Five lakh jobs lost between Oct-Dec 2008

The spectre of job losses seems to have arrived on Indian shores. With the latest US jobs data showing job losses of more than 500,000 for the third consecutive month resulting in the unemployment rate rising to 7.6 per cent, and the ILO has predicted that global unemployment could rise by a range of 18 million to 50 million workers, India does not appear to have escaped unscathed, says a new Citigroup survey.

A report released last week by the ministry of labour indicates over 500,000 job losses during October to December 2008, with export-oriented sectors such as gems and jewellery, autos, and textiles being most impacted.

However, this only covers the organised sector, which comprises barely 10 per cent of the country's 385-million workforce. While India's unemployment rate is officially at 8. per cent, with disguised employment the rate could be substantially higher.

On a sectoral basis, more than half the workforce continues to depend on agriculture, although it accounts for just 18 per cent of GDP. While this has been on the downtrend, it has resulted in widening income gaps.

While the economy could still post 5.5 per cent GDP in FY10E, high relative to developed economies, given India's demographic changes, the pressure on employment, confidence and price levels would be more burdensome than in the past (studies estimate that employment elasticity to GDP has tripled from 0.15 to 0.48.

India's weak social security net indicates much scope for improvement. While the negative fiscal implications of the National Rural
Employment Guarantee Scheme are well known, over the last few years, NREGS has helped rural employment.

In addition to fiscal measures for employment intensive industries and the urban sector, food price inflation also deserves a close watch given that primary articles comprise 42 per cent of the consumption basket.