The recovery in informal sector jobs has offset the loss in the formal employment in urban India.
The high unemployment rate in urban India subsided in the week ending 6 September 2020, falling to the lowest level since the lockdown began. The urban unemployment rate fell to 8.32 per cent in the week, according to the Centre for Monitoring Indian Economy. Interestingly, the employment situation in urban India has improved despite a severe loss of salaried jobs. An estimated 21 million salaried employees have lost their jobs by the end of August. There were 86 million salaried jobs in India during 2019-20, which fell to 65 million in August 2020. The loss in salaried jobs was the biggest among all types of employment.
So, what pushed urban employment?
Urban India’s growth story in terms of jobs is led by a significant rise in informal jobs. Street vendors, hawkers, urban farmers, etc have taken the front seat in the recovery process of the urban areas. “Salaried jobs hold a small proportion of urban India’s overall employment. Hence, the recovery in informal sector jobs has offset the loss in the formal employment,” Prabhakar Singh, Head-Institutional Business, told Financial Express Online. However, the impact of the salaried job loss takes some time to get absorbed into the system and it may show severe effects in the near-term, he added.
All salaried jobs put together account for 21 to 22 per cent of total employment in India. There are many more farmers and even more daily wage labourers than salaried jobs. Farmers and daily wage earners together account for nearly two-thirds of the Indian working population.
Can urban India once again become the growth engine of Indian economy?
While urban India was struggling with the disruptions in businesses and industries, the hinterlands were believed to be driving India’s growth towards recovery by July. However, in the month of August, the hinterlands faced two major roadblocks — a fall in the number of MGNREGA workers and weak farm activities. The CMIE data had shown that the employment in farming fell by 0.5 million in August and job losses in the rural non-farming sectors were to the tune of 3.2 million.
Meanwhile, the labour force expanded in urban India but shrunk in rural India. Also, the employment and employment rate expanded in towns and shrunk in the country-side. While the unemployment rate rose in both regions, it rose more in rural India.