The Mahatma Gandhi Rural Employment Guarantee Scheme turned out to be a great saviour in supporting livelihoods battered during the pandemic. Demand for jobs under the scheme continues to remain above the pre-lockdown levels even after a complete removal of restrictions on movement. Given India’s dismal record in creation of jobs, there is much merit in the scheme.
Economists have recommended an equivalent urban employment guarantee scheme. Some state governments have heeded this suggestion. The government of Rajasthan announced the Indira Gandhi Shehri Rozgar Guarantee Yojana on September 9, 2022. The scheme offers 100 days of employment in a year to a needy family residing in urban areas of the state.
Rajasthan has a high unemployment rate of around 25 per cent. In September 2022, the unemployment rate was 23.8 per cent. The rural unemployment rate was 23 per cent and the urban rate was higher at 26 per cent. The unemployment rate has increased dramatically from about six per cent till mid-2018 to around 12 per cent in the following two years. Since late 2020, the unemployment rate in Rajasthan has been over 20 per cent. The state has an unemployment challenge and the intervention is therefore understandable.
An encouraging aspect of Rajasthan’s rising unemployment rate is that it is a result of an increasing labour participation rate (LPR). Rajasthan’s LPR is among the highest of Indian states. At over 44 per cent during May-August 2022 it was the 7th highest among 28 states for which such estimations are made by CMIE from its Consumer Pyramids Household Survey data. While Rajasthan’s LPR was 44.1 per cent in May-August 2022, that for India was 39.2 per cent. Neighbouring Haryana, Madhya Pradesh, Delhi and Uttar Pradesh were much worse at 41%, 36.9%, 35.6% and 33%, respectively. Gujarat to the south was a shade better at 44.7%.
Rajasthan is one of the few states that has been recording a rising LPR. More importantly, it witnessed a bigger spurt in its LPR after the Covid pandemic spread in India. A greater and increasing proportion of the people of Rajasthan are expressing a desire to be employed. This is not true for India as a whole. In 2016, the LPR was 37.6 per cent. It rose to 38.6 per cent in 2017, 39.3 per cent in 2018 and 40.4 per cent in 2019. In the pandemic year of 2020 it increased further to 41.4 per cent and then vaulted to 44.6 per cent in 2021. In the first eight months of 2022 it averaged at 44.4 per cent.
Between 2016 and 2019, Rajasthan steadily narrowed the gap between its LPR and that of the all-India average. Since 2020, Rajasthan’s LPR has been much higher than the all-India average.
Rajasthan’s LPR has risen in both, rural and urban regions. This again, is unusual. Usually, the LPR is higher in rural regions than in the urban regions. But in Rajasthan, rural LPR has stagnated since early 2021 at around 44.6 per cent. In fact, it fell to 44 per cent during May-August 2022. Urban LPR has continued to rise to reach almost 45 per cent. In comparison, the all-India urban LPR is around 37.5 per cent.
Rajasthan is charting a different path in one more dimension – its urban female labour force participation rate is higher than its rural female labour force participation rate. Urban LPR was lower than rural LPR between 2019 and early 2021. Since mid-2021, urban LPR in Rajasthan has been higher than in rural regions. This is not how it stacks up for the rest of India. Urban female LPR in Rajasthan at over 8 per cent is significantly higher than the all-India urban female LPR which is around 7 per cent.
Similarly, the urban male labour force participation in Rajasthan at around 73 per cent is much higher than the all-India average of 64 per cent.
Evidently, the pressure for jobs in urban Rajasthan is much higher than in other urban parts of India. Also, in recent times the pressure for jobs in urban Rajasthan has grown a little faster than in the rural parts of Rajasthan. But, Rajasthan has not been able to generate the jobs required to meet this surging demand. The unemployment rate in Rajasthan at around 26 per cent is second only to Haryana. Further, the unemployment rate in urban Rajasthan at nearly 29 per cent is much higher than the rural unemployment rate of around 25 per cent.
Neighbouring states – Haryana and Rajasthan face similar challenges, of high labour participation and high unemployment rates. Both states have intervened, but differently. Haryana has sought to reserve jobs, including in the private sector, for locals. It has sought to exclude migrants because the state is a significant destination for people looking for good quality jobs.
Rajasthan on the other hand has chosen the path of providing jobs. It has possibly correctly diagnosed the problem as one of urban jobs. It has also possibly drawn lessons from the recent success of the MGNREGA scheme. It was logical for it to extend this scheme to urban regions.
While the Haryana intervention faces challenges in courts, Rajasthan is unlikely to face that challenge but it may remain a fiscal challenge.
In India, the unemployment rate has rarely spurred the political establishment beyond making pre-poll promises. But evidence from Rajasthan and Haryana show that when the unemployment rate touches around 25 per cent, the political establishment across ideologies get into action.
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