India’s unemployment rate rose to nearly 8% in April, a four-month high according to data from the Center for Monitoring Indian Economy Pvt. (CMIE), a private research firm. The possibility of India’s economy recovering is unlikely due to the current catastrophic effect of a second wave of the Covid 19 pandemic. State administrations are extending curfews and lockdowns to try to curb a record surge in virus cases.

“There is a fall in the jobs available. This could be due to the lockdowns,” CMIE Managing Director Mahesh Vyas said, adding “Since the virus is still quite intense and the medical health services are stretched, it’s likely that the situation will remain tense in May as well.”

On Saturday India became the first country to register more than 400,000 daily cases. Then daily Covid-19 deaths in India hit a record 3,689 on Sunday. However the number of new cases slowed slightly on Monday.

Prime Minister Narendra Modi, announced a strict lockdown in March 2020 that resulted in millions of lost jobs and a record contraction in economic output. He is now is urging states to only use such strict lockdown measures as a last resort. Local administrations have been forced to extend curbs as the nation’s unprepared health infrastructure suffers under the surge in virus cases which in turn jeopardises economic recovery.

The weak employment outlook is a risk for India’s chances of reaching double digit economic growth this year. Many economists already have lowered their projections, while several are warning of possible reductions if localized lockdowns are extended further.

Barclays Bank Plc on Monday lowered its forecast for Indias economic growth by one percentage point to 10%, as “there is growing uncertainty around the number of cases and fatalities,” economist Rahul Bajoria wrote in a research note. “Slowing vaccinations are also hurting India’s recovery prospects.”

There is also a backlash against the governments handling of the world’s worst Covid-19 outbreak. President Modi’s party lost a key state in the recent election. Social media is filled with criticism of the handling of the second outbreak highlighting the governments failings. This is leading to foreign envoys offering help with medical supplies as the pandemic continues to ravage the country especially the capital Delhi.

A separate survey by IHS Markit showed the manufacturing sector was still suffering job losses April but the rate of contraction was the weakest in the proceeding 13-month run of the shrinking economy. The CMIE data, which is closely tracked by economists in the absence of real-time employment data from the government, showed joblessness is more acute in urban areas as unemployment forces labourers to return to their villages

The labor-force participation rate, which includes the number of people with jobs and those seeking work, declined to just below 40% in April.

“It’s a double whammy for the economy,” CMIE Managing Director Vyas said. “Some people get disappointed and leave the labour market. The problem is the inability of the Indian economy to generate sufficient jobs for people who want them, so incomes are falling.”

Source: Bloomberg