Resilience of the Rural Employment Sector to Economic Shocks in India

Abstract

The study explores the effect of recent economic shocks due to policy changes and the COVID-19 pandemic on rural employment in India. The study uses three cases; (i) demonetization, (ii) Goods and Service Tax (GST) implementation, and the recent (iii) COVID-19 pandemic to explore the resilience of employment in the rural regions of India. The study used state-level data estimates on rural employment in India provided by CMIE, employment data from NSSO, and migration data from the population census. A modified version of interrupted time series analysis within the beta regression framework was used to quantify the effect of shocks. The study shows that the rural unemployment rates increased after economic shocks as per expectations. The effects were smaller in the case of demonetization but were significantly higher in the case of GST. Early trends suggest a significant short-term effect due to COVID-19-induced shock on unemployment. The study shows that the urban sector is more resilient than the rural sector. The study highlights the need for employment guarantee programmes and direct assistance during the shocks to increase the resilience of the rural economy.