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In April 2020, the International Labour Organisation (ILO) estimated that nearly 2.5 crore jobs could be lost worldwide due to the COVID-19 pandemic in 2020. Further, it observed that more than 40 crore informal workers in India may get pushed into deeper poverty due to the pandemic. In this blog post, we discuss the effect of COVID-19 on unemployment in urban areas as per the quarterly Periodic Labour Force Survey (PLFS) report released last week, and highlight some of the measures taken by the central government with regard to unemployment.
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Methodology for estimating unemployment in PLFS reports The National Statistics Office (NSO) released its latest quarterly PLFS report for the October-December 2020 quarter. The PLFS reports give estimates of labour force indicators including Labour Force Participation Rate (LFPR), Unemployment Rate, and distribution of workers across industries. The reports are released on a quarterly as well as annual basis. The quarterly reports cover only urban areas whereas the annual report covers both urban and rural areas. The latest annual report is available for the July 2019-June 2020 period. The quarterly PLFS reports provide estimates based on the Current Weekly Activity Status (CWS). The CWS of a person is the activity status obtained during a reference period of seven days preceding the date of the survey. As per CWS status, a person is considered as unemployed in a week if he did not work even for at least one hour on any day during the reference week but sought or was available for work. In contrast, the headline numbers on employment-unemployment in the annual PLFS reports are reported based on the usual activity status. Usual activity status relates to the activity status of a person during the reference period of the last 365 days preceding the date of the survey. |
To contain the spread of COVID-19, a nationwide lockdown was imposed from late March till May 2020. During the lockdown, severe restrictions were placed on the movement of individuals and economic activities were significantly halted barring the activities related to essential goods and services. Unemployment rate in urban areas rose to 20.9% during the April-June quarter of 2020, more than double the unemployment rate in the same quarter the previous year (8.9%). Unemployment rate refers to the percentage of unemployed persons in the labour force. Labour force includes persons who are either employed or unemployed but seeking work. The lockdown restrictions were gradually relaxed during the subsequent months. Unemployment rate also saw a decrease as compared to the levels seen in the April-June quarter of 2020. During the October-December quarter of 2020 (latest data available), unemployment rate had reduced to 10.3%. However, it was notably higher than the unemployment rate in the same quarter last year (7.9%).
Figure 1: Unemployment rate in urban areas across all age groups as per current weekly activity status (Figures in %)
Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.
Recovery post-national lockdown uneven in case of females
Pre-COVID-19 trends suggest that the female unemployment rate has generally been higher than the male unemployment rate in the country (7.3% vs 9.8% during the October-December quarter of 2019, respectively). Since the onset of the COVID-19 pandemic, this gap seems to have widened. During the October-December quarter of 2020, the unemployment rate for females was 13.1%, as compared to 9.5% for males.
The Standing Committee on Labour (April 2021) also noted that the pandemic led to large-scale unemployment for female workers, in both organised and unorganised sectors. It recommended: (i) increasing government procurement from women-led enterprises, (ii) training women in new technologies, (iii) providing women with access to capital, and (iv) investing in childcare and linked infrastructure.
Labour force participation
Persons dropping in and out of the labour force may also influence the unemployment rate. At a given point of time, there may be persons who are below the legal working age or may drop out of the labour force due to various socio-economic reasons, for instance, to pursue education. At the same time, there may also be discouraged workers who, while willing and able to be employed, have ceased to seek work. Labour Force Participation Rate (LFPR) is the indicator that denotes the percentage of the population which is part of the labour force. The LFPR saw only marginal changes throughout 2019 and 2020. During the April-June quarter (where COVID-19 restrictions were the most stringent), the LFPR was 35.9%, which was lower than same in the corresponding quarter in 2019 (36.2%). Note that female LFPR in India is significantly lower than male LFPR (16.6% and 56.7%, respectively, in the October-December quarter of 2019).
Figure 2: LFPR in urban areas across all groups as per current weekly activity status (Figures in %)
Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.
