India unemployment falls to 5.1% in Q2 as rural participation and employment rise

New Delhi: India’s labor market improved in the July-September quarter, with unemployment easing and more people joining the workforce, driven mainly by a seasonal increase in rural employment during the kharif sowing season.

The unemployment rate in both rural and urban India eased to 5.1% in the September quarter from 5.4% in the previous three months, according to the Periodic Labor Force Survey (PLFS) released by the National Statistics Office (NSO) on Tuesday. Rural unemployment fell 50 basis points to 4.3%, while urban unemployment rose slightly to 6.8% from 6.7%.

The improvement was accompanied by an increase in labor force participation and the proportion of people in employment, although the nature of work continued to differ between rural and urban India. Rural employment remained heavily dependent on self-employment and agriculture, while regular wage and salary employment accounted for a larger proportion of urban employment.

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Year-on-year unemployment declined in both rural and urban areas from 4.4% and 6.9% in the September quarter of the previous fiscal year, respectively.

The overall labor force participation rate (LFPR) for those aged 15 and over rose to 55.5% in September from 54.6% in the previous three months. Rural participation increased to 58.1% from 56.9%, while the urban rate increased slightly to 50.4% from 50.2%.

“India’s work environment is moving in a positive direction. But the nature of jobs is changing. We are seeing demand for AI and data engineers, cyber security specialists, cloud architects, semiconductor professionals, EV and renewable energy engineers and data center specialists in areas such as power and cooling,” said Neeti Sharma, CEO, TeamLease Digital, HR and IT staffing.

That means a shift from volume-based hiring to skill-based hiring, she said. “The opportunity for India is to prepare its workforce for this transition through industry-led skills and reskilling so that people can move from automated roles to the new opportunities being created,” she added.

Participation of women

Female labor force participation rose to 34.7% in September from 33.2% in the previous quarter. For men, participation increased slightly to 77.3% from 77%.

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Compared to the previous year, overall labor force participation increased by 0.4 percentage points from 55.1%. Rural participation increased by 0.9 percentage points to 58.1% from 57.2%, while urban participation fell slightly by 0.3 percentage points.

The rise in labor force participation has been accompanied by an increase in the worker-to-population ratio (WPR), which measures the proportion of the population that is employed. The ratio improved for both men and women during the quarter, reaching 73.4% for men and 32.8% for women aged 15 and over.

Differences between the countryside and the city

The composition of employment continued to differ between rural and urban India.

The share of self-employed in rural areas rose to 62.7% in the September quarter from 61.4% in the previous quarter. In urban areas, the share of regular wage and salary workers increased to 49.6% from 49.3%, reflecting a greater concentration of employment in these categories.

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The share of casual work, generally associated with less secure employment, has decreased in both rural and urban areas. In rural India, it fell to 21.7% from 22.5%, while in urban areas it fell to 10.7% from 11.1%.

Year-on-year, the share of casual work in rural areas fell to 21.7% from 22.2%, while the share in cities fell to 10.7% from 10.9%.

The sectoral composition of employment also shifted with the agricultural season.

In rural India, the share of workers employed in agriculture rose to 56.7% in the September quarter from 52.9% in April-June, reflecting increased demand for labor during the kharif season. The share of the secondary sector, which includes mining and quarrying, decreased to 21.9% from 24.4%, while the share of the tertiary sector fell to 21.4% from 22.7%.

However, year-on-year, the share of the rural secondary sector was higher, at 21.9% compared to 21% a year earlier. The share of the tertiary sector remained essentially unchanged at 21.4% versus 21.3%. In urban areas, the shares of the secondary and tertiary sectors remained largely stable.

The survey estimates that an average of 579 million people aged 15 and over were employed during the quarter, including 405 million men and 174 million women. These estimates are based on projected population numbers from the Ministry of Health and Welfare.