Latest data released by the Centre for Monitoring Indian Economy (CMIE) indicates that the unemployment rate in India decreased to 7.7 per cent in May 2023, marking a decline from the previous month’s figure of 8.5 per cent.
This decrease was attributed to a drop in labour participation, indicating a decrease in the number of individuals actively seeking employment.
CMIE analyst Natasha Somayya K explained that the labour participation rate (LPR) in May witnessed a decrease of 1.1 percentage points compared to April, settling at 39.6 per cent. April experienced a substantial influx of individuals entering the labour force, yet only a small portion managed to secure employment. Consequently, many individuals were discouraged from actively seeking work in May, leading to a contraction of the labor force from 453.5 million to 441.9 million.
Interestingly, the decline in labor participation in May 2023 was more prominent in rural India compared to urban India. In urban areas, the labour force shrank by approximately 4.5 million individuals. In April, the urban labour force comprised around 147 million individuals, but this number reduced to 142.5 million in May.
CMIE data revealed that the urban labour market experienced a decline in both employment and unemployment figures. The reduced urban labour force in May was a result of approximately 2.4 million lost jobs and a decline of 2.1 million unemployed individuals in urban areas. Consequently, the total urban workforce numbered 129.5 million individuals, with approximately 13 million individuals remaining unemployed.
Rural India displayed a similar trend, witnessing a decline in both employment and unemployment figures. The rural labour force decreased to 299.4 million in May, down from 306.5 million in the previous month. While rural India had witnessed significant job creation compared to urban India in April, it was unable to sustain this positive trend in May.
The data provided by CMIE highlights the complex dynamics of India’s labor market. While the unemployment rate decreased to 7.7 per cent in May due to a decline in labour participation, the decrease in employment opportunities in both urban and rural areas underscore the challenges faced in generating sustained job growth.