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Demonetisation After-effects: Unemployment Rises to Two-year High, Labour Participation Rate Falls

Reportedly, the rate of unemployment had risen to a two-year high of 6.9 per cent.

An article on the job market statistics, published on the website of Centre for Monitoring Indian Economy (CMIE), an independent think tank, revealed that the rate of unemployment rose to a two-year high of 6.9 per cent in October 2018.

According to the analysis, there has been a return of the potential labour force into the labour market after a forced-hiatus post demonetisation. The article notes two important parameters to understand the current job-market scenario in India — unemployment rate and labour force participation rate.


The number of unemployed people has risen sharply (unemployment is defined as people actively looking for employment).  “As of October 2018, there were 29.5 million unemployed persons actively looking for jobs. This is much larger than the 21.6 million unemployed persons looking for jobs in October 2017,” the article notes.

The estimated number of persons employed during October 2018 at 397 million was 2.4 per cent lower than the 407 million persons employed in October 2017. (PC: CMIE)

After demonetisation, reportedly, many unemployed people had stopped seeking employment because the labour market was not able to sustain employment. Where around 40 million people were looking for jobs before demonetisation; the number had hit a low of 14 million in July 2017 before rebounding to around 29.5 million in October 2018. CMIE also mentioned that if more number of people were to start looking for jobs again, there would be further increase in the rate of unemployment.

Labour Participation Rate

Labour participation rate is defined as, “a measure of the number of persons who are employed or are unemployed and are actively looking for employment as a per cent of the total population that is of the age 15 years and above.”

Reportedly, the labour participation rate for October 2018 was 42.2 per cent which is the lowest since January 2016. The report also observes that pre-demonetisation, the labour participation rate was around 47-48 per cent and that it had also risen slightly in September before falling again in October.

Also read: Demonetisation a ‘Shrewd Scheme’ to Help PM Modi’s ‘Suit-booted Friends’: Rahul Gandhi

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