Supporting the unemployed

India was in the middle of an economic slowdown before the pandemic. With the coronavirus, and the national lockdown imposed to curb its spread, the slowdown has potentially turned into a recession. The government’s announcement of ₹20 lakh crore package is an acknowledgment of the crisis at hand.

One key way in which this crisis is getting reflected is in the unemployment figures. Even before the pandemic, India was staring at relatively high unemployment — an official report indicated a 6% unemployment rate in 2017-18, the highest in 45 years. Over 12 million people enter the workforce every year, and India has struggled to create new jobs. This trend has now got accelerated. According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate was 24% in the week ending May 17. Its April data shows that it was predominantly small traders and labourers, followed by entrepreneurs, and then salaried employees who lost their jobs. This is not surprising. If factories and shops are closed, if daily wage labourers and street vendors can’t work, if companies begin losing revenues drastically, there will be job losses. The problem is that the easing of the lockdown will not immediately restore these jobs.

That is why a key component of any relief package has to take into account this rising unemployment. By pumping in an additional ₹40,000 crore into the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the government is hoping to create a financial buffer for those who have returned home to their villages. And by unveiling structural reforms, it hopes to get the economy kickstarted. But this will not solve the immediate crisis — where people, in the absence of jobs, don’t have incomes, which, in turn, makes basic livelihood difficult. The poor will get most severely affected, but so will large sections of the middle class who are staring at salary cuts or job losses, which will reduce their purchasing power and ability to take and pay loans sharply. This, in turn, will have an impact across a range of sectors. Finance minister Nirmala Sitharaman has said that she is open to suggestions and, as the year progresses, there will be more measures. India will have to look more carefully at both the United States, which is offering a generous unemployment allowance, and the United Kingdom, which has offered wage support to workers. There will be issues of resources, and identifying and targeting beneficiaries. But India may, sooner than later, need to introduce an unemployment allowance to help citizens overcome this crisis.