Unemployment had been one of the main causes of suicides in India according to the National Crime Bureau Report data for 2019. Now with the urban unemployment being at a high of 9.83% while the #GDP has fallen to -23.9% has spread a distress amongst the nation. However, rural India has been leading a better scenario with respect to the employment rate according to Centre for Monitoring Indian Economy i.e. CMIE.
This stablility is observed in rural India due to heavy monsoon season that improved the sowing of kharif crops for the farmers leading to an increased output. Although this stability won't last long as the #fallingGDP shows that unemployment is to only spread from now on. The fissures in rural economy are already showing during August when the Covid-19 cases have increased at a blinding rate. As a result, overall employment in rural India declined by 3.7 million with employment in farming down by 0.7 million last month and job losses in the rural non-farming sectors at 3 million. (Observe Chart 1: Unemployment Rate 2020, source- CMIE)
With the fall in employment it is resulting into shortage of money in people's hands which decreases their consumption. Consumption (C) being the biggest driving force of GDP in India has thus taken a toll. When people don't have the money to spend, they also don't have it to invest which further derails investments (I), the second factor that drives a GDP of any nation. The other two engines that run the GDP - government expenditure and net exports do not carry the same weightage of driving the GDP of India. With the falling GDP it can be viewed that the two areas that carry the most load of driving the nation's GDP - consumption and investment have taken a deep toll.
Hence, what needs to be done is that government needs to make use of schemes like #MGNREGS that would employ the labor force that comes from rural India back to the urban cities. Also it is important that government increases its spendings on the public and makes sure that they have money that could be spent on consumption. As any economist would suggest in a recession that the solution to come out of it is, increasing government expenditure which has fallen short till now. McKinsey Global Institute provides ways in which an additional 3.5 per cent of the GDP can be raised by the government. So the nation that comprises of 65% of a young population now waits for PM Modi to find solution to the rising umemployment rate and the crushed dreams of young graduates that are waiting to be employed. It would also do well to think how government will provide the money to supply back into the economy as it itself is indebted for the past few years. The government hence, needs to be careful of going more in debt as that could create long-term problems that one will not foresee until one reaches that bridge.
