Economy and jobs suffered the impact of the pandemic over the past two years. While the Indian economy has managed to bounce back beyond the pre-Covid levels, the job market has not been equally blessed. While economy and labour have moved divergently in opposite directions, this divergence could put 4.9 million at the risk of being unemployed in the current fiscal, says a report by the Centre for Monitoring Indian Economy.
Real GDP is estimated to have fallen by 6.6% in 2020-21 and it bounced by 8.95% in 2021-22. In absolute terms, the GDP was ₹147.7 lakh crore in 2021-22, compared to ₹145.2 lakh crore in 2019-20, before the pandemic.
Real GDP in 2021-22 was therefore about 1.7% higher in constant prices than it was before the pandemic was full-blown, the think tank points out. Meanwhile, employment in 2021-22 at 401.8 million was 1.7% lower than its level of 408.9 million in the last pre-pandemic year of 2019-20.
As jobs declined, the number of unemployed increased from 32.9 million in 2019-20 to 33.3 million in 2021-22. But this rise is not in line with the fall in employment.
“While employment fell by 7.1 million, the unemployed swelled by only 0.4 million. The remaining 6.7 million who lost their jobs in the aftermath of the pandemic have left the labour force, most probably in dejection over the lack of availability of employment opportunities,” CMIE says.
The labour force shrunk by 1.5%, from 441.8 million in 2019-20 to 435.2 million in 2021-22, it notes.
This divergence in real GDP and employment growth may continue during the current fiscal too, although at a smaller scale. While the Indian economy grows at 7.5% in the financial year 2022-23 — the median value among professional forecasters, employment is expected to grow at merely 1.5%, growing from 401.8 million in 2021-22 to 407.8 million in 2022-23, CMIE estimates on the basis of employment elasticity.
“This implies that the 7.5% growth in real GDP could help generate 6 million additional jobs in 2022-23,” the think tank says.
This is grossly insufficient considering the required employment levels. The population dynamics are expected to add 25 million to the working age population in FY23. Keeping the labour force participation constant at 40.1% in FY23 would mean 10.5 million new additions to the labour force.
“This then means that the 7.5 per cent expected growth in real GDP is likely to add 4.9 million to the current stock of the unemployed. The stock of unemployed in 2021-22 was 33.3 million. This could rise to 38.2 million. This further implies an unemployment rate of 8.6% in 2022-23,” notes CMIE.
The projected increase in unemployment and the unemployment rate could be the largest, the report adds. At 38.2 million, the count of the unemployed would be the largest in any year, even the pandemic year of 2020-21. The unemployment rate similarly would be the largest recorded in any year so far.
The employment rate may drop to 36.7% from 37% in 2021-22. The 407.8 million employment expected in 2022-23 would still be around 1.1 million less than it was in 2019-20, which was 408.9 million.
