Rising Unemployment Rates in India
- Millions of young, educated people in India are impacted by the severe and ongoing jobs crisis, which prevents them from finding acceptable work in the formal economy. The independent think tank Centre for Monitoring Indian Economy (CMIE) reports that India’s unemployment rate hit 7.9% in December 2022 after hovering over 7% for the majority of 2021 and 2022. Compared to most emerging economies and the world average, this is significantly greater.
Which Employment Types Are Most Common in India?
In an economy like India’s, two sorts of employment are prevalent:
- The first is wage employment, which arises from labour demands made by businesses in an effort to maximise profits. It is further subdivided into:
- Jobs with Regular Wages: These are official, structured roles where workers are paid a certain income on a regular basis.
- Jobs in governmental agencies, commercial businesses, and global enterprises fall under this category.
- Casual or Daily salary Work: A large number of labourers in India work for a daily salary, particularly in the construction, agricultural, and unorganised labour markets.
- These jobs frequently have inconsistent pay and little work stability.
- The second type of employment is self-employment, in which the worker employs themselves, with labour supply and labour demand being equal. It is further separated into:
- Entrepreneurship: A large number of people in India operate small businesses or other ventures as part of their entrepreneurial endeavours.
- These could be manufacturing facilities, small stores, or neighbourhood services.
- Farmers: In India, one of the main industries for self-employment is agriculture. Numerous people own and run farms, either on their own or as a part of a family-owned business.
- Informal employment and Freelancing: As the gig economy has grown, so too have informal employment arrangements and freelancing.
- This covers those who work part-time jobs, as consultants, or as independent contractors.
What are the causes of India’s unemployment rate?
- static Employment Growth Rate: The non-agricultural sector’s salaried employment growth rate over the past forty years has been, for the most part, static.
- This suggests that official job options have not expanded significantly.
- Disguised unemployment: The Indian economy has a high rate of informal employment, such as self-employment and contract labour, as well as open unemployment, or job seekers without a job.
- The term “disguised unemployment” refers to the latter, which mimics open unemployment and is caused by a lack of appropriate job possibilities in the formal sector.
- elements Affecting Labour Demand: There are two main elements that affect labour demand in the formal non-agricultural economy.
- First, the quantity of output that businesses are able to sell has an impact. Businesses are less inclined to add new employees when there is less demand for their products.
- The development of labor-saving technologies enables businesses to achieve the same amount of production with fewer workers, therefore technological level also matters.
- Although this boosts productivity, it may also result in fewer jobs being offered in the formal economy.
- Policy Focus on Output Growth: GDP or value-added growth, or output growth, has historically been the focal point of Indian economic policies, which may not adequately address the problem of creating jobs.
- Employment opportunities may not increase in tandem with output growth policies, particularly if labour productivity growth rates improve.
- Absence of Response in Employment Growth Rate: In India, the formal and non-agricultural sector’s employment growth rate did not respond to a notable increase in GDP growth and value added growth in the 2000s compared to the 1980s and 1990s.
- The problem of jobless growth is reflected in the employment growth rate’s lack of responsiveness to changes in the output growth rate. It suggests that the growth rates of labour productivity and production are strongly correlated.
What Is the Case of India’s Jobless Growth?
- An economy is often believed to become more productive as it expands. In other words, businesses become able to produce more output per worker as a result of increasing the amount of overall production they produce. “Economies of scale,” as economists refer to them, are the reason for this.
- Businesses find it easier to implement labor-saving technologies as they increase their output. But labor’s negotiating leverage determines how far labor-saving technology are introduced.
- A double class of jobless growth regimes can be distinguished according to how closely the increase of labour productivity and production are correlated.
- Weak Response of Employment to GDP Growth: In this scenario, the adoption of labor-saving technologies and automation are the only factors that raise the probability of jobless growth.
- However, if output growth rate happened to increase, employment growth rate in these countries would inevitably rise as well.
- The beneficial impact of GDP growth rate on employment would outweigh the negative impact of labor-saving technology in the case of low labour productivity.
- Here, faster economic growth is the only way to address the employment crisis.
- High Employment Response to GDP Growth: In India’s situation, the labour productivity growth rate is highly sensitive to the output growth rate.
- In this case, the negative impact of labor-saving technologies is not offset by the favourable effect of output growth rate on employment.
- In these nations, raising the GDP growth rate alone will not raise the employment growth rate.
- The Kaldor-Verdoorn coefficient quantifies the degree to which an increase in labour productivity is correlated with an increase in production.
- A larger coefficient denotes a more robust correlation between the two.
- The claim that the non-agricultural sector in India has a greater Kaldor-Verdoorn coefficient than that of other emerging nations suggests that unemployment growth is more prominent in that nation.
What Steps Should Be Taken to Address India’s Unemployment?
- Adopt a National Employment Policy (NEP): The data indicates that faster GDP growth is no longer the only way to address the employment crisis. Instead, in addition to the concentration on GDP growth, a distinct policy focus on employment is required.
- Both supply-side and demand-side elements will be required for such employment programmes.
- For instance, bridging the skills gap and improving worker quality through improved care are crucial given that Indian companies find it simpler to automate as a result of inadequate public health and education services.
- Direct public employment creation will be required on the demand side.
- Presenting the Urban Version of MGNREGA: It can give the urban poor a safety net and a source of income. The programme can be put into place for the impoverished in cities who frequently work in irregular and unstable jobs. This can generate public assets and services in the urban regions while also giving them a bare minimum of economic stability.
- Recently, Rajasthan unveiled an urban version of the MGNREGA.
- Invest more in agriculture and industrialise more; this will increase output and create jobs. Rapid industrialization is one of the most reliable solutions to India’s unemployment problem.
- A greater number of industries corresponds to a greater number of employment prospects.
- Additionally, through multiplier effects, investments or capital formation in agriculture can create jobs both directly and indirectly.
- Enhancing rural income and job possibilities can be achieved through diversifying agriculture and fostering the agro-processing industries. A significant transition away from crop cultivation is urgently needed in favour of labor-intensive and higher-yielding industries like horticulture, vegetable production, floriculture, animal husbandry, and fisheries.
- Additionally, there is a lot of job potential in promoting the agro-processing sectors for export.
- These sectors can also boost value addition and decrease agricultural produce waste.
- Increasing Access to Health and Education: This can boost human capital and create jobs in the social sector. In addition to encouraging the development of human capital, which boosts productivity, the expansion of health and education services will also create a significant number of job possibilities.
- The workforce’s employability and skill level will increase with the implementation of vocational and technical training programmes and educational reforms.
- Students can gain the skills and information needed for particular industries and occupations with the aid of vocational and technical training.
- By doing so, the mismatch between the supply and demand for skilled workers can be lessened, increasing the economy’s competitiveness and productivity.
- Developing Rural Areas and Decentralising Development: These strategies can lessen the demand of migration on cities and promote more balanced development.
- The development of rural areas can lessen the burden on jobs in metropolitan areas by reducing the migration of rural residents to such areas.
- Additionally, decentralised development can guarantee that the advantages of expansion are distributed more fairly among various areas and industries.
- This may also encourage community involvement and individual empowerment.
