Economics (AS & A Level) · May / June 2023 · Paper 21 · Question 1

Unemployment in India Changes in the rate of unemployment in India between July 2020 and May 2021 can be seen in Fig. 1.1. 0 2 4 6 8 10 12 May 2021 April 2021 Mar 2021 Feb 2021 Jan 2021 Dec 2020 Nov 2020 Oct 2020 Sept 2020 Aug 2020 Jul 2020 Unemployment rate (%) 7.4 7.4 8.4 8.4 6.7 6.7 7.0 7.0 6.5 6.5 9.1 9.1 6.5 6.5 6.9 6.9 6.5 6.5 8.0 8.0 11.9 11.9 Source: tradingeconomics.com, July 2021 Fig. 1.1: India’s unemployment rate, July 2020 to May 2021 India’s unemployment rate rose in December 2020, reaching a six-month high. The fact that the unemployment rate has been rising during this period, despite an economic recovery, has raised concerns among economists at the Centre for Monitoring Indian Economy (CMIE) research institute in Mumbai, although they recognise that there are possible difficulties in the measurement of unemployment. One of the reasons for the increase in unemployment in December 2020 is an increase in frictional unemployment. According to CMIE, India’s labour force increased from 421 million in November 2020 to 427 million in December 2020 and the majority of these new workers were unable to find work immediately. Many of these people are reluctant to relocate to take jobs and others are unaware of job vacancies. Another reason for this increase in unemployment in India is because of seasonal unemployment. One of the main reasons behind rising unemployment has been the failure of the agricultural sector to absorb the additional labour. One economist at CMIE has stated: ‘Farming is the last resort of many who are without work. However, December is not the month in which farming can absorb labour. This is the month when it needs fewer workers. In December 2020, the job losses from agriculture were 9.8 million. The economists at CMIE stated that the rise in unemployment in certain months was not a good sign for the Indian economy as it could lead to higher income inequality and poverty. Source: Adapted from India Today, 5 January 2021

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