Biggest Job Creator Short of Labor Amid Vast India Unemployment

(Bloomberg) -- India's construction sector, the country's biggest job creator, is facing a shortage of workers amid a record increase in national unemployment.

That's because internal migrants, who comprise about half India's workforce, are choosing to return to their villages after facing hunger and weeks of uncertainty in cities because of the coronavirus lockdown. Prime Minister Narendra Modi's government this week permitted local administrations to transport their citizens across state borders, around the same time it allowed certain economic activities to resume while extending most stay-at-home rules through May 17.

“While utmost effort is being made to keep the workers in safe and hygienic conditions, along with food provision and masks allocation, the workers are not ready to return to the sites and have been longing to go back to their native places,” said Sandeep Runwal, managing director at Mumbai-based Runwal Group. The laborers want “to be with their families as uncertainties rise around the lockdown,” he said.

The challenge of retaining staff despite 122 million people losing their jobs in India last month shows how difficult it will be for Modi to restart Asia's No. 3 economy, where the bulk of the workforce comprises so-called informal labor that are denied security and benefits. Economists predict a rare contraction in national output and have urged Modi to ensure food and a basic income for the poorest Indians.

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Runwal doesn't expect the workers to return anytime soon. The two-decade-old Goodwill Developers is also facing a similar squeeze.

“We have not been able to start any construction activity and it might take some time to re-start the process,” founder Hakim Lakdawala said in an interview.

Key Indicators
Construction contributes 9% to India's gross domestic product Employs 51 million people, second-largest after agriculture Sector was the second-largest recipient of foreign direct investment in 2017

India's construction sector has been under pressure since late 2016, when Modi invalidated currency notes, followed by the botched roll out of a nationwide sales tax and a crisis in the shadow bank sector that funds developers. The lockdown further choked cashflow and contracters were unable to pay workers, according to Pankaj Kapoor, managing director at property research firm Liases Foras. He predicts 2 million workers from Mumbai will choose to return to their villages.

The Confederation of Real Estate Developers Associations of India lists availability of credit and raw materials as other impediments.

“Unless there is a resumption in the whole supply chain management of the industries feeding into the real estate sector, the process of construction will again come to halt in the next few weeks,” said Amit Modi, CREDAI president.