Rise Of Unemployment Rate – COVID-19’s Biggest Impact

Over two months of nationwide lockdown to curb the spread of the coronavirus, businesses are beginning to open up in a staggered manner yet India’s unemployment rate at 19.7 percent as of 11 June 2020 looks intimidating. Urban India unemployment rate is at 20.4 percent while rural India stands at 19.4 percent (CMIE data). A glimmer of hope as slow depreciation is seeing in the unemployment rate when compared to 24% high just last month.

With the hope of reviving the economy from the setback caused by the pandemic, India slowly eases lockdown restrictions. A major Rs 20 Lakh crore stimulus package was announced to bring business back on track. Labors reforms have also been announced, the most notable being those relating to new labor codes.

When the first 21 days lockdown was announced the unemployment rate in India shot up because millions of workers lost their jobs in the city. They started to make their journey back to their respective villages on foot, due to the restriction of government transport. Since the coronavirus pandemic began, world economies have been on a downward spiral. India was not spared either. The implication on businesses was a partial or complete shut down of operations. India has lost at least 4.5 billion dollars for every day during the period of the lockdown.

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Even the Indian labor laws can do little to guarantee employment protection in this dire period. To put this in context, the labor laws couldn’t stop five major companies: Uber India and South Asia, Ola, Zomato, Swiggy and Cure.fit from cutting the jobs of over 4400 employees in total  in April-May period. According to CMIE data, 27 million youth in the age group of 20-30 years lost their jobs in April alone.

Furthermore, the tourism sector and its value chain is expected to suffer losses estimated to be between 38 to 50 million lakh crore due to job losses, according to the Federation of Associations in Indian Tourism & Hospitality. All of these have set India several paces backward on its ease of doing business coefficient.

With the country’s leaders looking at measures to revive the crumbling economy, experts predict that a successful economic recovery might largely hinge on labor reforms in India. Seeing that almost every sector of the economy has been hit by the pandemic, policy makers must look to make labor law changes that not only increase labor participation rate but also protect the interest of employees.

You might also be interested to read: Putting India Back To Work Safely

While some states have pandered towards the suspension of labor laws, the Indian government has made it clear this needs deeper assessment before making such changes. States such as Uttar Pradesh, Gujarat, Goa, and Madhya Pradesh have put up new labor reforms aimed at making desirable changes and attracting investment and reviving the economy. It is estimated that nearly 90 percent of workers do not benefit from the existing labor laws. With the new worker protection laws, it will incentivize the growth of new businesses, which will translate to an improvement in the unemployment rate of India.


  • Labor reforms give India a chance to compete with a favorable destination like Vietnam by Janay Jain|| May 14, 2020
  • Coronavirus live updates by Express Web Desk||May 30, 2020
  • Coronavirus lockdown and a tale of labor reforms sans laborers by Prabhash K. Duita||May 15, 2020

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