1. Context: Recent Economic Indicators

• Inflation for May 2025 was below 5% — a positive signal celebrated by the government.
  
  
• However, unemployment remains high despite the falling inflation rate.
  
  
• As per CMIE data:
  
  
  • Unemployment rose from 4% to 8.2% in May 2025.
    
    
  • Urban unemployment rose from 7% to 9.2%.
    
    
  • Labour participation rate (LPR) fell from 9% to 40.7%, suggesting fewer people looking for jobs.
    
    

2. What This Suggests

• Falling inflation ≠ improved job market.
  
  
• Job creation is not picking up even though prices are stabilizing.
  
  
• Demand for labour may be shrinking, or people may be withdrawing from the job market due to frustration or lack of opportunities.
  
  

3. Structural and Policy Issues

• There’s a disconnect between macroeconomic stability (low inflation) and labour market outcomes (joblessness).
  
  
• Private sector, despite high profits, is not hiring proportionally, especially in high-employment-generating sectors.
  
  
• Emphasis on capital-intensive production rather than labour-intensive growth.
  
  

4. Measurement and Data Issues

• The provisional estimates of GDP do not always reflect employment trends.
  
  
• High GDP growth doesn’t necessarily translate into more jobs (jobless growth).
  
  
• Need for better labour market data and deeper analysis of sector-wise job creation.
  
  

5. Policy Recommendations

• Focus on employment-intensive sectors like textiles, construction, agro-processing, and MSMEs.
  
  
• Reform labour laws to encourage hiring and formalization.
  
  
• Monitor LPR, youth unemployment, and disguised unemployment more accurately.
  
  
• Shift away from GDP-fetishism towards people-centric development metrics.
  
  

6. Broader Implications

• Rising unemployment amidst falling inflation can lead to:
  
  
  • Weak demand in the economy.
    
    
  • Widening inequality.
    
    
  • Political and social unrest if jobless growth persists.
    
    

🧾 UPSC-Style Questions (GS3 – Indian Economy)

🔹 10-Marker (150 Words)

1. Falling inflation does not necessarily translate to job growth. Explain with reference to India’s current macroeconomic scenario.