Name: Trayi Reddy

Title of the article: Unemployment rate rises again, at 7.75% in Oct

Source: Financial Express
Link:
https://www.financialexpress.com/economy/unemployment-rate-rises-again-at-7-75-in-oct/23613
65/
Key concept: Economic well-being
Section of the syllabus: Macroeconomics
Wordcount: 801

The article above is about the joblessness in India caused by the spread of Covid-19 which has
therefore caused increased unemployment rates pre and post the pandemic, hindering India’s
economic performance. Unemployment refers to the people of working age who are looking for
a job but aren’t employed, in context, due to the increase in unemployment due to the
pandemic. A lockdown was imposed due to the massive and deadly outbreak of the Covid-19
pandemic, causing devastation to the economic activity and overall commercial activity resulting
in a loss of jobs. The government is relying on the festive and cultural factors of the Indian
purchasing parity to create an optimistic view of the economic downfall. The government is
expecting boosted employment in general and in retail trade due to the festive season and is
relying on the large size of the retail trade industry to raise the employment rates, and therefore
to recover from the covid-19 blow. The government should intervene and modify their fiscal
policy to an expansionary fiscal policy and to incorporate stimulus packages targeting all the
industries, especially those that are a good source of long term revenue and employment unlike
the businesses surrounding the festive season. The key concept used is “Economic Well Being”
and it refers to the standard of living enjoyed by the various members of the economy.

The graph depicts a decline in the real GDP due to the lockdown being imposed, caused by the
fall in AD. The unemployment rates start to rise due to the unexpected outbreak of covid-19.
The fall in employment causes a recessionary gap, shown by the shift in AD1 to AD2. The
lockdown, which led to an increase in overall unemployment, is responsible for the fall in GDP.
This surge led to the same occurring across the entire nation and across all the sectors, total
increase in unemployment. Y refers to cyclical unemployment, which India is faced with as they
are developing heavy dependence for seasonal employment, the festive season, which might
not be the best to rely on as it will not follow the same positive trends in the long term.

The graph above depicts the changes that will most probably occur if the fiscal policy of the
government is changed to adapt to the new employment rates. An expansionary fiscal policy
can be used to reduce unemployment. The tools used to achieve the same would be an
increase in government spending and/or a decrease in taxes, shifting the AD curve to the right,
which results in an increase in the real GDP and decrease in the unemployment, but it may also
cause inflation to some extent. The increase from Y1 to Y2 shows that the expansionary fiscal
policy can be successful as the real output will increase. This is a depiction of the increase in
national income and employment. This is therefore the most optimal solution to the falling
employment rates due to the lockdown. Providing citizens with stimulus checks and
implementing funds for businesses such as schools, restaurants, and various other services will
lead to an increase in the national income and GDP of India, therefore increasing purchasing
power and employment.

It is evident that the predicted interventions of the government will lead to extremely successful
notions and might benefit the overall performance of the economy. A stimulus package with
stimulus checks and funds for business could possibly create more job opportunities and more
diverse options and even the expansion of the sectors. A steady recovery from the economic
recession is mandatory to ensure that employment is restored so that the Indian economy can
work at an efficient rate. Relief packages may also help people and regenerate money into the
market and nation and are a viable option for those who are not able to find employment. The
regeneration of money and flow into the community will create more jobs in the long term as the
businesses will expand based on consumer spending. Funding education is also a good long
term investment the government should look into as they will be able to provide a good
education to the future generations of the working class and revenue generators. Education is
the backbone of a good career and creates general awareness of how the economy functions
so that people can make reasonable and responsible decisions when it comes to career options
and even spending. Education is also the basic factor for even being able to qualify for a job,
directly impacting employment. Therefore, the perfect solution for extreme unemployment
caused by the pandemic is implementing expansionary fiscal policy as it is extremely beneficial
to India in both the long and short term, unlike the government’s other plans to simply rely on
seasonal changes, caused by festivities, in the demand for output and necessity for
employment.