The unemployment rate in February is at 6.9 percent, lower than the average since July at 7.3 percent, but other metrics like labour participation rate have worsened. Mahesh Vyas, MD and CEO of Centre for Monitoring the Indian Economy (CMIE), discussed what the real signals emanating on employment in the economy are.

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"The unemployment rate is the number of people who are looking for jobs and not finding it as opposed to those people who have got jobs," he said in an interview with CNBC-TV18.

"What the falling unemployment rate is telling us is the number of people looking for job is declining or is not growing,” he added.

“However, what is the denominator, what is the base on which this number is calculated, what if that number itself is shrinking? Unemployment rate was a very good indicator for developed economies where a lot of people were looking for jobs and not finding jobs in a stable labour force situation,” he stated.

"The problem in India is that for many years that denominator is not stable, it shrinks. When that shrinks, the unemployment rate becomes less meaningful. So what is more meaningful is to see how many people are looking for jobs. In India that number has been falling," he further mentioned.

According to him, all is not good because the base itself is shrinking.

He believes one cannot confuse anecdotal evidence of increase in employment somewhere with an aggregate trend. "At all times, there will be some sectors that will show a rapid increase in employment. There is more hiring in the formal sector, which is a good thing but there is a larger fall in the informal sector and that is not a very good thing,” he said.

For more, watch the video.

(Edited by : Priyanka Rathi)

First Published:Mar 2, 2021 2:21 PM IST