Unemployment In India – A Cause of Concern?

Unemployment In India – A Cause of Concern? Thumbnail

Unemployment is a serious global concern, and even India is not left out of its ambit. The issue of unemployment in India is quite severe because of the continuously growing population of the country and job demands amongst the youth. In our society today, unemployment is a serious social issue. There has been a rising number of suicide cases among the youth of the country due to unemployment. These youth are supposed to fuel the country’s economy but are frustrated due to lack of jobs.


In a simple language, unemployment is a situation where people are actively seeking jobs, capable of working, but are unable to get any jobs. To understand unemployment, the concept of labour force has to be understood.

WHAT IS UNEMPLOYMENT? Info 1As per internationally accepted definition, all those people who are working (having a job) and though not working but are capable and seeking for job are deemed to be in labour force. Likewise, those people who are neither working nor seeking for jobs are considered to be outside the labour force and, therefore, they are not included in employment or unemployment statistics. Labour force can be said to be a summation of employed and unemployed. To obtain the unemployment rate, the number of unemployed people is divided by the total number of people in the labour force.


Open Unemployment – A huge portion of the workforce is unable to find work that would normally provide them with a steady income. When compared to the rate of economic growth, the labour force expands at a higher rate, which means that not everyone gets a job.

Seasonal Unemployment – Seasonal unemployment occurs when jobs are only available during a specific season or time period of the year, and the people who work there are unemployed during the rest of the year. Tourism, agriculture, and other sectors where economic activities take place at specified times.

Disguised Unemployment – When more persons are employed in a given job than are required, such unemployment results. Even if some individuals are laid off, production does not suffer. The most prominent example in India is the unorganized and agricultural sectors, where there is excess manpower, and some workers do not contribute anything to productivity.

Cyclical Unemployment – When the demand for goods and services falls, less production occurs, and fewer people are required to maintain the same level of productivity. Cyclical unemployment happens when the economy’s aggregate demand is insufficient to supply jobs for everyone who wants to work. Unemployment in this country rises during recessions and falls during economic growth.


Structural Unemployment – Structural unemployment occurs when the labour market is unable to supply jobs to people due to a mismatch between the skills of those ready to work and the skills required for the available jobs. Some sectors of the Indian population lack the necessary abilities for employment due to a lack of sufficient education. As a result, training them becomes a challenging task, worsening the unemployment situation day by day.

Technological Unemployment – Technological unemployment occurs when employment losses occur as a result of technological advancements. Due to shifting business dynamics and automation – for example, in banking and information technology – India saw a substantial amount of job losses during the pandemic. Artificial Intelligence is also to blame for employment losses.

Frictional Unemployment – Frictional unemployment occurs when unemployed, jobless people are seeking for jobs in a healthy economy. Here, workers become voluntarily unemployed either because they are moving out due to some reason or are seeking for a better job.


Considering India’s vast size and diversity, analysing the Indian Labour Market accurately can be a difficult task. Even though India was said to be the fastest-growing economy among the large economies, the faster growth is not converting into jobs. Since 1972 to 73, even though aggregate employment has increased at an average annual rate of 2% in India during the past four decades, the employment growth has reduced substantially in the past few years.

On the basis of work conditions, the Indian Labour Force is divided into two sectors: the Organized and the Unorganized sector. The organized sector is such, registered with the government, and enterprises are taxed and have acts applied to it. The employment terms are fixed and regular for such sectors, along with assured work and social security received by the employees. The unorganized sector is such which is neither taxed nor regulated by the government. The employees are not provided with any social security by the employers. People engaged in such sector includes small and marginal farmers, people working in small enterprises and their owners, daily wage labourers, migrant workers, etc.


