India’s unemployment rate climbed to a four-month high, the latest data showed, as there were more people joining the workforce compared to available jobs in Asia’s third largest economy.
Creating enough jobs for India’s burgeoning population will remain a key challenge for Prime Minister Narendra Modi’s government, especially as he looks to a third term in office in national elections due next summer.
The unemployment rate increased owing to a rise in the labor participation rate,” Mahesh Vyas, head of CMIE, wrote in a column for the Business Standard newspaper.
India’s labor force increased by 25.5 million people to 467.6 million in April, possibly due to “increase in optimism about finding employment,” taking the labour participation rate to 41.98% in April, the highest in three years, he added.
About 87% of this expanded labor force were able to secure employment as an additional 22.1 million jobs were created in the month. The employment rate rose to 38.57% in April, highest since March 2020.
“The notable rise in LPR and employment rate in India in the month of April reflects an increase in willingness among people to seek employment,” Vyas said.
More jobs were created in rural areas than in urban areas, CMIE data showed. Around 94.6% of the people who joined the rural labor force became employed, while only 54.8% of seekers in urban areas found new jobs. CMIE’s finding corroborates with the fact that demand for government’s job guarantee program is falling in rural areas.
In its April bulletin, the Reserve Bank of India said demand for work under the Mahatma Gandhi National Rural Employment Guarantee Act has been moderating since January on the back of better winter crop sowing and a recovery in informal sector employment.
Rising labor force participation is the last leg of economic normalization since the pandemic, according to Gaurav Kapur, Chief Economist of IndusInd Bank. “It is a sign that normalization is happening, or has already gone through,” he added.
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