The double engine of trouble: Unemployment and rising inflation rate

Since the dreaded pandemic began towards the end of 2019, the world has taken a huge hit in terms of employment generation and livelihood. Countries worldwide are seeing unemployment which are worst since World War 2. Except for China, more or less every country is seeing a growth rate in negative. India is a great example where the numbers began creating an uproar in September when its GDP growth rate shrunk by 23% in the Q1 of FY 2020-21.

The shrinkage in the growth rate was quite obvious as the nation implemented one of the strictest lockdowns in the initial phases of the pandemic owing to the country’s thick population density and lack of public health awareness. Though it succeeded in keeping down the death rate and the number of infections extremely low (keeping in mind its population) it had a disastrous impact on the livelihood of people. Especially the lower and middle class.

The country’s majority of population depend upon an unorganized sector for their livelihood. As per the international labour market’s 2016 report as huge as 82% of people in India are associated with the unorganized sector. Out of which industry-wise distribution of the unorganized sector is as follows:

Industry	Distribution (%)
Mining	1.79
Manufacturing	52.49
Electricity and water supply	1.21
Construction	48.92
Trade, Hotel and Restaurant	50.17
Education	6.31
Health	2.68

These are astronomical numbers given the size of India’s population. With repeated lockdowns and innumerable shutdowns in the critical parts of the important cities, the sectors such as manufacturing, construction, trade, hotel & restaurant and education have taken a huge hit.

According to a Pew Research Centre report, India’s middle-class population shrunk by at least 32 million with 75 million people driven below the poverty line in 2020. India contributed 60 per cent to the worldwide drop in the middle-class population. Given the volatility of the inflation rate in the recent days, which surged by 6.3% on the retail level and to a staggering 12.94% on the wholesale rate, in the month of May 2021, these numbers are extremely worrying. The rising fuel price and cost of transportation is the reason behind the surge which is haunting the commoners separately.

According to the data provided by Department of Consumer Affairs, the prices of six edible oils – groundnut oil, mustard oil, vanaspati, soya oil, sunflower oil and palm oil – have risen between 20% and 56% at all-India levels in the last one year. The retail price of mustard oil (packed) has increased by 44% to ₹171 per kg on May 28 this year, from ₹118 per kg on the same date last year. The monthly average retail prices of all six edible oils have risen to an 11-year high in May 2021. The sharp increase in cooking oil prices has come at a time when household incomes and employment, in general, have been hit due to Covid-19.

As per the leading business information company CMIE‘s (Centre for Monitoring Indian Economy) latest unemployment report, states with the highest unemployment rates are Rajasthan 26.2%, West Bengal 22.1 % and Kerala 15.8%. Whereas the top 5 leading states in GDP in the country are as follows:

States	Nominal GDP (Trillion INR, lakh crore ₹)	Unemployment rate (%)	Data year
Maharashtra	₹32.24 lakh crore (US$450 billion)	4.4	2020–21
Tamil Nadu	₹20.91 lakh crore (US$290 billion)	8.3	2020–21
Gujarat	₹18.85 lakh crore (US$260 billion)	1.8	2020–21
Karnataka	₹18.05 lakh crore (US$250 billion)	5.6	2020–21
Uttar Pradesh	₹17.91 lakh crore (US$250 billion)	4.3	2020–21

While the sorry state of affairs in states like West Bengal, Kerala, Tamil Nadu and Rajasthan aren’t discussed much due to media management by the Left-leaning politicians and journalists, other states have managed to keep their unemployment rates relatively low especially Maharashtra, Gujarat and Uttar Pradesh.

Although amidst huge uproar from the Left and extreme Left journalistic factions on the internet and the Instagram based viners, the government was committed to continuing with its key construction project – the Central Vista Project. The nod from the Delhi HC and the SC with regards to the Central Vista Project was a much-required confidence booster. This has ensured that the livelihood of the labourers engaged on the site is protected. Also, with the successful trials on the dedicated freight corridors in the Eastern and Western railways, the highway construction hitting an all-time high with as much as 36.9 km of highway being built on the peak days of the pandemic, the central government has managed to keep the wheels rolling. Yet, the numbers of the beneficiaries of all these stand nowhere close compared with the total population of unemployed people in the country at the moment.

Moving ahead, both the state and central governments have to put humongous efforts to improve the state of the economy at the state level first and then at the national level. Controlling the price rise of essential commodities like petrochemicals, cooking oil and cooking gas will ensure a lower inflation rate and a relief to the commoners.