India's unemployment rate drops to 6.5% in January; employment rate surges to 37.9%: CMIE

The year 2021 started on positive note for India as it recorded a significant fall in the unemployment rate and an equally impressive increase in employment rate in January, according to private think tank CMIE. Employment in India, however, remained lower than it was before the pre-COVID levels, but there were lesser unemployed people willing to work as well, it said.

As per Centre for Monitoring Indian Economy (CMIE) data, the unemployment rate declined to 6.5 per cent in January 2021 from 9.1 per cent in December 2020, while the employment rate surged to 37.9 per cent as compared to 36.9 per cent.  

Nearly 12 million additional people were employed during January at 400.7 million as compared to 388.8 million in December 2020, which was the highest since lockdown began in March 2020. The surge in employment in January also compensated for the loss in the past three months.

"This is big because month-over-month variations in employment rarely crossed the 5 million mark before the lockdown. The increase in January was twice this max variation. Also, after the initial months of sharp fall and rise in employment during the lockdown, the recovery process had slowed down and then stalled even before the recovery was complete. Employment declined in each of the three months October through December 2020. The recovery in January 2021 is therefore a welcome relief," said Mahesh Vyas, CEO, CMIE.

Also Read: New labour codes to affect employees' in-hand salary, companies wage bill

CMIE data showed that the rise in employment in January reduced the number of unemployed to 27.9 million. "These are the unemployed who are willing to work and who are actively looking for employment. This is an exceptionally low number. On an average 33 million persons who were willing to work and were looking for work were unemployed in 2019-20. This is now down to less than 28 million," it said.

As per the CMIE, the fall in the count of the unemployed in January was reflected in a fall in the unemployment rate in the same month. The unemployment rate was volatile in the past six months, ranging from a low of 6.5 per cent in November 2020 to a high of 9.1 per cent in December 2020. The average unemployment rate during this six-month period was on higher side at about 7.4 per cent.

Also Read: TCS to hire 1,500 tech staff in UK over next year

"The two most recent months December 2020 and January 2021 have seen an unusual jump in this volatility. In December 2020, India added 11.3 million unemployed persons. In January 2021, India saw the count of unemployed decline by 10.7 million. These are extraordinary variations. Perhaps, the sharp rise in the unemployed in December 2020 was extraordinary. And, in January 2021 India has reverted to its normal count of unemployed, which seems to average at about 28 million. This is the average count of the unemployed since September 2020, save for the month of December when it shot up to 38 million," it said.

CMIE said that its Consumer Pyramids Household Survey captures two levels of unemployed - people who are actively looking for work and those who are not. A person is considered to be unemployed only if such a person is willing to work but does not have any employment. CMIE distinguishes such people into those who are actively looking for work and those who are not.  

In January 2021, there were 27.9 million unemployed people who were actively looking for work, while there were another 12.1 million who were also unemployed and willing to work but, they were not actively looking for work. CMIE does not consider these in its computation of the unemployment rate.

The total unemployed who were willing to work but did not have any employment in January 2021 was 40 million. While this is a large number, it is the lowest in over two years, it said.