Two years after demonetisation, India is still struggling to create jobs

Waiting for jobs.
Waiting for jobs.
Image: AP Photo/Mukhtar Khan
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Two years since the Narendra Modi government derailed the Indian economy with the note ban, it is still limping, at least on the jobs front.

The November 2016 demonetisation of Rs500 and Rs1,000 notes, which accounted for about 86% of the currency in circulation by value at the time, had dealt a body blow to the country’s small and medium businesses as they struggled to sustain operations amid an acute cash crunch.

In the months that followed, over 1.5 million jobs were lost, according to the Centre for Monitoring Indian Economy (CMIE), a Mumbai-based think-tank that tracks business and economic data.

The situation remains grim even now. There was zero growth in the job market in financial year 2018. For October 2018, the unemployment rate rose to a two-year high of 6.9%, according to a CMIE report.

Another worrying sign is the labour participation rate (LPR), which, in October, stood at a dismal 42.4%, the lowest level since January 2016. LPR, deemed a better indicator of employment, is the share of the population above 15 years of age that is employed or seeking jobs.

“Labour participation rate (LPR) was of the order of 47%-48% before demonetisation. But, it fell sharply after demonetisation and has still not recovered,” Mahesh Vyas, CEO of CMIE, said in the report.

Going ahead, a sharp recovery in the situation is unlikely as private-sector investments have remained subdued.

All this is a far cry from Modi’s 2014 election promise of creating 10 million jobs annually. A failure to fulfill its poll commitments can wreck the ruling Bharatiya Janata Party’s fortunes in the upcoming 2019 general elections.

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