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DAILY NEWS ANALYSIS

  • 15 May, 2021

  • 2 Min Read

Rising Unemployment and Need for Domestic Demand

Rising Unemployment and Need for Domestic Demand

Unemployment

  • Rising unemployment, including among the salaried class, and shrinking real incomes have led to a lack of demand that bodes ill forthe economy, said Mahesh Vyas, managing director at the Centre for Monitoring Indian Economy (CMIE).
  • Unemployment rose to8% in April, from 6.5% in March, the CMIE said.

Labour participation rate

  • Labour participation rate recovered soon after the lockdown was eased last year, but has run out of momentum even before it could recover fully.
  • The labour participation rate(LPR) was 40% in April. “The LPR is about two percentage points below what it was before April 2020.
  • This is a very serious matter for a population of our size. Post-lockdown recovery Observing that the economy had recovered after the lockdowns were eased in2020, CMIE said, “All supply-side indicators saw a robust turnaround.

Need to push up Demand

  • But where is the demand? ”Asserting that the lack of demand was a bottleneck for further growth, CMIE said, “Income and consumer sentiment have also been hit.
  • Income is lower than it was year earlier. 90% of families have seen income shrinkage (i.e., real income, adjusted for inflation).”
  • Domestic demand is key. “We can’t depend on exports. It is domestic consumption that will help the economy,” Mr. Vyas, CMIE director said, adding that it was critical to put money in the hands of the consumer now.
  • Significantly, the size of the salaried class shrank forthe third consecutive month in April, with 3.4 million jobs lost.
  • During 2019-20, there were 85.9 million salaried jobs.
  • As of April2021, there were just 73.3million, as per CMIE observations.

Source: TH


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