By Satish Singh
Gradually, the Omicron variant is starting to become a factor in the start of the third wave. According to experts, even though this variant is not fatal, but its rapid transmissibility has started becoming a hindrance in the path of development. The fear of stagnation in economic activities has started mounting. Due to this, the possibility of a sharp increase in the unemployment rate in the country has also increased, while the unemployment rate in the country is already at a high level.
According to the report of the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in December stood at 7.9 percent, which was higher than 7.0 percent in November. According to the unemployment data released by CMIE, the unemployment rate in May 2021 was the highest at 11.84 percent. The unemployment rate in January 2021 was 6.52 percent, while in February, March, April, May, June, July, August, September, October, November, and December were 6.89 percent, 6.50 percent, 7.97 percent, 11.84 percent, 9.17 percent, 6.96 percent. percent, 8.32 percent, 6.86 percent, 7.75 percent, 7.00 percent, and 7.91 percent respectively. These figures show that due to impact of the second wave of Corona, the unemployment rate has increased in the last months. The slowdown in the second wave saw a decline in the unemployment rate in January and February 2021, which remained moderately high in the following months as economic activity returned to normalcy at slow pace.
According to the CMIE, the unemployment rate in the urban area was at 9.3 percent in the month of December, while it was at 8.2 percent in the month of November. In rural areas also, the unemployment rate increased to 7.3 percent in the month of December. Experts also believe that the Omicron variant can damage the recovery of the economy in the last quarter, as its transmissibility is very fast. 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 the capital Delhi also, the unemployment rate was 9.8 percent in the month of December 2021.
According to CMIE data, the unemployment rate reached at 11.84 percent in May 2021, which improved in subsequent months and came down to 6.86 percent in September and now again due to the Omicron variant of Corona. It has started increasing rapidly.
Unemployment is considered a yardstick of 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. The unemployment rate shows how many people are employed in the country and how many people are unemployed. In the current negative scenario, CMIE believes that the performance of the agriculture sector in the current financial year may once again be excellent, as the cases of corona will increase less rapidly in the rural area. This will create opportunities for migrant laborers to work in the fields and there may also be a slight improvement in the unemployment rate.
The impact of the Omicron variant is starting to show in the corporate world. Companies are again implementing the concept of work from home, which can be effective till April 2022 in the current environment. Pharma company Shipla has issued a work from home order for all employees. A similar order was issued by ICICI Prudential Mutual Fund in the first week of December itself, while in the light of the latest order of the Maharashtra government, Mahindra & Mahindra Mutual Fund has asked its employees to come to the office 3 days a week. Given the potential for rapid expansion of the Omicron variant, government and private offices in Maharashtra will now operate at 50 per cent capacity. Companies like Dabur India, Flipkart, Parle and Make My Trip have also issued work from home orders for their employees.
Corona cases are again increasing rapidly in the country. On January 3, 2022, 33,750 new patients were found infected with corona, which is 22 percent more than on January 2. On January 3, the number of patients infected with corona had increased to 1,45,582. This number is the highest in 12 weeks. During the last week i.e., 20 to 26 December 2021, 41,169 new cases were reported. In this way, the rate of corona infection in the country has almost tripled in a week and the number of patients infected with corona has increased by 82 thousand.
Here, the activities of the manufacturing sector have strengthened in the month of December, but it is less than the month of November. In the month of 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 due to the rapid pace of the third wave of Corona.
The Purchasing Managers Index is an indicator of economic health. With the help of this, the economic condition of a country is assessed. PMI is associated with many activities of the private sector including the services sector. With the help of this index, information about the economy is made available before the official data, which gives accurate indications about the economy earlier and makes it possible to take corrective steps in time. It is based on 5 major factors namely, New Order, Inventory, Production, Supply, Delivery and Employment status. Generally, this index is used to find out the position of business and manufacturing.
It would be fair to say that the increasing speed of the third wave of Corona has started having a negative effect on the economy. If this is not controlled soon, then the hope of recovery in the economy may be tarnished again. Therefore, both public and the government need to be cautious as well as take necessary steps to prevent it.
(Author is Chief Manager at State Bank of India, Mumbai. The views expressed are personal opinion of the author. He can be reached at satish5249@gmail.com and singhsatish@sbi.co.in.)
