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

India’s employment situation has again worsened in August, reversing some of the gains made in the preceding month.

According to the Center for Monitoring Indian Economy, nearly 1.5 million people in both formal and informal sectors lost their jobs in August. The number of employed fell from 399.38 million in July to 397.78 million in August, and both urban and rural areas have been affected.

India’s urban unemployment rose almost 1.5 percentage points to 9.78% in August. It was at 8.3% in July, 10.07% in June, 14.73% in May, and 9.78% in April.

Rural areas also suffered due to lull in agricultural activity and unemployment rose 1.3 percentage points to 7.64% in August against 6.34% in July.

The national unemployment rate rose to 8.3% in August from 6.95% in July. At least eight states, including Haryana and Rajasthan, have reported double-digit unemployment rates.

Although most parts of the country have opened up following lockdowns, the job market has yet to pick up. The labor force participation rate climbed marginally in August, indicating that a larger pool of people was willing to get into the job market. The latest data showed that 36 million people were actively looking for work, compared with around 30 million in July.

India saw an addition of 16 million jobs in July, but the report points out that they were of poor quality. Most of the new hires were employed as daily wage workers in the agriculture sector. On the other hand, the number of salaried jobs, which are of better quality, fell by 3.2 million in July.

Experts point out that unless the formal sectors show promise, recovery of good quality jobs will take time. They expect the forthcoming festive season to bring in some jobs.

Manufacturing down

Meanwhile, India’s manufacturing recovery also lost momentum in August according to a survey. IHS Markit reported that the Purchasing Managers’ Index declined to 52.3, from July’s 55.3 owing to weakness in demand and high input prices. A score below 50 indicates a contraction.

This decline had also led to a pause in the manufacturing sector’s hiring, which had resumed in July after shedding jobs for nearly 15 months.

The cost burden of the manufacturers has now been rising for 13 straight months, and raw material scarcity and transportation problems were cited as reasons.