One year of economic depression accompanied by the burden of unemployment is sinking Kashmir into a pit of no retreat
IN JULY 2019, India’s leading economic intelligence company, Centre for Monitoring Indian Economy Pvt. Ltd (CMIE) conducted its routine monthly state-wise unemployment survey in the erstwhile state of Jammu and Kashmir. At that point in time, CMIE recorded over 6.5 Lakh unemployed people in the region. With a total workforce of about 43 lakh, comprising just 1 percent of the Indian workforce, J&K’s unemployment ratio was hovering at around 15.11 percent, almost double the national July’19-unemployment rate of 7.3 percent.
Fast forward to August 2020, latest CMIE survey ironically shows the unemployment rate in J&K improving to 11.10 percent while the national ratio deteriorating to 8.35 percent. Although deterioration of national unemployment ratio does make sense keeping in consideration the impact of Covid19 lockdowns but J&K showing an improvement despite sustaining twin shocks of Aug 5 2019 and this lethal pandemic, sounds nothing short of a perfect paradox. The discrepancy might, to some extent, be attributed to the way unemployment ratio is calculated based on the Labour force participation rate (LFPR). LFPR — the ratio of people in the working age (16-64 years) to those employed or actively seeking jobs – has contracted. Many job seekers have withdrawn themselves from the job market. This is a common phenomenon during recessionary times. Data from CMIE therefore seems to suggest that there has been a migration of labour force from the “working age and looking for jobs” category to “working age but not looking for jobs”. This alarmingly shrinking labour force is even worse; indicating hopelessness, despondency and dejection.
Besides CMIE, there are other data sources which indicate the severity of unemployment in J&K in last 12 months. For example, the employment registration exercise carried out by the Directorate of Employment, GoJK in Nov-Dec 2019. It witnessed around 3 Lakh registrations by graduates, post-graduates and PhD holders. This overwhelming response & the fact that this doesn’t capture the major portion of the workforce which comprises of undergraduates or less qualified, speaks volumes about the economy’s absolute failure in containing J&K’s unemployment tsunami.
Another such recent event was witnessed in the month of July 2020. In response to Class IV posts advertised by the Jammu & Kashmir Services Selection Board, a whopping 4 Lakh applications flooded the Board’s online portal. Similar overwhelming numbers were witnessed for the post of Accounts Assistant and those floated by some regional Banks.
From the Same Author: Quantifying Kashmir’s Economic Winter
The other aspect that deserves to be embarked upon vis-à-vis unfolding employment crisis in J&K is the impact of economic contraction that the region has faced in last 12 months. This column has previously pegged the economic loss on account of twin systemic shocks in last 12 months at a whopping Rs. 40,943.38 Crore. With 25.80 percent of J&K’s GSDP being wiped off, the impact on job markets has been equally devastating. Elementary economic models like the Okun’s law which helps in establishing an indicative relationship between economic growth (or contraction) and unemployment rates can be handy in arriving at a rough estimate of the additional jobs lost due to this output contraction.
As per Okun’s law, increase in the rate of unemployment is equal to almost half of the corresponding contraction rate in the economic output. This implies that a 25.80 percent economic contraction will result in incremental unemployment to grow by 12.90 percent of the workforce. With a base of 43 lakh workers, a 12.90 percent contraction in jobs will therefore result in a staggering loss of 5.55 Lakh additional jobs. Incidentally, Kashmir’s apex business body, The Kashmir Chamber of Commerce and Industry too has pegged the number of jobs lost in various sectors at 4.57 Lakh. This additional mass of 5.55 lakh unemployed people when aggregated with the existing 6.50 lakh (CMIE survey July 2019), we arrive at a towering figure of around 12 Lakh unemployed people. That’s an intimidating unemployment ratio of around 28 percent. In other words we are talking about choked income or in worst cases no income for around 12 lakh households. As a result a big portion of the population is in the process or has already been pushed into abject poverty within a short span of only 12 months. That’s not just socio-economically alarming for the general masses but equally lethal for the Govt’s tax revenues.
Except two sectors, Govt sector comprising of around 4.5 Lakh govt employees who draw home around Rs. 37,000 Crore annually in terms of salaries and pensions and a mutedly impacted agrarian sector; the distribution of these job losses is holistic. Almost 50% of the job losses are expected to be borne by labour intensive industries like trading, construction, manufacturing & handicrafts. These economic segments are going to be worse hit in terms of employment downsizing. Besides these one of the most badly hit sectors in J&K since Aug 5 2019 has been the transport sector which supports the livelihood of over 3 Lakh people in J&K. Likewise Tourism sector comprising hotel & restaurant industry and other allied overlaps of the gig economy is expected to remain down and out for a long time. A substantial portion of employee downsizing in these segments is therefore expected to be irreversible. Add to this the on ongoing reverse migration of scores of people who were working in different parts of mainland India and rest of the world. The underlying balloon of unemployed people is J&K has therefore assumed dangerous proportions.
The policy responses on the other hand have been timid, lax and directionless. Too much of hope has been pinned around the unwanted & hassle laden credit linked support to businesses. The administration is even not able to fast track the already approved vacancies in the Government sector. That needs to be prioritised in order to instil some semblance of hope and stability in an otherwise defeated labour market of J&K.
Private sector, which has the ability to soak unemployment pressure substantially, has been running from pillar to post, gasping for tax rebates, loan waivers and other facilitative policies. In absence of any tangible handholding from the Govt the private sectors’ appetite too is thinning fast. If not for the people, the fast emptying coffers of the Government treasury should ring sufficient alarm bells. Government too depends on sustained tax revenues to survive, which can only be achieved when there are enough wage earners, buyers & sellers in the markets. It is therefore in the interest of both, the ruling as well as the ruled, to collectively stand up to this challenge wholeheartedly without further delay.
Ejaz Ayoub has been working in the BFSI industry in the field of Financial Risk Management, Strategy, Investments and Foreign Exchange. He can be reached at:[email protected]
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