HomeBusinessUnemployment below pre-COVID level: Finance Ministry

Unemployment below pre-COVID level: Finance Ministry

Q1 growth in private consumption is a function of not only increase in demand, but also increase in employment levels, it says

Q1 growth in private consumption is a function of not only increase in demand, but also increase in employment levels, it says

The Union Finance Ministry said on Saturday that demand for work under the National Rural Employment Guarantee Scheme hit a two-year low in August, indicating that the recovery in the economy is creating more jobs in rural and urban India. .

India’s inflation, the ministry said, is “under control” and is expected to dip below the 7% mark in August in the coming months as global supply constraints ease. However, the upside risk remains as producers are likely to pass on higher input costs to customers “at the earliest” and the fall in kharif sowing raises concerns on the food inflation front.

Emphasizing that the decline in unemployment rate has come down from pre-pandemic levels due to expansion in economic activities as well as increase in employment opportunities, the ministry said Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). There has been a decrease in the work demanded by the people. has been declining in recent months.

“The demand for work under MGNREGA has been declining since May and was lowest in August 2022 as compared to the same period of the previous two years, indicating a potential reduction in the unemployment rate in rural areas,” the ministry’s August Economic Review said. indicates.” ,

“This decline can be attributed to a pick-up in agricultural and non-farm activities, which is associated with the end of reverse migration as a result of increased employment opportunities in industrial and urban areas,” it suggested. .

According to Periodic Labor Force SurveyThe unemployment rate in urban areas declined for the fourth consecutive quarter to 7.6% in the April-June quarter (Q1, 2022-23), lower than the corresponding pre-pandemic level, the review noted.

Citing data from the S&P Global Purchasing Managers’ Index for the manufacturing and services sectors and a private job portal, the ministry said employment growth has continued in July and August as well.

“The unemployment rate is now below pre-pandemic levels as measures taken to increase employment levels, both before and during the post-pandemic period, are bearing fruit,” it argued.

Arguing that the growth in private consumption in Q1 may not only be driven by stagnant demand and free mobility, but may also be a reflection of “the increasing effectiveness of income support and targeted subsidies provided by the government, the high The creation of jobs from the level of “capital expenditure of the public sector, and a general increase in the level of employment”.

“India’s relatively bright outlook on economic growth and improving its employment levels is also reflected in the country’s relatively strong position in the external sector,” the ministry stressed.

Despite the ongoing global slowdown, India’s exports grew at the second highest rate in the first quarter and foreign direct investment inflows were the fifth largest among “a defined set of developed and developing economies”.

“The rate of job creation in the services sector has become the strongest in 14 years, with each of the sub-sectors including transport, information and communication, finance and insurance and real estate and business services seeing improvement. The Naukri Job Spec Index also reflects a similar increase in job creation driven by the agriculture, services and construction sectors,” the review said.

inflation outlook

The acceleration in inflation to 6%-plus levels by 2022 was driven more by imported price increases compared to 2021, and is expected to ease further as global supply conditions ease, the ministry said.

It attributed a return to 7% from a five-month low of 6.7% in August, mainly to retail inflation on food prices, and said a fall in kharif sowing could reduce production of rice and pulses. , thereby increasing the “reverse risk”. food inflation.

This core consumer price inflation, which excludes food and energy items, “may remain sticky in the coming months with pending pass-through of input costs to liquidate consumer products”. Told.

“The strong growth of private consumption, confirmed by the GDP projections released for the first quarter of 2022-23, is likely to happen at the earliest, even as inflationary pressures increase,” the ministry concluded.

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