The unemployment rate had come down to 10.18% in June 2020 after touching the peak of 23% in April and May 2020 during the nationwide lockdown.
As per the data, surge in unemployment rates has been driven by significant increase in urban unemployment rates at 14.73% in May compared to 9.78% in April and rural unemployment rate at 10.63% as against 7.13% in April 2021.
Further, the index of consumer sentiments worsened in May at 48.6 compared to 54.4 in April 2021. It was at 48.6 as of May 30, 2021.
“Thanks to the second wave of Covid-19, India’s economic recovery process is stalled. India needs household incomes and their sentiments to improve substantially before it can hope that they would contribute to the recovery process,” CMIE said in its weekly analysis.
According to CMIE, recovery of the Indian economy depends to a great extent on acceleration in the spending of these relatively richer households i.e. those that have an annual income of Rs 500,000 to Rs 10, 00,000 and those who earn more than a million rupees a year.
CMIE data shows income of households with annual income of a million or more rupees was 14.5% lower in the quarter ended December 2020 than in the December 2019 quarter while households with income of less than a million rupees saw their incomes shrink by less than 1% in a similar comparison.
However, even a small hit in income has hurt consumer sentiments disproportionately. The Index of Consumer Sentiments of households that earn more than a million rupees in the quarter ended December 2020 was 48% lower than it was in the quarter ended December 2019 while consumer sentiments of households that earned less than a million were down by over 50% in the same comparison.
While these showed an improvement in the quarter ended March 2021 but sentiments declined again in April, the month when the second wave of Covid-19 peaked in India, says CMIE.
In April 2021, 36% of the richer households said that their incomes were worse than they were a year ago while only 11.8% said their incomes were better than they were a year ago.
According to CMIE, the biggest spoiler to the expectation that the top arm of the K in the K-shaped recovery would power India out of the abyss is its sudden elevated pessimism.
“In April 2021, less than 6% of the richer households said that they expected their incomes to be better in a year,” it said. This is half of the proportion who claimed to have seen an improvement in their incomes compared to a year ago.
This is also half of the respondents who believed in the preceding four months that their incomes would improve in the coming year. “Sentiments have suddenly worsened for the richer people in April,” it added.