Drop in India’s Labour Participation Rate

Even as national output has crept back to pre-pandemic levels, what remains an enduring puzzle is the dramatic fall in India’s employment rate to an all time low of around 42% lately. This is by far the lowest among all comparable Asian economies where the labour participation ratio (LPR) or active job seekers are above 60% of the employable population, as per ILO data below.

Employment rate or LPR is a measure of how many able and employable people in the economy are actually looking for work.

As per independent economic data agency CMIE, India’s LPR was 41.38% in March 2021 (almost same as the ILO figure) but has further fallen to 40.15 % last month (see table below).

This means 60% of employable people in India have fallen off the job market. They are just not looking for work. Can an economy prosper with 60% of its employable people not seeking work? This is the all important question.

CMIE’s CEO Mahesh Vyas argues that for some unknown reasons, Indian policymakers have not paid much attention to the unusual decline in the LPR in recent years.

— source thewire.in | M.K. Venu | 30 Dec 2021

Nullius in verba

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