumulation, while the aggregate supply is less impacted,” the Reserve Bank of India said in its monthly bulletin.

However, it believes the economic slowdown was not as severe as a year ago. “The resurgence of Covid-19 has dented but not debilitated economic activity in the first half of Q1:2021/22,” the central bank said. Earlier in the month, the Reserve Bank unveiled fresh measures to help lenders tide over mounting bad loans and give some borrowers more time to repay their debts.

Covid toll

India’s coronavirus caseload has now crossed the 25 million mark. It’s the second country in the world after the United States to pass the dubious milestone. The death toll has now crossed 283,000, with the second wave recording a much higher number of daily fatalities than the first one. However, experts caution that even these numbers are a huge underestimate and the actual infections and deaths could be five to 10 times higher.

This time the rural areas have also been badly affected and the poor health infrastrucure in villages is proving to be a major liability in combating the virus. Hospitals across the country have had to turn patients away while mortuaries and crematoriums have been unable to cope with bodies piling up.

Although the official count of daily cases has begun to decline, experts have called for caution. On Monday, for the first time since April 21, the number of daily new cases dropped below 300,000.

Well-known virologist Dr Shahid Jameel told the Indian Express newspaper, “The virus is still circulating, it is still infecting, there are still a lot of susceptible people, so possibly that’s one explanation of why we are seeing such a wide plateau, and that also tells you that the other side of the peak is not going to be an easy climb down. It is possibly going to be a more prolonged, long-drawn-out process running possibly into July, maybe even into August. We’ll just have to keep an eye on it.”