Unemployment rate jumps 16-month high to 8.3% in Dec

By: Anshul Vipat

India's jobless rate increased to 8.30% in December, the highest level in 16 months, from 8.00% in November

Unemployment rate in India rose to 8.30 per cent in December 2022, the highest in 16 months, according to data from Centre for Monitoring Indian Economy (CMIE). It was 8 per cent in the month of November. While urban unemployment rose to 10.09 per cent in December, from 8.96 per cent in November, rural unemployment moved to 7.44% from 7.55%, the data revealed.

Over the past 12 months, the unemployment rate has averaged at about 7.4 per cent within a 6.4 - 8.3 per cent range. The 8 per cent unemployment rate in November is therefore on the higher side of the recent levels of the unemployment rate. The labour participation rate (LPR) settled at 39.6 per cent in November 2022. This is close to the average LPR during the past 12 months. The LPR had reached a low of 38.8 per cent in June and it has been improving since then. But, it is still lower than the 40 per cent it averaged during 2020-21 and 2021-22. 

The rise in unemployment comes amid a demand slowdown following a robust festive season. The Indian economy is seen slowing as tighter interest rates dampen demand for goods and services, and exports witness a fall. Borrowing costs climbed by 225 basis points last year as inflation stayed above the central bank’s target level for most of 2022.

Most of the jobs added in November were in rural India and the increase in the unemployed in the month was essentially in urban India. Employment increased in rural India by a substantial 4.3 million. This helped improve the employment rate in the hinterlands from 37 per cent in October to 37.5 per cent in November. Unemployment, on the other hand, declined in rural India by 1.2 million. This in turn helped improve the unemployment rate as it fell from 8 per cent to 7.6 per cent. The increase in employment in rural India is largely in the form of farmers and agricultural labourers. The increase is concentrated in crop cultivation implying a large incremental deployment of labour into rabi crop sowing activities.

Employment increased in urban India by 1.1 million. This implies a 0.9 per cent increase over the previous month. Growth in employment in rural India in comparison was 1.6 per cent. Rural India employs more and grew more than urban India and therefore was the bigger contributor to the increase in employment during November. Its contribution was 79 per cent.

The data released on Sunday also showed that the unemployment rate was the highest in Haryana at 37.4%, followed by Rajasthan at 28.5%, Delhi at 20.8%, and Bihar at 19.1%. Meanwhile, Odisha showed the least unemployment rate at 0.9%, followed by Gujarat at 2.3%, Karnataka at 2.5%, Meghalaya at 2.7% and Maharashtra at 3.1%.

A rise in joblessness is particularly tricky for the government in light of the busy political calendar this year, with elections due to be held in key states, including Karnataka, Madhya Pradesh, Rajasthan and Telangana. The general elections are due in the summer of 2024, in which Prime Minister Narendra Modi is expected to seek a third term in power.