CMIE says India's unemployment rate may rise to 8 per cent in April

As states go into lockdowns and impose restrictions amid the second wave of COVID-19, the unemployment rate in April is likely to increase to nearly 8 per cent from 6.5 per cent in March, according to the Centre for Monitoring Indian Economy (CMIE).

CMIE's CEO Mahesh Vyas said that fast frequency labour statistics indicate that labour market conditions have been deteriorating in April 2021. "The labour participation rate (LPR) looks unlikely to fall in April. The 30-day moving average LPR indicates that the ratio was rising till April 15 when it peaked at 40.8 per cent. Then it started falling, but it is unlikely to fall to a level lower than that of March 2021," he said.

Unless there is an unusual bounce in the last week, the April LPR is likely to stabilise at its March level of 40.2 per cent, as per CMIE. "The April markets seem incapable of absorbing the supply of labour at an LPR of 40.2 per cent. While the LPR has declined in the last four weeks, the unemployment rate has increased," Vyas said.

In the last week of March, the LPR was 41.2 per cent and the unemployment rate was 6.7 per cent. In the following week which ended on April 4, the LPR was stable at 41.2 but the unemployment rate shot up to 8.2 per cent. Labour retreated in the next week as the LPR dropped to 40.1 per cent in the week ended April 11. Yet, the unemployment rate was unrelenting as it inched up to 8.6 per cent. In the following two weeks, the unemployment rate has dropped first to 8.4 per cent and then to 7.4 per cent. "Nevertheless, the unemployment rate during the month of April is likely to be close to 8 per cent after closing March at 6.5 per cent," he said.

April could be the third consecutive month of deterioration in terms of the most important fast-frequency labour statistic, the employment rate, he added.