For much of 2021, India remained under siege on multiple fronts. The laundry list of problems that beset the world’s largest democracy is more than an arm’s-length long and is likely to continue to be our Achilles Heel for much of 2022, if radical course correction is not undertaken. If there is no change in the trajectory, India is well headed into another era of the ‘lost decade’ by the time of the next General Elections in 2024.
Though some of the problems that India confronts today are driven by extraneous factors like the Covid-19 pandemic, most of them are Narendra Modi government’s own making. From China menacing India in Eastern Ladakh, Sikkim and Arunachal to waging a war on the civil society, from economic slump to the radical right lighting sectarian bonfires across the country, from a creaking health infrastructure that was brutally exposed during the second wave of the pandemic to the hollowing out institutions, from galloping food inflation to deteriorating ranking on the hunger index, to name a few, are some of the most daunting challenges that the country faces. Now, add to these ever widening faultlines the high unemployment rates prevailing in the country, you have a potentially lethal cocktail that is as explosive as a bottle of Molotov.
As on January 14, 2022, according to the Centre for Monitoring Indian Economy (CMIE), the 30-day average unemployment rate was 7.2%, with urban unemployment running as high as 8.6% and the rural rate at 6.6%. Unemployment of above 7% along with retail inflation of above 5% — retail inflation based on Consumer Price Index in December 2021 jumped to 5.59% against the targeted 4% — portends bad tidings in the coming months. But it’s the rural unemployment rate of 6.6% in combination with high retail inflation that is causing massive distress in the countryside in a country, where approximately 60% of the population lives in villages.
Scale of the problem
In November 2021, the demand for job under Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) grew by a 2.16%, but in December, it jumped by a massive 16.71%, underlining the scale of the distress. Historically, the rural poor have borne the brunt of macroeconomic upheavals because they have access to fewer resources. Data gleaned from the Ministry of Rural Development portal paints a grim picture. In October last year, 2.07 crore (20.7 million) households availed of MNREGA jobs; in December, however, that figure shot up to 2.47 crore (24.7 million), representing a 19.23% increase in three months.
The magnitude of rural distress can be gauged from the fact that by the first week of January 2022, more than 1.28 crore (12.8 million) rural households had already signed up for MNREGA jobs. This is before the third wave of the Covid-19 pandemic that’s currently surging through India. In January, as the Covid-19 case numbers started climbing once again, multiple states announced partial lockdowns, which triggered yet another surge of reverse migration. This implies that when the complete data for January and February 20022 come in, the number of households that availed of MNREGA jobs are likely to be on the higher side.
A state-wise breakup reveals that Tamil Nadu, Rajasthan and Uttar Pradesh accounted for the highest number of MNREGA jobs. In December last year, Tamil Nadu provided employment to 38 lakh (3.8 million) households, while Rajasthan and UP accounted for 32 lakh (3.2 million) and 31 lakh (3.1 million) households, respectively.
Among the three states that accounted for the maximum number of MNREGA jobs in December, the unemployment rate in Rajasthan touched a staggering 27.1% as on January 14, according to CMIE data. For Tamil Nadu that figure stood at 6.9%, while for UP it was 4.9%. Interestingly, Haryana, which has the highest unemployment rate in the country at a whopping 34.1%, provided jobs to a mere 1.5 lakh households, which means the state doesn’t have the wherewithal to provide succour to its rural poor.
Analysis of age-wise data from April 2021 to January 2022 paints a grimmer picture. The most productive age group from 31 to 50 years accounted for the massive 58% of MNREGA jobs, implying that the bulk of rural India’s workforce doesn’t have gainful employment, adversely impacting the rural economy.
The increase in demand for jobs under the scheme and demographics corelate to the overall salaried job loss data in 2021. According to the CMIE, 95 lakh (9.5 million) people in this class became jobless between January and December 2021 and another 10 lakh (1 million) entrepreneurs were forced to shut shop, with the manufacturing sector bearing the brunt, which saw almost 9.8 million people getting unemployed. Slowdown and closures in the manufacturing sector have a direct bearing on rural spending power because bulk of the labour force is drawn from the countryside.
As a result of the escalating demand for MNREGA work, states that have relied on it to provide economic support to the rural poor have run out money. This year, the budgetary allocation was ₹73,000 core, but the actual expenditure is above, as per the Ministry of Rural Development data, ₹99,000 core, including unpaid wages amounting to ₹11,569 crore. Throughout the year, the overall demand for work remained above the 2 crore (20 million) mark.
It’s nobody’s case that India has a massive unemployment problem on its hand and the rural population is under severe pressure. Unfortunately, the state of current politics is such that it doesn’t figure in the public narrative, but this is a ticking timebomb on a short fuse that can explode anytime.