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India's Unemployment Level to Worsen in 2017 and 2018
Jan 16, 2017

Let's take a look at some numbers on unemployment in India...and what's the likely trend over the next two years.

As per the latest United Nations labour report, India's unemployment level is set to rise through 2017 and 2018. In other words, job creation is expected to remain stagnant.

Today's chart presents the projected rise in unemployment over the next two years.

The report pegs the unemployment rate at 3.4% in 2017-18, similar to current levels. But there's high probability these numbers are understated. The unemployment rate reported by the BSE website puts the current unemployment rate at over 6%.

India has been struggling with jobless economic growth since over a decade. According to the latest Economic Survey, annual employment growth in India was only 0.5% during the period 2004-12, while labour force growth was 2.9%. This is in sharp contrast to India's gross domestic product (GDP) which has been growing at over 7%, on average, for quite a few years now.

Given this history, we're not sure if the projected unemployment rates are realistic and reflect the full impact of the demonetisation drive. While Finance Minister Arun Jaitley has rebuffed worries about job losses and losses to businesses on account of demonetisation, we believe there are solid reasons to think otherwise.

The note ban has hit India's informal economy very hard. And India's informal economy is is the largest employer. As per Bloomberg, the actual share of the informal sector in non-agricultural employment in India is 83.6%. Just to give you a sense, this number for China stands at just 32.6%.

Let us remind you that our prime minister had promised to create 100 million jobs by 2022. The Modi government is already halfway through its term and there are no signs that job creation is picking up.

The coming months will be crucial to evaluate the full impact of the demonetisation drive on the Indian economy, employment, and corporate earnings. We will keep monitoring the ground realities and keep you updated.

Data Source: United Nations International Labour Organisation

This Chart Of The Day was published in The 5 Minute WrapUp - Robotics and Automation: Opportunity in Crisis

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