Shift in ground in the Indian labour market

India’s unemployment rate has been falling for a long time now. The latest quarterly bulletin of the Periodic Labour Force Survey (PLFS) — it covers the quarter ending September 2024 — shows a continuation of this trend. The urban unemployment rate fell to its lowest ever level of 6.4% in this quarter despite a rise in the labour force participation rate (LFPR). It is important to read the unemployment rate with LFPR because the former can fall when people withdraw from the workforce as well.

This newspaper has been sceptical in unequivocally celebrating the falling unemployment rate and rising LFPR numbers because of another statistic in the PLFS numbers — a rise in unpaid self-employment which has, technically speaking, kept the unemployment rate low but would have done little to boost incomes. It is on this front that the latest PLFS report marks a welcome break. The share of the unpaid self-employed has fallen marginally for the first time since the pandemic. This has been accompanied by a rise in the share of salaried workers who earn the most among various kinds of workers in the Indian economy.

Is the Indian labour market finally turning a corner not just in quantitative but also qualitative terms? The latest PLFS report gives us the first sign of this. To be sure, one should wait before pronouncing a final verdict on this matter. PLFS’s quarterly bulletins only look at urban labour markets and the bulk of the rise in unpaid work took place in India’s farms. Rural labour market numbers are only released in the annual report which will be published in the second half of next year. This cautionary note apart, it would be a good idea to have more high-frequency data for rural labour markets too.

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