Measures taken by the government for workers
The Standing Committee on Labour in its report released in August 2021 noted that 90% of workers in India are from the informal sector. These workers include: (i) migrant workers, (ii) contract labourers, (iii) construction workers, and (iv) street vendors. The Committee observed that these workers were worst impacted by the pandemic due to seasonality of employment and lack of employer-employee relationship in unorganised sectors. The Committee recommended central and state governments to: (i) encourage entrepreneurial opportunities, (ii) attract investment in traditional manufacturing sectors and developing industrial clusters, (iii) strengthen social security measures, (iv) maintain a database of workers in the informal sector, and (v) promote vocational training. It took note of the various steps taken by the central government to support workers and address the challenges and threats posed by the COVID-19 pandemic (applicable to urban areas):
The central and state governments have also taken various other measures, such as increasing spending on infrastructure creation and enabling access to cheaper lending for businesses, to sustain economic activity and boost employment generation.
As of May 29, 2020, there are 1,65,799 confirmed cases of COVID-19 in India. 47,352 new cases have been registered in the last week (since May 22). Out of the confirmed cases so far, 71,106 patients have been cured/discharged and 4,706 have died. Most cases are in the state of Maharashtra (59,546) followed by the states of Tamil Nadu (19,372), Delhi (16,281) and Gujarat (15,562).
With the spread of COVID-19, the central government initially undertook many measures to contain the spread of the pandemic, including restrictions on travel and movement through national lockdown. With gradual resumption of activities, the central government has recently announced measures to ease restrictions on travel and movement. Further, the government has continued to announce policy decisions to ease the financial stress caused by the pandemic, and to contain further spread of the pandemic. In this blog post, we summarise some of the key measures taken by the central government in this regard between May 23 and May 29, 2020.
Figure 1: Day wise number of COVID-19 cases in the country
Source: Ministry of Health and Family Welfare; PRS.
Finance
RBI announces additional measures to ease financial stress caused by COVID-19
On May 22, the Reserve Bank of India (RBI) issued a statement with various development and regulatory policies to ease the financial stress caused by COVID-19. These measures include: (i) improving liquidity in the market; (ii) support to exports and imports; and (iii) easing capital financing. Subsequently, following measures have been notified by the RBI:
Travel and Movement
Domestic Air travel resumes; fare limits set by government
Domestic passenger air travel has been resumed in a phased manned (with one-third capacity of operations) from May 25, 2020 based on the announcement of the Ministry of Civil Aviation on May 21. To ensure that airlines do not charge excessive fare and to ensure that journey is only for essential purposes, the Ministry of Civil Aviation issued an order to limit the minimum and maximum fare that airlines can charge from the passenger. The routes have been divided in seven sectors based on the approximate duration of the flight. For routes with shortest duration (for example, Delhi to Chandigarh), the minimum and maximum fare will be Rs 2,000 and Rs 6,000, respectively. For routes with the longest duration (for example, Delhi to Thiruvananthapuram), the minimum and maximum fare will be Rs 6,500 and Rs 18,600, respectively.
Further, the Ministry announced that all operational routes under the Regional Connectivity (UDAN) Scheme with up to 500 km of length or operational routes in priority areas (North East region, hilly states or islands) are permitted to resume operations. This is in addition to the one-third capacity of operations announced earlier.
Health
Guidelines for international arrivals issued
The Ministry of Health and Family Welfare issued guidelines for international arrivals. All travellers are required to give an undertaking that they will undergo a 14-day mandatory institutional quarantine at their own cost (7 days in institutional quarantine followed by a 7-day isolation at home). In emergency cases (such as pregnancy or death in the family), home quarantine will be permitted. Use of Aarogya Setu app will be mandatory in such cases. Only asymptomatic passengers will be allowed to board (flight/ship) after thermal screening. On arrival, thermal screening will be carried out for all passengers. The passengers found to be symptomatic will be isolated and taken to a medical facility.
Movement of migrant labourers
Supreme Court gives an interim order regarding problems of migrant labourers
The Supreme Court of India took cognisance of the problems of migrant labourers who have been stranded in different parts of the country. In its order, the Court observed that there are lapses being noticed in the process of registration, transportation and in providing food and shelter to the migrant workers. In view of these difficulties, the Court issued the following interim directions:
The Court directed the central and state governments to produce record of all necessary details such as the number of migrant workers, the plan to transport them to their destination, and the mechanism of registration.
Other measures
PM CARES Fund included in the list of CSR eligible activities
The Ministry of Corporate Affairs notified the inclusion of PM CARES fund in the list of activities eligible for Corporate Social Responsibility (CSR) under the Companies Act, 2013. Under the Act, companies with net worth, turnover or profits above a specified amount are required to spend 2% of their average net profits in the last three financial years towards CSR activities. This measure will come into effect retrospectively from March 28, 2020, when the fund was setup.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
