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Sunday, April 18, 2021

Labour pains

Delhi survey signals continuing stress in labour markets. More policy support is needed

By: Editorial |
Updated: March 19, 2021 7:48:09 am
The extent of the labour market scarring during this period has been enormous.

Even as leading economic indicators seem to suggest that the Indian economy is recovering to pre-COVID levels, the stress in the labour market does not appear to be receding at an equal pace. In fact, going by the state of the labour market in Delhi, the distress in large sections of the labour force continues unabated. As reported in this paper, a Delhi government commissioned survey shows that even after economic activities began to gain traction with the easing of the lockdown restrictions, the unemployment rate stood at a steep 28.5 per cent in October-November 2020, as compared to 11.1 per cent in January-February, before the pandemic had hit. In the case of women, it had worsened from 25.6 per cent before the pandemic to 54.7 per cent in October-November. This is an alarming situation.

The extent of the labour market scarring during this period has been enormous. The periodic labour force survey released by the National Statistical Office had shown a sharp rise in the unemployment rate in urban areas during April-June 2020. The unemployment rate for those aged 15 years and above had risen to 20.8 per cent during April-June 2020, from 9.1 per cent during January-March 2020. Even the labour participation rate had fallen during this period, indicating that many workers simply opted out of the labour force. As economic activities gained traction in the months thereafter, at the national level, the unemployment rate is likely to have declined. But this recovery is unlikely to have been even across various segments of the labour force, and the situation in Delhi likely mirrors trends in other parts of the country.

In rural areas too, data on work demanded under MGNREGA suggests continuing labour market distress. In February the number of additional households demanding work was around 64 lakh, indicative of a continuing lack of absorptive capacity in rural areas. Yet during this period, when more government support was needed, many state governments cut back on spending. Data from PRS Legislative Research shows that the Delhi government also spent 9 per cent less than what it had budgeted for in 2020-21. Given the extent of the labour market scarring, far greater policy support is needed.

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