Editorial: Challenging days ahead
Though India is one of the fastest-growing economies, the fact remains that jobs have not been created at a steady pace
The soaring unemployment rate, which touched 8.3% in December, should be a matter of concern for the policymakers as India enters the new year with hope and expectations of a rebound in the economy. The December unemployment rate was the highest in 16 months. According to data published by the Centre for Monitoring Indian Economy (CMIE), the unemployment rate fell to 6.4% in September — which was attributed to hiring around the holiday and festive season — but it rose steadily after that, to 7.8% in October and 8% in November. Among the States, Haryana’s unemployment rate stands at a staggering 37.4%, while it is 28.5% in Rajasthan and 20.8% in Delhi. This trend, coupled with the warning by the International Monetary Fund (IMF) that a third of the world would be hit by recession in 2023, presents a sobering prognosis for the immediate future. Though India is one of the fastest-growing economies in the world, the fact remains that jobs have not been created at a steady pace and exports have fallen. Micro, Small, and Medium Enterprises (MSMEs) have been struggling since 2016, as is borne out by the fact that the unemployment rate was about 5% five years ago as compared with 8.3% now. As the global economy stares at possible recession, India, being part of the globalised world order, may not be able to completely escape the spillover effects. Even before Covid-19 struck, India was facing high inflation and had eight successive quarters of falling growth, unlike developed countries that saw inflation spiralling only post-Covid and the Russia-Ukraine war.
As a result, India’s journey back to normal growth would be a more daunting task. Overall, the picture does not inspire much confidence — the country’s current account deficit reached an all-time high of $36.4 billion in the July-September quarter, trade deficit with China has risen to record levels and the rupee had a terrible year, falling from Rs 74.33 to Rs 82.72 to the US dollar in 2022, a decline of 10.14%. All this suggests that India may be in for another difficult year. The IMF projections show that global growth will slow down to 2.7% in 2023 from 3.2% last year and 6% in 2021. In such a situation, all central banks are moving towards the tight lending rate territory which would further slow down global growth. In India, manufacturing continues to be wobbly. Factory output, as measured by the Index of Industrial Production (IIP), slumped to a 26-month low in the festive month of October. Core sector growth for October was just 0.1%, the lowest for 20 months. That has led to a rapid downward revision of India’s growth projections by analysts for the next fiscal. There is continuing distress among the MSMEs, reflecting the deep cleavages in industrial recovery.