India’s labour market has been characterized by declining female Labour force Participation Rate, along with decreasing employment in urban areas. The increase in employment opportunities has increased for both the organized and the unorganized sectors over the years, but it was mainly for the informal workers. Open unemployment had caused such a rise which had reduced the bargaining power of the workers. In addition to this, the non-agricultural jobs were growing but at a diminishing rate (construction and services were in such a category, whereas manufacturing was decreasing).  Since the 1990s, India has witnessed slow and steady growth in employment in the organized sector. The GST in July ’17 has brought a change in employment in this sector in a better way, moving towards formality.

In spite of the fact that employment growth has increased in quantitative terms previously, some features of employment growth that have emerged in recent years are:

  • Employment growth has slowed down.
  • Employment growth has mostly been contributed by the unorganized sector, having no security and poor working condition, low income, etc.
  • Slow growth in employment in the organized sector is mostly led by the employment of casual and contract labour.
  • Sectors having higher employment potential have noticed slower growth.


The global pandemic has taken away not only lives of people all over the world but also the ability for many to earn a living. The world economy had come to a complete standstill, and the situation in India was no different. When the Indian government announced the complete lockdown in 2020, the unemployment increased from 8% to 24% approximately. This was because strict lockdowns have caused businesses to close down, permanently or temporarily, causing job loss. However, some occupations had flexibility, whereby people could work from home and earn their living. Hence, employment was hardly affected in occupations providing such flexibility. Given the fact that social distancing was mandatory, tertiary sector activities such as hospitality, tourism, repairs, and related services suffered to a great extent, not just the industry as a whole but also the people employed in such industries. Most of the firms in the insurance, FMCG, finance had to lay off their employees in order to cut costs, especially the contract labourers. Along with them are the migrant labourers, casual and daily wage labourers, who had lost their jobs and had no clue about their re-employment. All this led to loss in income, where they spent their savings on daily expenses to fill the empty bellies of their families. Some of them had pawned or sold off their assets, and some borrowed money to meet their daily expenses. Prior pandemic, income earned by women was approximately one-fifth of what men earned. Job loss among men was 7%, whereas, among women, it was 47%, where most of them did not return to jobs at all by the end of the year. The condition of women was even worse in the informal sector, where, after the first wave of the pandemic, there was approximately 80% job loss for rural Indian women in the informal sector. The pandemic had also led to children dropping out of schools, where girl dropouts were more than boys – among which 65% were reluctant to continue the education of their girl child and, instead, turned to child marriage to save costs. This means that this entire generation of women was deprived of education and future employment opportunities.



The Indian economy has witnessed a very slow growth in domestic consumer demand, and the capacity utilization was also not up to the mark, leading to investments in India being adversely affected. Lack of new investments by large business entities and generation of employment is currently required in India would be difficult. It is expected that employment will be of poor quality unless new investments pick up the pace.


Employment in India did not restore to pre-epidemic levels months after the pandemic. In 2019-20, India employed 408.9 million people, but the figures did not improve in 2021-22. Although the working-age population has increased, there has been a decrease in active job seekers, and hence employment has not improved since the pandemic. Since the recovery, India’s employment composition is said to have deteriorated.


As per the data released by CMIE, the average Labour force Participation Rate (LPR) was least during the second wave of the pandemic, April-June ’21 (approximately 40%), and in June alone, it fell 39.6%. This was when India had restricted mobility and state-wide localised lockdowns due to the rising number of COVID-19 cases. In March 2022, when there were no covid-19 waves and lesser restrictions on mobility, this LPR rate was 39.5%. In March 2022, the labour force and employment has shrunk, which happened last in July 2021. Also, there was a reduction in the count of unemployed in this month. But this reduction in the unemployment rate or the count of unemployed is not because more people have been employed – there has been a reduction in employment in March 2022 by 1.4 million. Millions of people have left the labour market where they are no longer searching for jobs – either are possibly too distressed that their qualifications do not match the required job skills or are under the belief that there are no jobs. For the first time, India is witnessing that in a month, both the constituents of the labour force (employed and unemployed) have reduced simultaneously. According to experts, figures on the labour force reflect indicators of economic turmoil. Because of the reduction in LPR, there has been an increase in the shortage of employment options, but why? This LPR compares the population of working age to the labour force. LPR declines when the working-age population grows faster than job possibilities.


