India’s latest job figures are causing consternation among economists, who believe the new data may undermine the country’s economic recovery.
India’s unemployment rate rose to 10.4% last month from 9.7% in July, marking a slowdown from July’s peak of 11.5%.
The latest data shows the unemployment rate for July was 8.5% versus 9.9% in June.
This is likely to put pressure on the Reserve Bank of India (RBI) to cut interest rates.
India, a top destination for foreigners seeking a job, is a magnet for overseas investment.
But the latest data suggests the country may face another challenge: a surge in unemployment due to an increase in the number of people looking for work.
A study by the Centre for Policy Research (CPR) suggests the Indian economy may face a “recessionary phase” if the country continues to grow at its current pace.
This is because there are a lot of unemployed people in the labour force, said the report.CPR said it had “uncertain” reasons for the sharp increase in unemployment.
“If the economy continues to expand at a slow pace, it will be difficult for the Indian government to manage the labour shortage,” the report said.
“Even though unemployment has been falling, this may not be enough to offset the fiscal deficit.”CPR also noted that the jobless rate may not reflect the real unemployment rate because the data is collected only from the survey of the working age population, which does not include people in their early twenties.
“In addition, we do not have sufficient data to determine the actual unemployment rate,” the study said.
It added that there were also some “lackluster” indicators for job creation.
“Although there have been strong job gains, it is important to remember that the overall number of jobs is still not very high,” the paper said.
A large part of the recent surge in the unemployment is due to young people who are looking for jobs, said CITES official Rajeev Bhatnagar.
India has a high level of job vacancies.
In 2016, there were around 15 million vacancies.
But a growing number of unemployed persons are now seeking jobs, especially in the rural areas.
This has led to the creation of large numbers of new job vacancies, the report added.