UNEMPLOYMENT TO INCREASE & UNDEREMPLOYMENT TOO

The current rate of Urban unemployment stands at 10%. The number it is quite alarming and with moratorium coming to an end the same will amplify. The business is getting stopped as consumption has now become a cautious approach. A loss of job and pay cut finally impacts the corporates. This problem will continue until the whole of India gets out of COVID and vaccination is the solution. Partially unwinding of the economy will not be of much help. This will not bring jobs so easily and all investments plans are currently deferred. Vaccination will only resolve the ground reality problems.

The stock market can scale and climb high riding on funds diverted from the business but that is not the real economy. The end of Moratorium will now give a more clear direction how much deep is the impact of COVID 19 for an economy like India. The current state of the stock market and economic ground reality are completely on opposite sides of the road. The unemployment will grow more in coming days. The rural unemployment rate in August increased to 7.65% as against 6.66% recorded in July. Among states, Haryana is the worst hit, with a whopping 33.5% unemployment rate in August, followed by Tripura (27.9%). Whereas Karnataka (0.5%) and Odisha (1.4%) were the better-off states in absorbing labour forces in August, CMIE data showed.

The recently published International Labour Organisation report in collaboration with the Asian Development Bank says that 41 lakh youth have lost their jobs due to the pandemic and predicts that 61 lakh jobs will be lost by the end of the year. Another report by McKinsey Global Institute said that India needs to create 9 crore jobs by the end of 2030 for those who will be entering the workforce between 2023 and 2030. The data about unemployment — be it the CMIE surveys or the ILO-ADB report — only give us a partial picture.

 India’s gross domestic product (GDP) contracted by a historic 23.9% in the June quarter, and according to official data, some of the labour-intensive sectors contracted much higher in the April-June period. For example, the construction sector contracted by 50%, manufacturing by 39.3%, and trade, hotel and transport segment fell by 47%. Hence the real estate sector followed with IFRA where Private investments come into play has now become completely stalled. Trade, hotel and transport segment fell by 47% which means that vaccination is the only solution rather having any other speculation.

In reality, the pain is more in that sector which are ancillary to the above-mentioned sectors.  Steel, Cement, Capital Goods, Industrial Products all are facing more heat which remains un-accounted. The current flood situations have made life more painful for many states. Loss of life and loss of property, business and trade is now far from being able to be calculated. Food inflation is going to pick up in coming months giving less relief. Post monsoon and festive season consumption seem to slow and one of the poorest expected from us. We don’t think that H2 of FY-21 will be a bed of rose unless the vaccination comes and people get vaccinated. Since vaccination brings opening up of economy fully and not partially.

The biggest fear which stands now is the end of Moratorium. This will have severe consequences on the retail front where unemployment might spook up as many awaited for the last moment game change. The government is planning to get NREGA jobs in urban India so that they support the economy. Well, this will just make a living but less of surviving.

The pay scale is coming down for the urban class. There are cases where one was offered a sales job of Rs 4 lakh per annum to a graduate and he declined because he did not want a sales job. But now he has ended up taking a sales job for Rs 2.5 lakh per annum in the middle of June. This reflects pressure on the pay scale and growth of odd jobs. We will not be surprised if we find a sudden surge in cab drivers or other logistic support services coming up. We will not be surprised to find that jobs are getting underpaid and also being treated as daily wage earners. Majority of the population in India is employed in informal sectors, so capturing the level of unemployment accurately is a problem. More than that, one-third of them cannot afford to be unemployed.

Another interesting part is that many businesses are under uncertain waters. They are now facing a leadership crisis which creates more problem for those people working in those organisations.  This has been neglected and not taken into account. The time of getting another job and the gap in between will create more falls for the Indian GDP. The stock market can rise to an all-time high but simultaneously the economy is under deep cold water just like the image shown above.

Vaccination and proper unwinding and most importantly one need to understand where the money flows will create the jobs. You need vaccination since sales jobs only happen when you go out on street and meet people. Unless that happens business volumes will not pick up. Negotiations and other discussion and conversion cannot happen on zoom or on any other video chats. The government have to come forward with packages boosting infra investments. Only Indian Infrastructure investments and growth can absorb and save the unemployed.