India's unemployment rate 8.2%, highest in 11 months, greater unemployment 15%: Top consultant CMIE

By Jag Jivan*
One of India's premier independent consultants, Centre for Monitoring Indian Economy (CMIE), has estimated that India's urban unemployment rate in the week ended October 8 is 8.2 per cent, the highest in the past 11 months. This has happened, says CMIE, despite the fact that the "urban labour participation rate has recovered to its level during the last December-January period."

Explains CMIE, "The rise in labour participation rate and the unemployment rate shows that labour is returning back to the labour markets but it isn’t finding jobs", adding, "The fall in labour participation rate began soon after demonetisation. We are probably seeing a recovery after about a year."
Based on surveys carried out jointly with the Bombay Stock Exchange (BSE), the CMIE believes, it's data, which reflected in its about-185-page statistical volume, "can help us understand employment and unemployment in India through the demonetisation period, and going ahead, through the Goods and Services Tax (GST)."
The volume, which is produced at the interval of each quarter, "provide estimates of the labour force, labour participation rate, employed and unemployed persons and the unemployment rate", it adds.
Pointing out that the methodology used by the volume shows a "useful set of additional indicators" about "greater labour force and the greater unemployment rate", CMIE regrets, a person is considered unemployed only if s/he is "willing to work and is actively looking for a job but, is unable to get a job."
Carried out by Mahesh Vyas, Managing Director and CEO, the CMIE analysis of the data says, while calculating unemployment, "three conditions must be fulfilled -- the person must be unemployed, must be willing to work and, must be actively looking for a job." It adds, "The last criterion implies applying for jobs, appearing for interviews, making enquiries for jobs, standing in queues for jobs, etc."

Mahesh Vyas

However, unfortunately, CMIE underlines, "If an unemployed person is willing to work but is not actively looking for a job then s/he is not counted as an unemployed person for calculating the unemployment rate." Calling it an "international practice and this is what we follow", the CMIE says, if one considers as the unemployed those who are "willing to work but are not actively looking for a job", the actual unemployment today would around 15 per cent.
"During 2016, the unemployment rate was 8.2 per cent", equal to what it is today, "but, the greater unemployment rate was 15 per cent", says CMIE, adding, actually, "the labour force is simply the sum of the unemployed as defined above and the employed. And, the unemployment rate is the ratio of the unemployed to the labour force."
Answering the question why "should an unemployed person who is willing to work not be looking for a job?", CMIE says, "Possibly, because such a person does not believe that a job is available. Maybe, there is a seasonality in seeking jobs. Or, there could be social constraints that refrain a person from seeking a job."
CMIE insists, "While the reasons for such behavior could be interesting, it is perhaps, very important to know the size of such persons who are willing to work but do not actively look for jobs."
" The sum of unemployed who are willing to work and are actively looking for a job and, unemployed who are willing but not actively looking for a job is the greater unemployed", CMIE says, adding, "Interestingly, the unemployed who are willing to work but are not actively looking for a job was about 70 per cent of the size of the unemployed who are willing and looking for a job."

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*Freelance writer

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