India’s Labor Force Participation Rate (LFPR) has recorded a significant drop as per data from the Centre for Monitoring Indian Economy (CMIE). Falling from 47% in 2016, India’s LFPR now stands at a mere 40%. This indicates that more than half of the country’s population aged 15 years and above is opting out of the job market, with this proportion on a rising trend.
The LFPR is an economic term referring to the percentage of working-age population that consists of people who are either employed or are unemployed but actively looking for work. Essentially, it measures the “demand” for jobs in an economy. This is inclusive of both those who are currently employed and those who are seeking employment.
However, not only is India’s LFPR low in comparison to global figures, it is also steadily declining, having fallen from 47% in 2016 to 40% as of December 2021.
Reasons for Low LFPR in India
Primarily, India’s significantly low LFPR can be attributed to the dismally low participation of women in the workforce. As of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%. Numerous reasons contribute to this low female LFPR such as poor law and order, inefficient public transportation, societal norms, violence against women, and the majority of women being engaged exclusively in household work.
Limitations of LFPR Calculation
The Unemployment Rate purely determines individuals who are unemployed and searching for jobs, but does not account for those who have given up on seeking employment. Therefore, tracking the Employment Rate (ER), which refers to the proportion of employed people within the working-age population, might give a more comprehensive picture.
Various Types of Unemployment in India
India’s unemployment issue is quite complex with various forms of unemployment prevailing in the country:
– Disguised Unemployment: This implies that more individuals are employed than required, commonly found in the agricultural and unorganized sectors.
– Seasonal Unemployment: This type of unemployment occurs during specific seasons of the year due to lack of work throughout the year for agricultural laborers.
– Structural Unemployment: Unemployment due to a mismatch between available jobs and the skills of the workers.
– Cyclical Unemployment: Unemployment associated with fluctuations in the business cycle, which rises during recessions and falls with economic growth.
– Technological Unemployment: Job loss due to technological advancements and changes.
– Frictional Unemployment: The time lag between jobs when an individual is looking for a new job or switching jobs.
– Vulnerable Employment: Informal employment lacking legal protection and proper contracts.
Initiatives by Indian Government
To tackle unemployment, the Indian Government has introduced several initiatives, such as the Support for Marginalized Individuals for Livelihood and Enterprise (SMILE), PM-DAKSH, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Pradhan Mantri Kaushal Vikas Yojana (PMKVY), and the Start Up India Scheme.
Suggested Approaches to Resolve Unemployment
Developing labor-intensive industries, decentralizing industries, and drafting a National Employment Policy are among several strategies that could help create jobs and mitigate unemployment. Efforts should also be directed towards enhancing skills, creating quality jobs, promoting social cohesion and equity in the job market, and supporting the private sector and self-employed individuals.
