COVID: Indian economy struggles with widespread unemployment and inflation | Asia | An in-depth look at news from across the continent | DW


A railroad jobs recruitment campaign in India’s northern states of Bihar and Uttar Pradesh turned violent last week as groups protesting mass unemployment blocked roads and railways.

Protester Navin Kumar Jha, 28, told DW he was among 10 million applicants for around 36,000 jobs in total.

“Authorities eventually had to suspend recruitment. We wanted to draw attention to the worsening unemployment in the country,” Jha said.

The large-scale unemployment riots are a stark indicator of India’s growing socio-economic unrest.

Neelam Kapoor, a 26-year-old housewife from a middle-class household in Delhi, struggled for 2 years to keep the lights on and pay the rent.

Her husband, Rajesh, a salesman, lost his job at a garment manufacturing company last year at the height of the pandemic and has yet to find a job.

“Our savings are depleted. Retail prices have skyrocketed. Everything has gone up from oil, cooking gas and services. It’s a miracle how we’re managing every month,” Kapoor told DW.

India faces record unemployment

Jha and Kapoor are just two of the millions affected by India’s current economic difficulties caused by acute unemployment and runaway inflation.

According to economists, the rising cost of living, job losses and inflation have become crises in their own right.

The unemployment rate in India, Asia’s third-largest economy, rose to 7.9% in December 2021, corresponding to around 35 million people, Mahesh Vyas, managing director of the Center for Monitoring Indian Economy ( CMIE).

“Inflation looks set to rise in the short term, but there is no sign that the unemployment rate will decline commensurately. The short-term economic outlook therefore looks worse than India’s current situation,” Vyas said. .

The deterioration in the country’s labor market is likely to hamper the post-pandemic economic recovery, as unemployment appears to persist in more than one sector or region, according to the CMIE.

Vyas said unemployment has been rising since September 2020, which is not a good sign for economic recovery.

Unemployment a “humanitarian crisis?

Economists said India is likely to be stuck for the foreseeable future with persistent unemployment, high inflation, weak demand and falling savings and investment.

“Tackling unemployment is the overriding concern in India at the moment. This is a humanitarian crisis and I argue that the government should be the employer of last resort in such an emergency. in rural and urban areas of India is vital,” Lekha Chakraborty, a professor at the National Institute of Public Finance and Policy, told DW.

“The Indian economy is suffering from a long COVID. Lockdown strategies have helped flatten the curve but this has created almost irreversible economic disruption,” he added.

Economist Rudrani Bhattacharya said increasing private consumption, investment and reviving micro, small and medium enterprises (MSMEs) are key challenges for the future.

“We are seeing stable and positive double-digit growth in credit flows to MSMEs, showing a steady pace of recovery for this sector representing a significant fraction of the informal workforce. Reviving MSMEs is a formidable task that we wait,” Bhattacharya told DW.

MSMEs are the backbone of the Indian economy. These companies contribute about 45% of manufacturing output, more than 40% of exports and more than 28% of GDP. This equates to the employment of over 110 million people, which in terms of volume is second only to the agricultural sector.

The divide between rich and poor is likely to grow

Amit Mitra, former finance minister and current senior adviser to West Bengal Chief Minister Mamata Banerjee, said India could be heading for stagflation.

Stagflation is defined as a situation involving rising prices of goods and services combined with high unemployment and stagnant demand.

“Wholesale inflation is over 14% and unemployment has increased. Without private investment, we could be heading for stagflation,” Mitra said.

Unemployment is particularly worrying for young people trying to enter the labor market, with no relief in sight. Inflation also puts pressure on people’s savings. And both factors contribute to rising economic inequality in India.

According to the recently released World Inequality Report 2022, India is one of the most unequal countries in the world with growing poverty and a wealthy elite. According to the report, the richest 1% of the population now controls 22% of the national income and the poorest 50% hold only a 13% share of the country’s income.

Edited by: Wesley Rahn

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