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Steep rise in unemployment rates in India a concern, say experts

At 8.30 pc, unemployment rate was at a16-month high in December


Experts have flagged concerns after data from the Centre for Monitoring Indian Economy (CMIE) showed that the unemployment rate in the country has gone up to 8.30 per cent in December, from 8 per cent in the previous month—a 16-month high. The data revealed that the urban unemployment rate rose to 10.09 per cent in December 2022 from 8.96 per cent in the previous month. There was a decline in the rural unemployment rate which went down to 7.44 per cent from 7.55 per cent.

According to CMIE data, in December 2022, the unemployment rate rose to 37.4 per cent in Haryana, followed by 28.5 per cent rise in Rajasthan and 20.8 per cent increase in Delhi.

Experts noted that this is not good news going into 2023. “All the talk about India taking over the spot from China does not seem to add up. On one side, the GST collections are growing, but it does not seem to be showing up in people getting jobs, which does not seem to be fine. However, I believe there should be a single-minded focus on growing GDP, and if that happens consistently, we should have unemployment go down as well. However, if you go a little deeper, urban employment has increased and this could be for a variety of reasons, from increased use of automation to slowing growth in the new economy jobs. There have been multiple reports about this decade belonging to India, and taking a cue from that, the current phenomenon should be temporary,” remarked Sathya Pramod, CEO, Kayess Square Consulting Private Limited and former CFO of Tally Solutions.

According to experts, it is a matter of concern that the recent increase in the employment rate cannot be attributed to the seasonal influx and outflow of labour in the agricultural sector. However, at the same time, it is interesting to observe that while employment is high in rural areas, it is low in metropolitan areas. “Women were particularly hard hit by the pandemic's effects on employment, and these effects were still being felt in 2022. In 2023, jobs are expected to decrease by 20 per cent. This drop in IT recruitment is projected to have a significant impact on college placements, recruiting, and entry-level positions. As work-from-home arrangements become increasingly widespread, non-metro locations are becoming a hotbed for digital skills. Rather than candidates traveling to cities in search of work, jobs are increasingly coming their way. Furthermore, 1.5 lakh professionals have enhanced their abilities in digital-related technologies, which substantially adds to expanded work opportunities,” Krishna Kumar, CEO and founder, Learnbay, told THE WEEK.

Kumar feels that because of higher investments and improved technology, the need for contract labour is predicted to climb by up to 21 per cent. IT services and product development organisations are expected to account for up to 70 per cent of contract labour. “While the recession is not likely to have a direct impact on India, due to the origins of big IT businesses in the West, significant players in the field have been instructed to reduce recruiting. Aside from the recruiting slowdown, Indian tech firms have seen a greater likelihood of turnover rates. The goal of delaying recruiting has been to increase cost efficiency by lowering pay raises and variable rewards. Many companies have also opted to slow down on recruiting replacements. Several businesses have now moved their attention to staff reskilling. I believe that in the coming years, individuals will continue to demand a method of learning that is tailored to their requirements. A personalised, individualised approach, for example, will remain critical for people with less confidence and lesser digital abilities. They would rather study in person, through e-learning, over the phone, or from individuals they know, such as personalised training professionals,” said Kumar.

Experts observed that in 2022 some sectors like travel, tourism, hospitality, financial services, consumer goods and automotive were reviving and performing better post-pandemic, and significant growth has been noticed in the telecom sector, post 5G rollout. “Such sectors will continue to perform well this year as well if there is no new wave of Covid. However, tech-driven startups and tech companies suffered largely due to funding winter and many resorted to layoffs. Recession fears and slowdown in the global economy have also impacted the IT and outsourcing sector, which resulted in a slow pace of hiring in this sector. These factors may have led to an increase in the unemployment rate. This cold winter will not continue in 2023 as we anticipate the hiring to pick up slowly with the world reaching a stable state. This is likely to boost the hiring in IT, outsourcing and services sectors as well,” said Aditya Narayan Mishra, MD and CEO of CIEL HR.

A few experts also felt that this may only remain a temporary phenomenon and nothing major may happen in the long run. “Though the unemployment rate has increased in December 2022, it is not a serious cause of concern in India. Given the turbulence in the economy across the globe, India remains as one of the countries with a healthy GDP growth and consequentially will benefit in employment generation as well. A fluctuating rate of employment over the last two years need not be taken as a pointer for worry,” observed Subramanyam Sreenivasaiah, CEO at Ascent HR. 

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