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

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

The unemployment rate across 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 Labour Force Survey (PLFS) released by the National Statistics Office (NSO) on Tuesday. Rural unemployment declined by 50 basis points to 4.3%, while urban joblessness edged up to 6.8% from 6.7%.

The improvement was accompanied by a rise in labour force participation and the share 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 salaried jobs accounted for a larger share of urban employment.

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

The overall labour force participation rate (LFPR) for people aged 15 and above rose to 55.5% in the September quarter from 54.6% in the previous three months. Rural participation increased to 58.1% from 56.9%, while the urban rate edged up to 50.4% from 50.2%.

“India’s employment landscape is moving in a positive direction. But the nature of jobs is changing. We are seeing demand for AI and data engineers, cybersecurity specialists, cloud architects, semiconductor professionals, EV and renewable energy engineers, and data centre specialists in areas such as power and cooling,” said Neeti Sharma, chief executive of TeamLease Digital, the talent solutions and IT staffing arm of human resources services firm TeamLease Services.

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

Female participation

Female labour force participation rose to 34.7% in the September quarter from 33.2% in the previous quarter. Among men, the participation edged up to 77.3% from 77%.

Compared with a year earlier, overall labour force participation increased by 0.4 percentage points from 55.1%. Rural participation rose by 0.9 percentage points to 58.1% from 57.2%, while urban participation declined marginally by 0.3 percentage points.

The rise in labour force participation was accompanied by an increase in the worker-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 above.

Rural-urban differences

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

The share of self-employed workers 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 salaried workers increased to 49.6% from 49.3%, reflecting a greater concentration of employment in these categories.

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

On a year-on-year basis, the share of casual labour in rural areas declined to 21.7% from 22.2%, while the urban share 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 labour during the kharif season. The share of the secondary sector, which includes mining and quarrying, declined to 21.9% from 24.4%, while the tertiary sector's share fell to 21.4% from 22.7%.

On a year-on-year basis, however, the rural secondary sector's share was higher at 21.9%, compared with 21% a year earlier. The tertiary sector's share remained broadly unchanged at 21.4%, against 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 above were employed during the quarter, including 405 million men and 174 million women. These estimates are based on projected population figures from the Ministry of Health and Family Welfare.