As per data, the biggest decline was encountered among salaried employees, where 9.5 million jobs were lost. In addition to these, 1 million jobs were lost among entrepreneurs. This offset was gained in daily wage labourers and mostly agriculture.


Looking at the source of declining employment, the situation looks even worse. The reduction in employment in March ’22 exposed a bigger issue on the employment front. There was a 16.7 million fall in non-agricultural jobs, which was offset by employment increase of 15.3 million in agriculture. Such a large increase in employment in agriculture may be due to workers’ seasonal demand for Rabi harvest preparation – but, again, in March may be somewhat too early. Another possibility is that the majority of employment increase in agriculture is disguised employment.


A large reduction in non-agricultural jobs can be quite problematic. As of March ’22, the industrial jobs fell by 7.6 million, where construction sector by 2.9 million, manufacturing by 4.1 million (fall in jobs in the large organised sector of metal and cement), mines by 1.1 million, and a slight increase was observed in the utility sector. Jobs in the manufacturing sector have been improving through 2021-22, after being disastrous in 2020-21. Except in July ’21, almost all months till February ’22 had seen a rising trend in employment in the manufacturing sector. The fall in jobs for March ’22 was a surprise – march being a seasonally busier month than others expected to maintain the rising trend in employment.


In the construction sector, which faced lockdown shocks, although recovered from it, employment is somewhat stagnated. It is unable to get back the pre-pandemic employment levels.


As of December ’21, when compared to the pre-pandemic level of 2019-20, the service sector had suffered job loss, where hotel and tourism lost 5 million jobs, education approximately 4 million, and a contrasting result was witnessed in retail trade where it gained 7.8 million jobs.


Currently, India has the lowest female workforce participation rate in the world. The proportion of women in the workforce aged 15 years and above is the lowest in the world in India. Jobs that have come back post-covid have been increased by the male workers mostly, whereas the female workers are losing out continuously.

Experts have given some reasons as to why the female labour force participation rate is low. Some say that women are taking on their responsibilities to care for the elderly and children at home, for which they are unable to join their work. The other reasons given are that women are pursuing higher education instead of work, lack of social security and flexibility at the workplace, etc. There is a contrasting result when it comes to the comparison of female labour force participation in rural and urban areas. Unemployment in female labour force in rural areas is lower than that of the male labour force, whereas it is just the opposite in urban areas. Also, the female labour force participation rate is greater in rural India than in urban India. Experts believe this could be that there is less gender discrimination in informal jobs dominating the rural area than in the informal sector dominating urban India. As per recent news, some over-qualified people, like post-graduates, PhD holders, engineers, etc., are turning up for low-skilled government job interviews. An instance proving such where over 10,000 young people, being graduates, post-graduates, and civil judge aspirants, have applied for 15 government jobs of drivers and watchmen in Madhya Pradesh. As per the Centre of Monitoring Indian Economy (CMIE), with rising education, the unemployment increases, and one out of five college graduates are unemployed as of December 2021. World Economic Forum had said that the high unemployment rate among the college graduates is “widespread youth disillusionment” – considering it to be a threat to the economic stability of India, playing a part in India’s growing job crisis. Demonstration of such disillusionment occurred this year when thousands of young job seekers in Bihar and Uttar Pradesh, two most populous states, had set fire on train cars, blocked railway traffics – issue arose over claimed recruitment flaws in government-run railway sector job process. Unemployment among youth and educated exists due to lack of appropriate jobs. Some job seekers are of the opinion that in private sector jobs, regulations for timely payment and benefits are not in place most of the time. This is in contrast to what is thought about government sector jobs, where the job seekers find a sense of security and timely benefits provided there – hence, the willingness to join this sector.

