Employment growth suffered even before Covid-19 pandemic: Care Ratings

While the pandemic has hit the employment opportunities hard, a new study found that even in the pre-pandemic period, growth in employment lagged far behind the economic growth.

In a report, Care Ratings have found that between 2016-17 and 2019-20, headcounts in 2,723 listed companies increased by 2.2% compounded annual growth rate (CAGR).

“The interesting fact here is that during this period real GDP growth (CAGR) was 5.8%, which supports the view that growth in the economy did not lead to commensurate growth in employment. Higher use of technology and increased productivity could be reasons for this deviation and can hence be attributed to the concept of total factor productivity,” the rating agency said.

Care Ratings have used data from the annual reports of these companies to arrive at the headcount numbers.

“The other disturbing sign here is that the annual growth rate has been coming down from 4% in FY18 to 2.1% in FY19 to 0.6% in FY20. Based on the trends witnessed in FY21, it can be expected that there would be degrowth in this year for certain,” the agency said.

According to a recent analysis by the Centre for Economic Data and Analysis based on the CMIE monthly time-series of employment by industry, manufacturing employment in 2020-21 was nearly half of what it was five years ago.

The decline was particularly sharper in 2020-21 owing to the pandemic — on a y-o-y basis, the sector employed 32% fewer people in 2020-21 over 2019-20. Real estate & construction also saw big fall in its share in employment in 2020-21 and a secular decline over the five-years to 2020-21.

As reported by FE recently, like the one a year ago, the recent lock-down also has had an immediate, telling effect on the employment scenario in the country. The country’s unemployment rate, that has remained elevated for a few weeks, soared to a near one-year-high of 14.45% in the week ended May 16.