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Source: The post is based on the article “Express View on employment: The stress signals” published in “The Indian Express” on 18th July 2023.
Syllabus: GS 3- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
News: In this article the author discusses the rising demand for work under Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), despite economic growth. They highlight high unemployment rates, especially among urban youth, and an increase in credit card defaults, indicating economic stress despite the expected growth.
About current economic and employment situation in India
- India’s economy is expected to grow at 8% in the first quarter of the current financial year.
- Demand for MGNREGA work is increasing, indicating a lack of productive job opportunities in rural areas. In June, 3.04 crore households availed work under the scheme.
- The unemployment rate among urban youth is high, at 17.3% in the first quarter of 2023.For males, it was 15.6%, but for females, it was even higher at 22.9%.
How has MGNREGA evolved over the years?
Rising demand: Demand for work under MGNREGA has been consistently rising. In 2015-16, 7.2 crore individuals were part of the scheme. This number increased to 7.88 crore by 2019-20.
Wage increase: The wage rate under MGNREGA increased from Rs 218 per person per day in 2022-23 to Rs 233.
Pandemic impact on MGNREGA: The pandemic caused a surge in demand for MGNREGA, with participation reaching 11.19 crore in 2020-21 and 10.61 crore in 2021-22. Even after a drop to 8.76 crore in 2022-23, it was higher than pre-pandemic levels.
What are the implications of high unemployment rates?
Effects on the economy: High unemployment rates can harm the economy. The demand for work under the MGNREGA scheme has risen over the years, indicating that more people are seeking employment. It implies fewer productive job opportunities in rural areas.
Impact on credit defaults and bad loans: Rising unemployment may increase credit defaults and bad loans. For instance, bad loans in the credit card segment rose to Rs 4,073 crore at the end of 2022-23 from Rs 3,122 crore the previous year. High unemployment can worsen this situation as people struggle to repay loans.
What should be done?
- Economic growth should be inclusive, providing more productive job opportunities, especially in rural areas.
- Measures should be taken to reduce the high unemployment rate among urban youth.
- Strategies to curb the rise in credit card defaults and bad loans are necessary.
- Areas showing stress, like MGNREGA demand, need close monitoring.
