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Unemployment in India

According to a recent data published by the Center for Monitoring Indian Economy (CMIE), the unemployment rate in India has touched a four-month high in December, 2021. Such an increase in unemployment rate could adversely impact our economy which is still recovering from the burns of CoVID-19.

What is Unemployment?

  • It can be defined as a situation wherein a person who is capable of working both physically as well as mentally at the existing wage rates is unable to find a suitable employment for himself or herself.
  • In other words, unemployment is a situation wherein an individual capable of working at the prevalent wage rate is unable to find a suitable job.

Types of Unemployment:

Unemployment can be categorized into the following types;

  1. Disguised Unemployment: It can be referred to as a situation wherein more people are engaged in a particular occupation than actually required. E.g., In agricultural sector, if ploughing a field requires two people and suppose four people are doing the job. Then in this case, the output of the latter two people is ZERO as even without their efforts the earlier two people would have ploughed the field.
  2. Seasonal Unemployment: It can be referred to as a situation wherein some people remain unemployed for some part of a year and are employed for the remaining part of the year. For instance, farmers in India rarely have any employment after harvesting their fields.
  3. Structural Unemployment: It is a situation of unemployment created when there is a mismatch between the existing skillsets of the workers and the skillsets which are required for the existing jobs. For instance, in India, it is often said that the youth here do not possess enough skills because of which the employer (company/organization) restrains from providing this youth with jobs.
  4. Cyclic Unemployment: This case of unemployment is a result of business cycle which rises with recessionary trends and declines with economic growth.
  5. Frictional Unemployment: It can be defined as a situation wherein people remain unemployed for a short time-period especially when they are searching for a new job or if they are switching between jobs.

Measures of Unemployment in India:

The National Sample Survey Office (NSSO) under The Ministry of Statistics and Program Implementation (MoSPI) measures unemployment in India using the following approaches;

  1. Usual Status Approach: In this approach, only those people are considered unemployed who had no gainful work for majority of the time in the previous 365 days preceding the survey.
  2. Weekly Status Approach: In this approach, only those people are considered unemployed who had no gainful work for even an hour on any day of the week preceding the survey.
  3. Daily Status Approach: In this approach, only those people are considered unemployed who had no gainful work for even one hour in a day.

Causes of Unemployment in India:

The causes of unemployment in India can be summarized as follows;

  1. Population Growth: A rapid increase in the population is one of the major reasons for increase in unemployment. According to CMIE, the unemployment rate in India as of December,2021 was at 7.9%.
  2. Lack of required Skills: Skill deficit in India is a huge issue for providing gainful employment. The available labor force isn’t equipped with the skills required by industries today. This is inhibiting India from reaping the potential offered by its Demographic Dividend.
  3. The issue of disguised unemployment in Agriculture: The agricultural sector is the biggest employer in India. It employs about 51% of India’s workforce. However, its contribution to India’s GDP has been hovering around 18%. This proves the fact that the agricultural sector is dominated by the phenomenon of disguised unemployment.
  4. Poor growth of Industrial Sector: After the economic reforms of 1991, the industrial sector did not grow as much as the service sector. Moreover, the development in industrial sector was dominated by the capital intensive industries and not labor intensive industries.
  5. Poor investment in the economy: The Indian economy is majorly driven by the Public Final Consumption Expenditure (~60%). The share of Gross Investment is about 30%. It is this structural bottleneck because of which the economy has not been able to generate employment.
  6. Improper Planning: The 5-year planning system adopted by India did not result in the generation of enough employment opportunities. There was a misconception that economic growth would lead to generation of employment. However, the fact of the matter is that India has faced a phenomenon known as “Jobless Growth”. This can be attributed to the faulty planning system adopted by India post independence.
  7. Social Factors: Due to the prevalence of caste-system in India, some people from a certain specific caste are forced to practice a certain kind of occupation only. Moreover, in case of joint-family system who own big businesses, people from the family who are unable to find any employment are dependent on the joint income of the family.

Steps required to fight Unemployment:

Following are the steps required to fight unemployment in India;

  1. Investment-driven economic model: As highlighted in the Economic Survey 2018-19, India needs to shift gears from the consumption-driven economy to an investment-driven economy. This shall lead to creation of a lot of employment opportunities in India.Virtuous Cycle
  2. Enhancing Skill-Development: In order to reap the potential offered by its demographic dividend, India needs to focus on quality education at school and university level and also ensure that its youth is adequately skilled in order to meet the demands of the industry.
  3. Labor-intensive Industries: It is the need of the hour that India starts focusing on Labor-intensive sectors. For instance, the Textile sector has immense potential to give provide employment opportunities.
  4. Policy reforms: The manner in which the government recently introduced the Labor Laws, likewise the government needs to come up with a holistic employment policy wherein it can undertake reforms to remove the structural reforms and boost employment creation.

Initiatives taken by Government:

The government has taken various initiatives in order to fight the menace of Unemployment;

  1. Pradhan Mantri Kaushal Vikas Yojana.
  2. Mahatma Gandhi National Rural Employment Guarantee Act
  3. Start-Up India
  4. Make In India





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