September 29, 2019

Rising Unemployment and the Urban Employment Guarantee

Tikender Singh Panwar

UNEMPLOYMENT in the cities is rising acutely since demonetisation was implemented in the country by Narendra Modi on September 9, 2016. The voices of the unemployed could not be heard at that time since most of the people who had to lose their jobs were from the unorganised sector. The informal sector comprises 93 per cent of the city jobs, the figure two decades ago was nearly 75 per cent. This figure explains the humongous loss done to the job security in the cities. The informal sector workers were the hardest hit because of demonetisation. However, the issue of unorganised unemployment could not gauge the limelight during that period. It was recently, when one of the automobile companies announced the shutting down of its plant for two days, that the issue could gain much attention. This is the worst scenario in last 40 years, as pointed by many economists.

The incapacity of the large scale unemployed from the informal sector has now led to a huge loss of the demand in the market thus leading to further loss of jobs even in the formal sector. The GDP growth rate for the previous quarter in the country has fallen to 5 per cent. However, economists point out that the actual growth is lesser than that. This is an impending crisis which was looming large since long and has now manifested itself in loss of jobs thus leading to an economic crisis.

Let us understand the employment scenario in the cities. As mentioned above that majority of the jobs in the cities are in the informal sector and it is this sector which was the hardest hit since last few years; the data revealed by the NSSO and CMIE are startling. The NSSO places the unemployment figures to 6.1 per cent(The CMIE for the first quarter of 2019 placed it 7.1 per cent). However, for urban unemployment the rate is 7.8 per cent. For urban women the unemployment rate is far worse; it is nearly 12 per cent.

The formal sector employment was also badly hit. There is a huge loss of jobs in the automobile sector. Mahindra’s, one of the giants in the automobile sector has stated that the worst is yet to come. Even a biscuit manufacturing company had to shut down its plant and has laid off 10,000 workers. It is estimated that in the recent period of three months more than two lakh people have lost their jobs. If the same situation persists it is believed that 25-30 lakh workers in the garment and textile industry may lose their jobs. The CMIE has estimated that in the year 2018 nearly one crore eighteen lakh jobs were lost out of which 88 lakhs were women workers.

The impact has been worst on the women. They are amongst the first to have been hit by the present crisis. The character of unorganised sector is such that they hire workers on conditions which are temporary. Even in the formal sector, the working conditions of a large section of the workers are informal; workers are hired on contract, as trainees, apprentice etc. Women are the most vulnerable especially in the garment industry.

The GDP fall is linked to the rise in unemployment which is also linked to a fall in investment. Modi, before leaving for US doled out concessions worth Rs 2 lakh crore for the big corporate houses in the form of reduction in corporate taxes and providing liquidity in the market by taking money from the RBI. We are told, this is done to boost investment in the market which correspondingly shall increase employment. This is not true; the period since last two years has shown that the private sector investment has reduced by half in the country. This money shall be usurped by the corporates and nothing will pass to the people.

Too much reliance on the private sector is not going to benefit the employment scenario in the country. The private investment in the last year has fallen from Rs 10 lakh crore to Rs 4 lakh crore, a fall of 60 per cent. What does all this point at? It points out that the private investment is falling owing to fall in demand and even if the tax rate and such other concessions awarded to the corporates are brought to zero; it is not going to help the investments in the country.

Nearly 12,80,000 houses constructed by the private sector are lying unoccupied as there is a fall in capacity of the buyers to pay. It is in such a situation that the government has given concessions to the big corporates with the intent that this will leverage demand in the economy and increase production and employment. However, the only gainer in this period has been the stock market and the private capital. There was a gain of Rs 6 lakh crore in the stock market, immediately after the announcement made by the finance minister to reduce the corporate tax from 35 per cent to 25.

The only alternative is to boost demand and provide public investment in the country and the cities. This investment shall then create jobs which eventually will create demand in the market. The idea of smart cities must be revisited in the present context. With the figures showing that not more than 15 per cent of the money has been off loaded it is pertinent to change the rules so that flow of money from the centre to the cities for infrastructure projects is eased out and the condition of 50 per cent equity participation of the state and city governments is also relaxed.

The short-term measures of the present government shall only serve the interests of the big corporates than mitigating the severe hardships the people are facing. The unemployed continues to swell but the government instead of strengthening the rural employment guarantee scheme and providing a similar provision in the cities is more interested to mitigate the problems of the big corporates.


An urban employment guarantee scheme shall not just create massive demand in the market it shall also help in addressing some of the imminent problems that the cities face in terms of city’s infrastructure and administration.

India has more than 5,000 cities and towns with an administrative system of a municipal corporation, municipal council and a nagar panchayat. Most of these urban local bodies, especially the smaller towns actually struggle to carry out even some of the basic functions as they lack financial and human capacity. A direct help from the centre which could be further aided by the state and city governments in the form of employment guarantee to the urban residents and make it a statutory right to work as guaranteed under Article 21 of the constitution. The act can be implemented by the local bodies as this will give them an organic affinity to implement as the cities that they govern will be able to get massive infrastructure development as well.


Mathew Idiculla, an urbanist writes that “the urban residents can undertake standard public works such as building and maintenance of roads, footpaths and bridges for a guaranteed 100 days in a year, at Rs 500 a day.” Not just that a set of green jobs which include creation, restoration/ rejuvenation, and maintenance of urban commons such as green spaces and parks , forested or woody areas, degraded or waste land, and water bodies. There is ample field in which the urban employment guarantee act can serve twin purposes; providing employment and thus creating massive demand and fulfilling the ‘development and care deficit’.