People working in the informal sector like construction, agriculture, etc., lack security, and no guarantee of work or timely wages exists. Supporting themselves and their family becomes quite difficult. Now, here we are, where education, in some cases, does not guarantee jobs to the youth. Even though they get a job, there are complaints regarding employee benefits, lack of job security and salaries not enough to meet the minimum wage requirements. As per estimates, an organised sector in India hardly generates 300,000 jobs a year, which clearly indicates a crisis in employment and raises questions on where actually these aspirants go.

When a single person is unemployed, the impact on society is usually negligible; nevertheless, high unemployment rates contribute to higher poverty rates and amplify the social unemployment impact. In addition to poverty, locations with high unemployment rates are more likely to have restricted professional prospects, limited recreational activities, insufficient housing, limited access to public services, low education, and so on. With a high unemployment rate, more people will have less income, and as a result, less money will be spent. As a result, the economic contribution of products and services produced and supplied will be reduced. We can also remark that unemployed people have little purchasing power, which means that demand for products and services will naturally fall. Businesses’ profits suffer as a result of this. Suppliers of commodities and services will now face budget constraints and will employ fewer people to meet demand. As a result, rising unemployment may eventually lead to a scarcity of products and services. This cycle continues, becoming increasingly difficult to break if the respective authorities do not intervene promptly.

Research has found that youth unemployment has harmed their mental health through higher levels of tension about their career, immense disappointment, frustration, and sadness. These individuals have low self-esteem and self-doubt. When such people start thinking they have very little control over important life events such as finding a suitable, a constant feeling of helplessness arises. Such prolonged feelings due to unemployment lead to depression. Regardless of their future employment, these effects persist in adulthood, affecting their future mental health. There have been instances where youths of India are committing suicide due to bankruptcy and indebtedness. As per the National Crime Records Bureau (NCRB) data, between 2018 and 2020, 9140 people had committed suicide due to unemployment, where the highest number being 3548 reported in 2020 when the pandemic triggered significant distress and the whole country was under complete lockdown. People who had resources and savings had survived the wrath of the pandemic, whereas those who had no source of income, no savings, and no hope of further improvement of their drastic situation, had committed suicide.


To reduce the rising unemployment and generate employment in India, the government has implemented various schemes. Some of the schemes are as follows:

Start-Up India Scheme, launched in 2016, for the promotion of entrepreneurship at the grass-root level, mainly focusing on job creation and economic empowerment. Its main aim is to reach the underserved people of our society, such as SC, ST and the women entrepreneur.

Skill India Mission, launched in 2015, to skill almost 40 crore people in both unorganized and organized sectors, to improve workforce efficiency, provide industries with job-ready human resources and ultimately improve the competitiveness of the young population of India, which is considered crucial for economic growth and development of the country. This scheme includes initiatives of government such as the Pradhan Mantri Kaushal Vikas Yojana, Skill Loan Scheme, National Skill Development Mission and National Policy for Skill Development and Entrepreneurship 2015.

Government Initiatives info 4

Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi (PM-DAKSH Scheme) being implemented from 2020 to 21 to provide skill development training programmes to the target groups- OBCs, Scheduled Castes, Economically Backward Classes, de-notified Tribe, sanitation workers.

Pradhan Mantri Mudra Yojana, launched in 2015, to provide loans loans up to 10 lakh to non-corporate, non-farm small/micro-enterprises mainly focusing on disadvantaged section of society such as (women entrepreneurs, SC/ST/OBC borrowers, Minority community borrowers, etc.)  and new entrepreneurs.

Other important schemes other than those mentioned above are Atmanirbhar Bharat Rojgar Yojana, National Career Service Project, MGNREGA, Pandit Deendayal Upadhyay Shramev Jayate, Prime Minister’s Employment Generation Programme (merger of Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP)), ASEEM Portal, etc.

