Few jobs and meagre pay for urban youth despite India’s economic growth

RAVI Verma was hired by a manufacturer of electrical parts early last year as India’s economy surged, but he was fired in November when the company lost several export orders. He has since remained unemployed and unable to pay back a 100,000 rupee (S$1,630) loan he took to buy a scooter.

He is among thousands of Indian workers who lost their jobs as the global slowdown hit exports. The post-pandemic re-entry of nearly 20 million workers into the job market has aggravated the problem.

The rising unemployment belies other indicators that India’s economy is undergoing a healthy rebound. Instead, the surge in people looking for work, many of them rural migrants, raises concerns about consumption and longer-term growth prospects.

“I have been looking for a job for two months,” Verma said, looking up from a Hindi-language newspaper he was reading at a community centre close to his one-room home in Faridabad, an industrial town in the northern state of Haryana.

“I face a risk of loan default if I don’t get a job soon.”

Data compiled by the Centre for Monitoring Indian Economy showed that the urban unemployment rate swelled to 10.1 per cent in December, although the total number of jobs touched a pre-pandemic level of 410 million.

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The figures also showed that urban unemployment spiked during the Covid pandemic years, largely because of lockdowns. But before those, the level hovered between 6 per cent and 7 per cent. The highest rate was 11.2 per cent, recorded in August 2016.

“Nearly 37 million workers were looking for work in December,” said Mahesh Vyas, managing director of the Mumbai-based think tank. 

That was the highest number of unemployed people since June 2021, the height of the pandemic, he said, adding that the return of female workers and the job-market entry of rural youths drove up the labour-force participation rate.

Globally, India remains a “bright spot” amid growing fears of a recession in the United States and Europe, and the economy is projected to grow 6 per cent in the next financial year, which starts in April. The forecast for the current fiscal year is 7 per cent.

But hiring in export-dependent manufacturing sectors such as engineering, textile and software has slowed as companies faced a decline in overseas demand. Exports of manufactured goods have been falling, and in December were 12.2 per cent down year on year.

For Prime Minister Narendra Modi, unemployment is emerging as a major challenge alongside high inflation. This could prove costly in state elections later this year and a general election in mid-2024, analysts said.

“The unemployment problem has become acute,” said Arun Kumar, an economist and former professor at Delhi’s Jawaharlal Nehru University. He said small businesses, which employ nearly 90 per cent of India’s workers, were shutting down while large companies and services led growth.

Hiring in IT, software, education and retail fell as much as 28 per cent in December from a year ago, data compiled by Naukri, India’s biggest recruitment consultancy, showed. However, hiring remained resilient in the insurance, banking and auto sectors.

Naukri said it saw a near-14 per cent rise in job applicants to 7.6 million in 2022 from a year earlier.

Based on the latest government data, the number of workers joining firms with social-security benefits fell for the third month in a row to 0.7 million in October. Meanwhile, the urban labour-force participation rate rose to 47.9 per cent in the quarter ended September, up 1 per cent from a year earlier.

Many young workers said they preferred to wait for skilled jobs they have been trained for, instead of accepting badly-paid menial jobs on offer.

This has pushed up the unemployment in some states – such as Haryana, Rajasthan and Bihar – to record levels.

In the northern state of Haryana, a manufacturing hub where global companies like Maruti Suzuki are located, the unemployment rate shot up to a historic high of 37.4 per cent in December. It was around 20 per cent before the pandemic.

“I need at least a 20,000-rupee salary after three years of a course in electronics,” said Anjali Yadav, a student at a polytechnic college in Faridabad.

Factories and firms there were not ready to pay more than 10,000 to 12,000 rupees a month, said Mithlesh Kumar, a trade union leader.

Another jobseeker, 22-year-old Uttam Shaili, said that after a two-year course to become an electronics mechanic, he would rather “stay at home” than accept a low-paying job.

Economists said the worsening employment scenario could affect consumer demand, drag private investments and hurt growth prospects.

“The loss of jobs in IT and some manufacturing sectors has hit consumer sentiment, and would hit household spending and business investments,” said Sunil Sinha, an economist at India Ratings, an arm of Fitch Ratings.

He said there was a growing fear of further job losses as companies faced sluggish demand in the domestic and overseas markets.

Rahul Gandhi, the leader of the main opposition party, has focused on unemployment, high prices and what he said are Modi’s divisive politics in a cross-country rally.

Gopal Krishna Agarwal, the economic affairs spokesman of Modi’s Bharatiya Janata Party, said that instead of offering “helicopter money” to unemployed youth, the government has followed a policy of generating jobs by pushing economic growth and supporting manufacturing.

“The economy is on a recovery path and inflation has moderated,” he said. “The annual budget next month will continue the policy of stimulating the economy through incentives for more sectors.”

Critics said this may not work in the short term.

Incentives given to a few corporates were not creating enough jobs, said Kumar, the economist, adding that the economy was in a “K-shaped” recovery: the growth in big companies was being accompanied by declines in the numbers of small businesses and jobs. REUTERS