A looming crisis
With the onset of the third wave, economic activities are facing a downturn, which doesn't augur well for the overall employment scenario
The Omicron variant is believed to be a prime factor behind the onset of the third wave of the pandemic. Some experts say, this variant may not be as fatal as the Delta but its rapid transmissibility has come to hinder the path of development. The fear of stagnation in economic activities has started mounting. As a result, the possibility of a sharp increase in the unemployment rate of the country — which is already very high — has further increased.
According to the report by the Centre for Monitoring Indian Economy (CMIE), unemployment rate in December stood at 7.9 per cent — higher than seven per cent in November. Unemployment rate in May 2021 was the highest at 11.84 per cent. While unemployment rate in January 2021 was 6.52 per cent, in the following months, it stood as follows: February (6.89 per cent), March (6.50 per cent), April (7.97 per cent), May (11.84 per cent), June (9.17 per cent), July (6.96 per cent), August (8.32 per cent), September (6.86 per cent), October (7.75 per cent), November (7 per cent), and December (7.91 per cent). These figures indicate that the second wave of the pandemic caused an increase in unemployment rate. The phase prior to the second wave saw a decline in the unemployment rate in January and February 2021, which remained moderately high in the following months.
According to the CMIE, the unemployment rate in urban areas was at 9.3 per cent in December, while it was at 8.2 per cent in November. In rural areas also, the unemployment rate increased to 7.3 per cent in December. Experts believe that the wave triggered by the Omicron variant can damage the recovery of the economy. The highest unemployment rate among states in November 2021 was in Haryana at 34.1 per cent, followed by Rajasthan at 27.1 per cent, Jharkhand at 17.3 per cent, Bihar at 16 per cent and Jammu and Kashmir at 15 per cent. In Delhi also, the unemployment rate was 9.8 per cent in December 2021.
Unemployment is considered a yardstick for measuring the health of the economy. If the unemployment rate is low, then the economy is considered healthy, and if it is high then the economy is considered sick. In the present scenario, CMIE believes that the performance of the agriculture sector in the current financial year may once again be satisfactory, as the cases of Coronavirus infection may increase less rapidly in rural areas. This will create opportunities for migrant labourers to work in the fields, causing a slight improvement in unemployment rate.
The impact of the Omicron variant is visible in the corporate world as well. Companies are again forced to implement work from home policy. Given the rapid expansion of the Omicron variant, government and private offices in Maharashtra have been operating at 50 per cent capacity. Delhi government has also mandated work from home policy for companies.
Activities of the manufacturing sector had strengthened in December, but it was less than that in November. In December, both production and demand had picked up. The Purchasing Managers' Index (PMI) for manufacturing declined from 57.6 in November to 55.5 in December. The Purchasing Managers' Index is expected to decline further in the coming months on account of the third wave.
The Purchasing Managers' Index is an indicator of economic health. With its help, the economic condition of a country can be assessed. PMI is associated with many activities of the private sector, including services as well. With the help of this index, information about the economy is made available before the official data, which gives accurate indications about the economy in advance, and makes it possible to take corrective steps in time. It is based on five major factors namely, new order, inventory, production, supply, delivery and employment status. Generally, this index is used to find out the position of businesses and manufacturing.
It would be fair to say that the third wave of the pandemic has started showing a negative impact on the economy. If this is not controlled soon, then the hope of economic recovery will be tarnished again. Both the public and the government need to be cautious and take necessary steps to prevent it.
Views expressed are personal
