The current employment crisis due to the COVID-19 lockdown will precipitate an unprecedented increase in poverty levels. This may set us back decades; most of the progress in poverty alleviation that India has made may be wiped out.

The most recent employment surveys in India were conducted by the Center for Monitoring Indian Economy (CMIE) in the week ended May 3 [1].

The unemployment rate has increased to 27.1%, highest on record. This increase is, in part, due to a surge in the labour participation rate from 35.4% in the week of April 21 to 36.2% in the week of May 3. It seems like many people entered the workforce in a bid to support themselves and their families but were unable to secure jobs.

Average employment in India during 2019 was 404 million. By March 2020, it dropped to 396 million. By the end of April 2020, employment had dropped to 282 million, a fall of 30% (over 2019).

An estimated 122 million jobs were lost in India in 2020. That is almost the entire population of Japan, and over 50% of the American labor force.
This is a colossal human tragedy.

Small traders and wage labourers, some of the most vulnerable members of our society, account for most of these job losses. Employment among these dropped from an average of 128 million in 2019 to 116 million in March and just 37 million in April 2020, a 71% decrease (over 2019).

Furthermore, 23% of large entrepreneurs and 21% of salaried employees have reported job losses (over 2019). The unemployment among large entrepreneurs is especially worrying because it means that a quarter of all job-creating large businesses will cease to exist post lockdown.

The vicious cycle doesn’t seem to end. Many of the unemployed seem to be turning to farmlands, as the number of persons employed in agriculture increased by 6 million in April 2020, a 5% increase (over 2019). As Mahesh Vyas correctly points out, this is mostly disguised unemployment. In 2018, agriculture contributed only 17-18% to the Indian GDP while employing a much larger chunk of the labor force [2]. Such an overburdened agricultural sector cannot absorb any more dependents.

The central government has recently increased the gross borrowing target for the current financial year by 54% to ₹12 lakh crore ($156 billion) [3]. This is a massive increase that (hopefully) reflects the government’s intent to spend during this time of crisis.

However, we need urgent action to support millions of families via measures like direct cash transfers and temporary ration cards for migrant workers. A back-of-the-envelope calculation suggests that only ₹3.75 lakh crore ($50 billion) is needed to send ₹5,000/month for a year to the bottom quartile of 250 million households in the country. For comparison, the average per capita income in India was ₹11,254/month at the end of 2019 [4].

We, the taxpayers, must bail out the working poor once, just like we have bailed out the stealing rich time and time again.

References

  1. Center for Monitoring Indian Economy: The jobs bloodbath of April 2020
  2. The Financial Express: India Economic Survey 2018
  3. Bloomberg Quint: India Raises FY21 Gross Borrowing Target To Rs 12 Lakh Crore
  4. Ministry of Statistics and Programme Implementation (MoSPI): National Income 2019