India’s unemployment rate is a pressing issue that has been exacerbated by the COVID-19 pandemic, reaching a four-month high of 7.9% in December 2021 according to data from the Centre for Monitoring Indian Economy (CMIE). The rise in COVID-19 cases due to the Omicron variant, as well as new restrictions implemented across various states, have negatively impacted economic activity and consumption levels, posing further challenges to the country’s economic recovery.
Unemployment: Definition and Measurement
Unemployment occurs when individuals actively searching for jobs are unable to secure employment. It serves as an indicator of the economy’s health. The standard measurement of unemployment is the unemployment rate, which is calculated by dividing the number of unemployed individuals by the total labour force. The National Sample Survey Organisation (NSSO) of India defines an individual’s employment status based on three categories: employed (working), unemployed (actively seeking or available for work), and unengaged (neither seeking nor available for work). The unemployment rate is derived from the percentage of the labour force that is jobless.
Types of Unemployment Faced by India
India experiences various forms of unemployment:
1. Disguised Unemployment: This is prevalent in the agricultural and unorganised sectors, where more people are employed than necessary.
2. Seasonal Unemployment: It affects agricultural labourers who often don’t have work throughout the year.
3. Structural Unemployment: This arises from a mismatch between the skills of the available workforce and job requirements. Poor education levels often make training difficult.
4. Cyclical Unemployment: Changes with the business cycle, increasing during recessions and decreasing during periods of economic growth. This form of unemployment is minimal in India and is more common in capitalist economies.
5. Technological Unemployment: Job losses driven by technological advancements. World Bank data predicts that 69% of jobs in India could be threatened by automation.
6. Frictional Unemployment (Search Unemployment): A temporary phase when individuals are transitioning between jobs or searching for new ones.
7. Vulnerable Employment: Informal, unprotected employment without proper job contracts, making it hard to maintain work records.
Causes of Unemployment in India
Several underlying causes contribute to India’s unemployment problem. Social factors such as the caste system and family dependency in joint families play a significant role. Rapid population growth, agriculture-dominated workforce, deterioration of cottage and small industries, immobility of labour due to familial, language, religious, and climate factors, and deficiencies in the education system further exacerbate the problem.
Government Initiatives to Tackle Unemployment
The Indian government has launched several initiatives to address unemployment including the Support for Marginalized Individuals for Livelihood and Enterprise (SMILE), Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi (PM-DAKSH), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Pradhan Mantri Kaushal Vikas Yojana (PMKVY), and Start Up India Scheme.
Proposed Solutions and Future Outlook
Strategies to mitigate unemployment include promoting labour-intensive industries like food processing, leather and footwear, wood manufacturing and furniture, textiles, apparel and garments through specially designed packages, decentralising industries to provide regional employment, developing rural areas to decrease urban migration, and drafting a comprehensive National Employment Policy (NEP). The NEP should focus on skill development, create quality jobs, support the private sector, strengthen social cohesion and equity in the labour market, and improve the capabilities of self-employed individuals to boost their earnings.
Last Modified: February 15, 2024