New Delhi: Urban India is reeling from the Covid-19 pandemic yet again. Rising unemployment, business shutdowns leading to reverse migration and plunging demand have again turned the spotlight on the urban economy.
Data from the Centre for Monitoring Indian Economy (CMIE) shows that urban unemployment crossed 10 per cent in the week ended 18 April. These levels were only seen for a few months last fiscal after Prime Minister Narendra Modi announced a nationwide lockdown in March 2020.
Now, urban unemployment was at 10.72 per cent in the week ended 18 April, as against 9.81 per cent in the week ended 11 April and 7.21 per cent in the week ended 4 April.
Effectively, urban unemployment has surged by over 3.5 percentage points in the last two weeks since states including Maharashtra started announcing various curbs to control the spiralling of the pandemic.
The unemployment scenario is likely to worsen further in the coming weeks with many states announcing stringent lockdowns for longer periods beginning Monday and restrictions on operating of factories and workplaces, local markets and other contact retail services like restaurants, malls and salons.
On Monday, Rajasthan and Delhi followed Maharashtra’s footsteps and imposed a complete curfew restricting movement and opening of shops even during daytime after the initial phase of night curfews.
Economic indicators paint grim picture
High frequency data from the Google mobility index also reflects the sharp slump in mobility and potential economic activity in the last two weeks, especially in urban areas.
Retail mobility and traffic congestion have taken a hit over the last few days, data shows.
Mobility trends for places such as restaurants, cafés, shopping centres, theme parks, museums, libraries and cinemas is down 34 per cent in India as of 14 April, the Google mobility data shows.
With a fall of over 50 per cent, the situation is worse in states like Maharashtra (51 per cent), Madhya Pradesh (51 per cent) and Chhattisgarh (76 per cent). Some of the states that have seen over a 40 per cent fall include Delhi and Gujarat.
Even among these states, the fall in mobility has been sharper in urban areas as compared to rural areas. For instance, and on expected lines, the fall in mobility in Mumbai by over 60 per cent is worse than the fall in the rural districts like Kolhapur, Jalna and Osmanabad.
Maharashtra, the biggest contributor to India’s GDP, has placed restrictions on operation of factories forcing many manufacturing plants to scale down production to adhere to the new norms.
Similarly, mobility trends show that usage of parks, public transport and travel to workplaces have also plunged in the last few weeks, signalling the impact of the pandemic and the restrictive measures put in place on mobility of people.
The data is compared against a baseline, which falls between January and February 2020.
“This is a situation comparable to the first Covid wave where agriculture and rural India did relatively better due to a good harvest and the rural job guarantee scheme. Unfortunately, we don’t have a counterpart to MGNREGA in urban areas. Any quasi intervention to address unemployment in urban areas is not possible,” said D.K. Srivastava, an economist and chief policy advisor at EY.
“People employed in construction, manufacturing and services are vulnerable and live in urban centres or just on the periphery. They will be hit and there are not enough urban intervention tools that have been developed,” he said.
Till the lockdowns are for a finite period and the curbs are limited to some states, the migrant labour may still decide to stay put in urban centres. But if the situation gets worse, reverse migration will again pick up, he added.
Return of reverse migration
Srivastava’s views on unemployment were echoed by Mahesh Vyas, managing director and chief executive, CMIE.
“The lockdown will hurt urban employment in April or beyond if the lockdowns continue. Hopes of salaried employees returning back to office seem to have receded with the continued fall in salaried jobs and with the resurgence of the lockdown,” he said in a 12 April note on CMIE’s website.
He also pointed out that lockdowns are engineering the urban to rural migration with reports of migrants moving out of Maharashtra, Gujarat and Delhi to Uttar Pradesh, Bihar and other eastern states.
“The return of reverse migration hit the retail and restaurants sectors in Delhi and Mumbai initially but is reportedly beginning to hit the logistics component of the supply chain as well,” he said.
Rural economy less impacted for now
The rural economy, however, is relatively less impacted for now. Bumper crops and expectation of a normal rainfall means that rural India may be better placed to battle the pandemic and its economic fallouts.
The forecast of a normal monsoon should support rural demand, a 19 April Bank of America Global Research report citing economists Indranil Sen Gupta and Aastha Gudwani said, forecasting that farmer incomes could grow by 10.4 per cent in the summer rabi harvests, marginally higher than 8.7 per cent reported the previous year.
However, the rising influx of people who are once again fleeing cities means that the demand for the flagship employment guarantee scheme may be much more than the actual work provided. In addition, migrant workers returning to their villages also carry the risk of spreading this virus in these places.
“While today rural India appears to be relatively insulated compared to urban India for now, we will come to know only in one or two months if the villages are relatively safe. Participants in Kumbh Mela were from hinterlands of different states and one needs to see what will be the impact on Covid cases,” said Madan Sabnavis, chief economist at Care Ratings.
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