India had an unemployment rate of 7.16% in January, significantly lower than the previous month of 7.6%, according to data released by the Centre for Monitoring Indian Economy (CMIE). However, unemployment registered a sharp increase in urban areas.

Urban unemployment rose to 9.7% in January, up from 9% in December 2019, and close to its recent peak of 9.71% in August 2019. Whereas rural unemployment fell to 5.97%, down from 6.93%, in the previous month, according to CMIE.

Detailing his findings in a Business Standard column, Mahesh Vyas, managing director and CEO, CMIE, said, “Although the average monthly unemployment for the 12-month period ended January 2020 is quite high at about 7.4%, it has stopped rising as it has been since mid-2017. The new phenomenon is a substantial increase in the month-on-month variations in the unemployment rate.” In recent months, the monthly unemployment rate seems to have stabilised at just below 7.5%. “But, month-on-month variations, at about 65 basis points, have been higher than in earlier years,” he added. Vyas talked about the unemployment data with Fortune India. Edited excerpts from the conversation:

As the data shows, the urban unemployment rate has been significantly higher in January. What are the reasons?

We are not able to create sufficient jobs in urban India corresponding to the number of people who come into the labour markets. The requirement for job creation in urban India is of slightly better quality than one can get in rural India. But the problem is that such jobs are being created in inadequate numbers, so the number of people coming to seek jobs is much bigger than the number of people who get jobs. As a result, the urban unemployment rate goes up.

The overall unemployment number in January was 7.16%, which you say in your column that it is substantially lower than the previous month. What should be the ideal rate?

The 7.16% what we got for January is lower than what we saw in December [2019], and also lower than what we got in October (2019) when the number had reached 8%. While the unemployment rate did touch 8% twice last year, it did slide back and I think the [January 2020] number is better understood as close to 7.5%. Now, 7.5% or 7.16%, whatever you pick, the number is too high. The unemployment rate in India which is higher than 3-3.5% is very high because that’s what our unemployment rate used to be in the past. According to official statistics in 2017-18, it crossed 6%, we are saying it has crossed 7% and stabilised around 7.5%, this is not a very good number. This is actually quite high.

There has also been a slowdown in the economy and the outlook for growth doesn’t look very good either. How do you see that impacting the general status of employment in the country?

It will adversely affect the unemployment situation in the country. If the economic growth is not adequate then we obviously cannot generate as many jobs that are required for the growing population. The population keeps growing and the number of people who, therefore, seek jobs will keep increasing. It is imperative that the economy does generate sufficient jobs to keep them well occupied and fuel the growth on the basis of that. If the economy does not grow adequately then we will not have enough jobs and that can be quite stressful.

What can the government do? The focus of the government even during the Budget has been to increase consumption and kick-start the economy. How can the government boost job growth?

The first thing for the government to do is to recognise that we do have an unemployment challenge. If there is a clear understanding that there is a problem, the second thing is to find ways to solve it. If we don’t understand the problem well, if we don’t measure the problem well, and I think in so far as the government is concerned, this is a concern. One needs to recognise this to be a problem that is worth trying to understand very clearly.

What about the quality of jobs being created? What does your data say about that?

The quality of jobs is certainly deteriorating and that’s what we are seeing in the loss of jobs in urban India, or rather the growing unemployment in urban India, and the falling unemployment rate in rural India. This means that we are creating more jobs in rural India that give poor quality jobs as compared to urban India. We are not generating good quality jobs for sure.

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