India’s Unemployment Rate Falls in July Due to Farm Demand

(Bloomberg) -- India's overall unemployment rate fell in July as rural areas saw increased demand for agriculture labor with the onset of monsoon rains.

The total joblessness rate fell to 7.95% in July, from 8.45% in June, according to data released by private forecaster Centre for Monitoring Indian Economy. Rural unemployment rate fell to 7.89%, from 8.73% in June, while urban unemployment rate ticked up, to 8.06% from 7.87% in the same period.

After a slow start, monsoon rains that water nearly half of the nation's farmlands have picked up pace, potentially bolstering the outlook for agriculture production and economic growth. Rains have been 4% above normal so far this season.

Rural joblessness rate typically falls in July due to increased demand for laborers for farming work. Unemployment rate ticks up again in August after the sowing is done, past data showed.

While the agriculture sector saw activity with improved rains, demand for labor from rural non-agriculture sector dropped in July, said Mahesh Vyas, managing director of CMIE. “This led to a fall in rural labor seeking employment, which in turn led to a fall in the rural employment rate.”

The labor force in rural India fell by five million, the data showed. Labor force participation rate in urban areas also fell, indicating broader weakness in the economy.

Creating enough jobs for Indians is crucial for Prime Minister Narendra Modi as he seeks a rare third term in office in the national polls next year. His administration is distributing appointment letters as part of a promise to provide one million government jobs by the end of this year amid wide discontent over rising unemployment.

--With assistance from Vrishti Beniwal.

More stories like this are available on bloomberg.com