Article Title: Inflation falls but not unemployment
24-06-2025
Economy Current Affairs Analysis
Context
• At less than 3%, the inflation figure for May is well within the target set by the government of India. This has led to a celebration in the media of the Reserve Bank of India’s prowess in macroeconomic management.
• While year-on-year inflation fell from 3.2% in April to 2.8% in May, the latest Periodic Labour Force Survey shows that the unemployment rate rose from 5.1% in April to 5.8% in May.
• For those employed, a reduction in inflation is good news
• But for those seeking employment, it makes no difference. They remain unemployed.
• Monetary Policy Committee meeting, RBI Governor expressed willingness to lower repo rate again if inflation continues to decline.
NAIRU (Non-Accelarating Inflation Rate of Unemployment)
• NAIRU, or the Non-Accelerating Inflation Rate of Unemployment, isthe level of unemployment below which the rate of inflation is expected to rise
• The Non-Accelerating Inflation Rate of Unemployment (NAIRU) for India is estimated to be around6.06%, according to some research
• This means that if the unemployment rate in India falls below this level, it is likely to put upward pressure on inflation
• Conversely, if unemployment is above this level, it would likely cause inflation to slow down or decrease
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