India’s labour indicator worsens as the economy suffers from Lockdown. The job crisis begins in India as the unemployment rate increases by 23% amid lockdown.
CMIE Report on Unemployment
A survey conducted by the Center for Monitoring Indian Economy Pvt Ltd (CIME) revealed that the unemployment rate has spiked to 23% after the lockdown came into effect in the last week of March. Mahesh Vyas, the chief executive officer of CMIE, stated that the unemployment rate was 23.4 % for the week ended 5th April 2020. Further, he noted that the labour statistics are worrisome. However, he said that the results are subject to the usual sampling errors. Therefore, it will be wise to focus on certainty rather than the magnitude of the movements.
Unemployment Rate Highest Since 2016
The private firm conducted telephonic interviews for carrying out the survey and took a sample size of 9,429 observations. CIME reported that the pandemic has added to the woes of the economic slowdown in India. Consequently, the employment rate has fallen to an unprecedentedly low level of 38.2% in March. The situation continued to worsen as the country proceeded into lockdown. The unemployment rate recorded in the last week of March has been the highest since September 2016.
Unemployment Rate in Urban and Rural Areas
As the lockdown suspended agricultural activities, the unemployment rate in rural areas increased to 13.08%. Also, the unemployment rate in urban areas has reached to 14.53%. Further, CIME reported that the number of employed fell from 411 million to 396 million, whereas the unemployed people increased from 32 million to 38 million.
Companies Go for Layoffs- Unemployment Rate Will Rise
M Rangaswami, a well-known venture capitalist and entrepreneur, stated that while big giants like Google and Facebook will follow the freeze hiring approach, small IT companies will surely go for lay-off and pay cuts. Though the companies have made sure that they have enough cash for 18 to 24 months, these are likely to cut their cost as the current situation is not suitable for raising money. Consequently, there will be an increase in unemployment levels over the next month.
Businesses Suffer
Zee entertainment and Sun TV witnessed a decline of 28% and 20% in ad revenues from January to March. Also, technology majors like Tata Consultancy Services (TCS), Infosys, HCL Technologies have decreased their hiring by 9% in March. Besides, OYO Hotels and Homes has cut down its workforce by 16% (4000 employees) in its domestic and international offices. While Ola laid off 8% of its workforce, Quickr has let go of 900 employees during the lockdown. Further, the Retailers Association of India (RAI) reported that job loss of around 40% of retail sector employees. Experts believe that the pandemic will lead to more unemployed youth in the country as new jobs dry up and existing ones vanish.
PM’s Advice
While many billionaires have done their part by contributing to the PM-CARE fund, the country needs the cooperation of small businesses. Citing the unemployment rate, PM Modi asked the industrial leaders not to fire workers in this troubling time. Also, the Karnataka government urged the private sectors, not to handover pink slips in the lowdown. Besides, the Maharashtra Labour department advised public and private sectors, not to layoff workers or cut wages during the lockdown.
Follow USA Example of Payroll Protection
The looming fear of pay cuts and job loss may cause another incident of civil unrest, which India cannot afford. The government can provide help to the employers by following some of the US Administration’s scheme-of Payroll protection. According to the scheme, the US government will write off loans of businesses that will keep their employees on payroll for eight weeks. The government of India can incentivise the companies with cheap loans post the lockdown period if the number of employees remains the same as it was in March before the lockdown. Also, the government can ask banks to provide zero interest rate loans to companies for keeping jobs intact.
With a small economic aid package, the businesses will go for cost-cutting, meaning more layoffs and pay cuts. In all, the shutdown has put temporary shutters on several companies which may turn permanent, increasing the unemployment rate.