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India’s Labour Market On A Slow Mend, Says Nomura

India’s labour market is showing signs of recovery after relaxations in the lockdown, according to Nomura.

A waiter wearing a protective face mask and latex gloves sanitizes a tables at the Punjab Grill restaurant in New Delhi, India, on Monday, June 8, 2020. (Photographer: T. Narayan/Bloomberg)
A waiter wearing a protective face mask and latex gloves sanitizes a tables at the Punjab Grill restaurant in New Delhi, India, on Monday, June 8, 2020. (Photographer: T. Narayan/Bloomberg)

Unemployment has begun to drop as Covid-19 restrictions are eased and the economic activity resumes.

Jobless rate fell to 17.5% during the week ended June 7 from the peak of 27.1% on May 3, according to data from the Centre for Monitoring the Indian Economy. This was the lowest unemployment rate since the week ended March 22 when states had started imposing curbs and that culminated in a nationwide lockdown starting March 25.

Urban unemployment stood at 17.08% for the week ended June 7, while the rural jobless rate was 17.71%, according to CMIE’s estimates.

Nomura, in a research note citing CMIE data, said the economy added 21 million jobs in May, after having lost 10 million in March and 114 million in April. As lockdown relaxations began in May, job additions were contributed by small traders, wage labourers and businesses worst hit by strict curbs.

  • According to the June 9 note:
  • Businesses added 5.5 million jobs in May after having lost 20.2 million in the preceding month.
  • Jobs for small traders and wage labourers rose 14.4 million in May after a loss of 78.7 in April.
  • Salaried employees continued to experience job losses even in May, after 14.9 million were shed the previous month.

Despite the gains, the economy has lost a cumulative 102 million jobs between January and May, compared with total gains of 8 million in 2019 and a loss of 10.9 million in 2018, wrote Sonal Varma and Aurodeep Nandi, economists at Nomura. The labour market still has a lot of ground to cover to return to normal, they said.

It’s expected mend further as the economic activity resumes and pent-up demand for durable goods follows. But some jobs are likely to be lost permanently.

With the hit to company profitability during the lockdowns, we expect firms to focus on cost savings. As such, not all jobs lost will be recovered, or jobs will be retained but at lower salaries. 
Sonal Varma, Chief India Economist, And Aurodeep Nandi, India Economist, Nomura

This will likely weigh on growth in consumer discretionary spends once the pent-up demand phase ebbs, they cautioned. Nomura, in an earlier note, estimated India’s economy to contract 5% in 2020.