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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 April 13, 2020, there are 9,152 confirmed cases of COVID-19 in India. Of these, 857 patients have been cured/discharged and 308 have died. As the spread of COVID-19 has increased across India, the central government has continued to announce several policy decisions to contain the spread, and support citizens and businesses who are being affected by the pandemic. In this blog post, we summarise some of the key measures taken by the central government in this regard between April 7 and April 13, 2020.
Source: Ministry of Health and Family Welfare, PRS.
Health
Supreme Court orders free testing for COVID-19 and provision of personal protective equipment for healthcare workers
Free testing for COVID-19: The Supreme Court held that COVID-19 tests should be free of cost for persons belonging to economically weaker sections as notified by the government and those covered under the Ayushman Bharat scheme, irrespective of whether they are conducted in private or public laboratories. Further, it held that COVID-19 tests may only be carried out in laboratories accredited by the National Accreditation Board for Testing and Calibration Laboratories, or any agencies approved by the World Health Organisation or Indian Council for Medical Research. Prior to this order, tests were free of cost in government laboratories. However, private laboratories were permitted to charge up to Rs 4,500 per test.
Personal protective equipment for healthcare workers: The Supreme Court held that availability of appropriate personal protective equipment (PPE) for front line healthcare workers must be ensured by the government. PPE includes gloves, masks, goggles, face shields, and shoe covers. Usage of PPE must be based on guidelines provided by the Ministry of Health and Family Welfare and the World Health Organisation. Further, it directed the government to promote domestic production of PPE by means such as allowing movement of raw material. Restriction on exports of PPE may also be instituted.
Security for healthcare workers: The Court also noted that healthcare workers treating COVID-19 patients were facing violence by the public due to stigma associated with their potential exposure to COVID-19. The Court held that states and union territories should direct police authorities to provide security to doctors and medical staff in hospitals, places where persons have been quarantined, and while conducting screening visits. Necessary action must be taken against persons who obstruct and commit any offence in respect to performance of duties by doctors, medical staff and other government officials working to contain the outbreak of COVID-19.
Exemptions from customs duty and health cess for certain items
The central government has exempted the levy of basic customs duty and health cess on certain items. These include ventilators, face masks, PPE, COVID-19 testing kits, and items necessary to manufacture these items. The exemptions will remain in force until September 30, 2020.
Financial Assistance
COVlD-19 emergency response and health system preparedness package
The central government approved the COVlD-19 emergency response and health system preparedness package. It will be implemented in three phases from January 2020 to March 2024. The objectives of the package include: (i) strengthening national and state health systems, (ii) support preparedness for COVID-19, (iii) procure essential medical equipment and drugs, (iv) setting up laboratories for surveillance, and (v) biosecurity.
The Ministry of Health and Family Welfare has initiated release of funds for phase 1 of the programme which will last until June 2020. These funds will be utilised for activities such as: (i) developing hospitals and isolation wards for COVID-19 patients, (ii) providing ventilators, (iii) expansion of diagnostic capacities, and (iv) community surveillance for the disease.
Permission granted for partial withdrawal from National Pension System
Subscribers of the National Pension System may make partial withdrawals to fulfil their financial needs. Withdrawals will be permitted on formal request by the subscriber. Funds may be utilised for the treatment of the illness of a subscriber, his spouse, children (including adopted children), or dependent parents.
All pending income tax refunds up to five lakh rupees to be issued
To provide immediate relief to businesses and individuals, all pending income-tax refunds up to five lakh rupees, will be issued immediately. This is estimated to benefit approximately 14 lakh taxpayers. Further, all pending GST and Customs refunds will be issued. This will benefit around one lakh business entities. The total refund granted will be approximately Rs 18,000 crore.
Compensation for Food Corporation of India Employees in case of death due to COVID-19
The central government has approved the proposal for monetary compensation to 1.08 lakh workers of the Food Corporation of India (FCI) including 80,000 labourers who are working to supply food grains across the country. Currently, families of FCI employees are entitled to compensation in the event of death due to terrorist attack, bomb blast, mob attack or natural disaster. However, the regular and contractual labour of FCI are not covered. Under this proposal, all workers on duty will be insured in the event of death due to COVID-19 between March 24, 2020 and 23 September, 2020. Regular labour will be entitled to 15 lakh rupees, contractual labour will be entitled to 10 lakh rupees, category 1 officers will be entitled to 35 lakh rupees, category 2 officers will be entitled to 30 lakh rupees, and category 3 and 4 workers will be entitled to 25 lakh rupees.
NGOs permitted to buy food grains directly from FCI for relief operations
The government noted that NGOs and charitable organisations are playing an important role in providing food to thousands of poor people during the lockdown. To ensure uninterrupted supply of food grain to these organisations, the central government has directed FCI to provide wheat and rice to NGOs at the Open Market Sale Scheme rate. These rates are generally reserved for state governments and registered bulk users. This implies that these organisations can purchase one to ten metric tonnes of wheat and rice at a time from FCI at the predetermined reserve prices.
Increasing financial resources
Reduction in salaries and benefits to Members of Parliament
The centre issued two Ordinances to amend: (i) the Salary, Allowances, and Pension of Members of Parliament Act, 1954 to reduce the salaries of MPs by 30% for a period of one year, and (ii) the Salaries and Allowances of Ministers Act, 1952, to reduce the sumptuary allowance of Ministers by 30% for one year. The government also amended the rules notified under the 1954 Act to reduce certain allowances of MPs for one year, and suspended the MPLAD Scheme for two years. The MPLAD scheme enables members of parliament to recommend developmental work in their constituencies. These changes are being made to supplement the financial resources of the centre to tackle the COVID-19 pandemic. The proposed reduction to the salaries and allowances of MPs and Ministers amounts to savings of around Rs 55 crore, and the suspension of the MPLAD scheme is expected to save Rs 7,800 crore. These measures comprise 0.03% and 4.5% respectively, of the estimated amount required to fight the immediate economic distress unleashed due to COVID.
For more information on the implications of the reduction of salaries and benefits to MPs, please see here.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
