Despite India being one of the fastest growing economies, job growth has not been steady
Posted Date – 12:45 AM, Thu – 1/5/23
Despite India being one of the fastest growing economies, job growth has not been steady
Soaring unemployment, which hit 8.3 percent in December, should be on the minds of policymakers as India heads into the new year with hopes and expectations of an economic rebound. The unemployment rate in December was the highest in 16 months. According to data released by the Center for Monitoring the Indian Economy (CMIE), the unemployment rate fell to 6.4% in September – which was attributed to hiring during the holidays and festive period – but has since risen steadily, reaching 7.8% in October and 7.8% in November. 8%. Among the states, Haryana has a staggering 37.4% unemployment rate, while Rajasthan and Delhi stand at 28.5% and 20.8% respectively. This trend, combined with a warning from the International Monetary Fund that a third of the world will be hit by recession by 2023, makes for a sobering forecast for the immediate future. Although India is one of the fastest growing economies in the world, job growth has not been steady and exports have fallen. Micro, small and medium enterprises (MSMEs) have been struggling since 2016, as evidenced by the fact that unemployment was around 5% five years ago and now stands at 8.3%. As the global economy eyes a possible recession, India, as part of the globalized world order, may not be able to fully escape the spillover effects. Even before the outbreak of Covid-19, India was facing high inflation and its growth had fallen for eight consecutive quarters, unlike the developed world where inflation only spiraled after Covid-19 and the Russia-Ukraine war.
Hence, India’s journey back to normal growth will be a more difficult task. Overall, the picture doesn’t inspire much confidence – the country’s current account deficit hit a record high of $36.4 billion in the July-September quarter, the trade deficit with China has risen to a record and the rupee has suffered a bad In 2022, it trades at Rs 74.33 to Rs 82.72 against the US dollar, down 10.14%. All of this suggests that India may be headed for another difficult year. Global growth will slow to 2.7% in 2023 and 6% in 2021 from 3.2% last year, according to IMF forecasts. In this scenario, all central banks are moving into the realm of tightening lending rates, which will further slow global economic growth. In India, manufacturing continues to falter. Factory output, as measured by the Index of Industrial Production (IIP), fell to a 26-month low in the festive month of October. Core industry growth was just 0.1% in October, the slowest rate in 20 months. That led analysts to quickly cut their growth forecasts for India’s next fiscal year. Micro, small and medium-sized enterprises continue to struggle, reflecting deep divisions in the industrial recovery.