National Mental Health Programme is a government initiative to counter the mental stress and suicide issues among the youth. It aims to provide workplace stress management, suicide prevention services, counselling in schools and colleges and life skill training.


Currently, India is facing the biggest development challenge of job creation, and as per experts, it needs to create more than 100 million jobs by 2030. Jobs in India, in recent times, are created by small/ young firms and not the big/established ones. Although an upward trend in the entry of new firms has been witnessed, it is unfortunate that it has not been strong enough to absorb the new workers who enter the workforce every year in India. Entrepreneurship has been one of the keys to employment generation – creating not only self-employment but also a structure of large-scale employment is built. As per experts, India has a low entrepreneurship rate and the promotion of which has become significant. There has been empirical evidence from districts in India that improving business climate, less regulation, less taxes, and most importantly, investment in physical and human infrastructure are factors that drive entrepreneurship and the creation of jobs.

Way Forward info 5

In the early 1990s, urbanization and job growth moved hand-in-hand, but the scenario changed in past years. Manufacturing enterprises have found megacities to be quite costly and hence, are now diverting their attention towards Tier II and III cities of India. Small towns and medium-sized cities have struggled with poor infrastructure. Job growth is likely to benefit these places by shifting from megacities to medium-sized towns, promoting competition between urban centers, and strengthening the collaboration between Centre and States. In other words, the development of rural areas will reduce the migration of individuals from rural to urban areas and decrease the pressure of jobs in urban areas. All this, taken together, will have a high potential in increasing job creation and per capita income.

India had a poor global ranking in human infrastructure, having low ratings in health, education, life expectancy and skills. The pace of job creation can be increased in India with increased investments in education and skills. The reach, quality and timeliness of access to improved health and education are urgently required. Investment in education and skills in the early years of children is considered a down payment now, which will scale up the pace of job creation and growth in the future.

Young/new entrepreneurs are finding it difficult to access land, labour and capital as established firms crowd them. With their strong networking, these established firms find it easy to obtain land and further use it as collateral to get loans. Land and capital markets should be focused upon to be made available to the new and emerging entrepreneur of the country.

India, having a huge service sector at its current development stage, has a great potential for job creation, the advantage of which should be taken appropriately. With the manufacturing sector losing its strength and the service sector gaining momentum, some services such as healthcare, IT, Telecom, retail, etc., can generate employment in India. Setting up educational institutes and taking steps to strengthen the existing ones can create jobs in the education sector as well.

Since unemployment impacts mental and physical health, government should take strict and precautionary steps to increase job creation and also strengthen its healthcare infrastructure.


Unemployment in India affects both individuals and the economy as a whole. It is responsible for causing financial hardships, which impact their relationship with family, standard of living, mental and physical health, etc. It creates a negative impact for not only those unemployed individuals seeking for jobs but also the already employed individuals who feel anxious and less secure about their job in future. Although unemployment has reached a very critical stage, with initiatives taken up by the government, this crisis can be curbed. The employment levels can be improved with time and better enforcement of the strategies. But there is a long way before one can say that all the working population in India will get employment.


  1. https://indianexpress.com/article/explained/explained-india-urban-unemployment-rate-in-numbers-7820915/
  2. India’s job crisis ‘biggest challenge, biggest opportunity’: Naushad Forbes | Business Standard News (business-standard.com)
  3. 25,000 suicides linked to debt, jobs in three years: Govt in Rajya Sabha | Latest News India – Hindustan Times
  4. Unemployment rise in India isn’t due to Covid alone. See what data says (theprint.in)
  5. https://www.thehindubusinessline.com/opinion/how-india-can-promote-job-creation/article35286136.ece
  6. https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=20220103135752&msec=816
  7. https://www.npr.org/sections/goatsandsoda/2022/03/16/1084139074/this-burning-train-is-a-symbol-of-the-anger-of-indias-out-of-work-youth



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