Inflation and unemployment take centre stage

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IANS | 08 Oct, 2022
Inflation and unemployment have taken centre stage in the political discourse as the Indian economy grapples with multiple challenges in a tumultuous world.

In a surprising commentary, Rashtriya Swayamsevak Sangh's Sahkaryavah, Dattatreya Hosabale recently expressed concern over the ever-increasing income inequality, unemployment and poverty as "demon-like challenges" which have to be ended.

Hosabale said that in the last 75 years, India has recorded remarkable achievements in many fields, but the number of poverty-stricken, unemployment rate and income inequality in the country still remains a challenge like "demons" and it is very important to end it.

Hosabale said that even today 200 million people in the country are below the poverty line. The per capita income of 23 crore people of the country is less than Rs 375.

He stated that the unemployment rate in the country is 7.6 per cent and four crore people are unemployed. Describing the unemployment situation in both the rural and urban areas of the country as alarming, the senior Sangh leader said that 22 crore people are unemployed in the rural areas while 18 crore people are unemployed in the urban areas.

The World Bank in a recent report said that inflation in South Asia, caused by elevated global food and energy prices and trade restrictions that worsened food insecurity in the region, is expected to rise to 9.2 percent this year before gradually subsiding. The resulting squeeze on real income is severe, particularly for the region's poor who spend a large share of their income on food.

Amar Ranu, Head, investment products & Advisory, Anand Rathi Shares & Stock Brokers, said India's unemployment rate fell to 6.43 per cent in September 2022, its lowest since August 2018 after touching an all time high of 8.28 per cent in August 2022 as per CMIE. Within the overall data, the urban and rural unemployment fell to 7.7 per cent and 5.84 per cent respectively. The strong employment growth rate is also a reflection of the strong inherent strength of the Indian economy, be it urban or rural centres. A strong demand due to the festive season, demand in the services sector along with steady monsoon rains also likely boosted the employment opportunities especially for gig workers. The Infra led boom which also aids other secondary sectors is also likely to keep the employment momentum strong - e.g. there is a strong demand for real estate which is leading to demand in other related sectors too, thus, creating employment opportunities.

On inflation, Ranu said that post Covid, the government took a targeted approach in helping the worst affected sectors and the rural population unlike its world peers which went on printing an unlimited amount of liquidity in the economy which led to uncontrolled inflation; in a few developed countries, the inflation has been at a multi decadal high.

On the contrary, though inflation is likely to be above the upper tolerance level of 6 per cent through the first three quarters of FY22-23, the calibrated policy action will keep the inflation expectations anchored, restrain the broadening of price measures and pre-empt second round effects. The volatile geopolitical situation, global financial market volatility and supply disruptions may be an overall dampener if they go awry. The consumer and business optimism supported by the festive season demand is likely to hold up domestic economic activity well. However, in the medium term, inflation is expected to be contained within the tolerance level of the RBI.

The CMIE said in a statement that labour market conditions improved substantially in India in September 2022. The unemployment rate dropped from 8.3 per cent in August to 6.4 per cent. This is the lowest unemployment rate recorded by India in the past four years since August 2018. This was not the only improvement.

Stress on the employment front dropped on many other counts. The fall in the unemployment rate was achieved along with an increase in the labour participation rate (LPR). The LPR inched up from 39.24 per cent in August to 39.32 per cent in September. As result of the increase in the LPR and a simultaneous fall in the unemployment rate, the employment rate rose from 35.99 per cent in August to 36.79 per cent in September 2022. The employment rate, which is the proportion of the population of 15 years or more that is employed, is the most important economic indicator, CMIE said.

Labour market conditions improved across rural and urban regions. But, it was rural India that made the bigger contribution to the turnaround in labour conditions. The rural labour participation rate improved by 0.29 percentage points. It rose from 40.39 per cent in August to 40.68 per cent. In June 2022, the rural LPR had fallen below 40 per cent for the first time since the pandemic stricken month of April 2020. It has recovered in each month since then and the performance in September indicates a continuation of that process.