Employment increases in rural India

In all the major labour market metrics, it is rural India that shows big improvements. Labour conditions improved in urban India also but not as much as they did in rural India

The sharp and sudden increase in employment in September 2021 was largely a rural story. In all the major labour market metrics, it is rural India that shows big improvements. Labour conditions improved in urban India, too, but not as much as they did in rural India.

Labour participation increased from 40.52 per cent in August to 40.66 per cent in September. This 0.14 percentage point rise was concentrated in rural India where the labour participation rate (LPR) increased by 0.20 percentage points. This is a much bigger increase than seen in urban India where the LPR increased by a much smaller 0.02 percentage points.

The all-India unemployment rate fell by 1.46 percentage points from 8.32 per cent in August to 6.86 per cent in September. The fall was larger at 1.58 percentage points in rural India than in urban India where it was only 1.16 percentage points. The unemployment rate in rural India was lower at 6.1 per cent in September compared to 8.6 per cent in urban India.

The employment rate rose by 0.85 percentage points in rural In­dia — from 38.68 per cent in August to 39.53 per cent in September. In comparison, urban India saw a smaller increase of 0.47 percentage points in its employment rate in the same months — from 34.15 per cent to 34.62 per cent.

India’s employment rate incre­ased by 0.72 percentage points — from 37.15 per cent in August to 37.87 per cent in September. This translates to a big 8.5 million increase in employment during the month.

Of these 8.5 million additional people employed in September, 6.5 million were in rural India. Rural India accounts for about 69 per cent of total employment. But 76.5 per cent of the additional employment created in September was in rural India. This is an extraordinary increase in rural India in the month of September when the demand for labour from agriculture is usually low. Surely, agriculture absorbed an additional 0.55 million during the month. But, the remaining, and much larger, 6 million were absor­bed in non-farm rural jobs.

The construction industry in rural India was the largest absorber of additional labour in September, taking in 7.55 million people. There could be two major reasons for this sharp increase.

First, investment in road building has been growing steadily. CMIE’s CapEx database shows that road projects are getting commissioned at a rapid pace. Roads projects worth Rs 1 trillion were completed in 2020-21, and Rs 1.27 trillion worth of projects are expected to be completed in 2021-22. Central government expenditure data from the Controller General of Accounts shows that spending by the Ministry of Road Transport and Highways during April-August 2021 was more than twice the spending in the same months in 2020. The ministry spent Rs 780 billion this year against Rs 374 billion in the last year or Rs 322 billion in the year before. This accelerated spending and the expectation of more road projects being completed in the year could have created the additional dem­and for labour in the construction industry.

Second, a somewhat less likely reason, is that it is possible there was some acceleration in employment under the Mahatma Gandhi Nat­i­o­nal Rural Employ­ment Guarantee Scheme (MGNREGS). The Ministry of Rural Development shows a 41 per cent fall in spending during April-August compared to the same period last year. But the ministry is known to delay payments. The MGNREGS website also does not show any spurt in employment in September. The website is known to show large variations over time. So, we need to wait to either confirm or reject this possible reason for the increase in employment in construction in rural India.

Rural India also saw a substantial increase in employment in the manufacturing sector in September. Em­ployment in rural manufacturing industries increased by 4.7 mill­ion during the month. Of this, emp­loyment in food industries in­­c­reased by 2.16 million. Other major industries that saw an inc­r­e­ase in employment in rural India were metal, which added 1.5 million jobs, and textile, which added 0.2 million new jobs.

However, the rural services sector shed a substantial 6.8 million jobs. Most major services industries shed jobs in September. These included retail trade, personal non-professional services, travel and tourism, and education.

As rural regions added 6.5 million jobs in September, they abs­orbed large numbers of the unemployed. As a result, the number of unemployed persons in rural India fell by 4.6 million — from 22.7 million to 18.1 million. Besides, people also seem to have moved from the services sectors to construction and manufacturing industries in rural India. Most of the new jobs created in rural India were of daily wage labourers. There was an increase in salaried jobs also. Rural India added 2.8 million salaried jobs.

The addition of salaried jobs was essentially in urban India. Nearly 60 per cent of the total 6.9 million salaried jobs added in September were in urban India. While rural India added 2.8 million, urban India added 4.2 million salaried jobs. But it is likely that these salaried jobs in urban India may not be of good quality. The manufacturing sector saw a fall in employment in urban India in September. And, a large part of the increase in services sector jobs was among non-professional personal services. There were increases in education, and travel and tourism but these were small. The big story of job increases in September 2021 is, therefore, of rural India.

The writer is MD and CEO, CMIE P Ltd