'Last Saturday, the largest number of people travelled by air on a single day!'
'There is a kind of hunger among consumers to spend as they have been confined to their homes and not spending for almost 2 years.'
Genius Consultants Ltd, a leading HR firm, recently issued a report Sudden Rise of Rural Unemployment based on a survey by speaking to more than 1,000 Indian companies.
57 per cent of the respondents were of the opinion that a revival of the MSME sector is essential for rural employment.
"It has not yet happened. But all the indices in the last one-and-a-half months -- the industrial index, GST collections and the Sensex -- show there is some improvement in the market," R P Yadav, CMD, Genius Consultants tells Rediff.com's Shobha Warrier.
Your report is titled Sudden Rise in Rural Unemployment. Is it actually sudden? Has it not been the situation not just after the pandemic, but even before that?
You are right; there was unemployment in the rural areas, and it was rising.
It had gone up further when we did the survey in September 2021. And there were reasons why it had gone up.
Rural employment depends on agri-business and manufacturing.
As you know, the factories are located in Tier 2 and 3 towns which are close to the villages, and the villagers go to the factories to work.
These are small factories and almost all of them were closed during the pandemic.
While most of the bigger companies retained their employees, the small companies and factories, which come under the MSME sector, did not as most of their employees are informal workers.
So, they could terminate the contract with the employees when production stopped and factories were closed down.
This was a major reason for the rise in unemployment in the rural areas.
Is it not right to say that the MSME sector started suffering from demonetisation onwards and the situation became worse with the pandemic?
Yes. Demonetisation definitely affected the MSME sector very badly.
That was because, before demonetisation, most of the transaction in the sector was through cash.
Most of the employee salaries were paid by cash, and in some cases, it was less than the minimum wages.
But after demonetisation, it became necessary to pay salaryies through the bank as it also became a part of the labour law.
If you look at the MSMEs, they are mainly suppliers to big companies.
Then GST came. When you are GST registered, your entire transaction will be formal.
If not, when the buyer pays on their behalf and when the buyer pays, the supply gets registered which means they have to get GST registered.
To be fair, the government was trying to bring in all the MSMEs into formal business. But that has affected them badly in the last 6-7 years.
To its credit, the government has now taken many initiatives to ease the suffering of the MSME sector. But it is still under the effect of the pandemic.
They had removed 50%-60% of the workforce from the companies during the first wave.
Though all the factories have opened from July, it is taking time to get back the workforce and start production.
In fact, it is the same case with bigger companies in the urban areas too.
If it is difficult in the urban areas, it is even more in the rural areas.
That's how the MSME sector got affected badly after the first and second waves of the pandemic.
57% of the companies you have spoken to in the survey was of the opinion that growth in the Indian economy and rise in rural employment will happen only if there is a revival in the MSME sector. Do you think that will happen soon?
It has not yet happened. But all the indices in the last one-and-a-half months -- the industrial index, GST collections and the Sensex -- show that there is some improvement in the market.
In fact, there is a huge demand to increase production from the manufacturing sector.
Just look at the amount of gold sold during Diwali. People now want to buy consumer durables.
Last Saturday, the largest number of people travelled by air on a single day!
There is a kind of hunger among the consumers to spend as they have been confined to their homes and not spending for almost 2 years.
So, there is strong demand and strong consumption at the moment.
Still, the CMIE report says that in October, unemployment rose to 7.75% from 6.86% in September. And rural unemployment was 7.91%. Is it not disheartening?
It is disheartening, but you should also remember that 3-4 months ago, unemployment had gone up to 16%! So, you can say the situation has improved.
There may be some variations in each month.
Even though there would be fluctuations, the indications we see are positive right now.