Unemployment in India

The Shape of Unemployment and Joblessness in India

Unemployment in India
Unemployment in India

Unemployment is a situation when able-bodied people willing to work cannot find a job. The job situation in India is a matter of serious concern with employment opportunities shrinking, formal jobs shrinking, and even the labour force is also shrinking. According to the National Sample Survey Office’s (NSSO’s) Periodic Labour Force Survey (PLFS) of Ministry of Statistics and Program Implementation, unemployment rate has increased to 6.1% in 2017-18 [highest in last 45 years]. The unemployment rate has tripled from 9%-27% for people between 15-19 years of age between 2011-12 and 2017-18. The rate of joblessness bounced more than three-fold to 17.5% in 2017-18 in comparison to 5% in 2011-12 in male among ages 15-29. Among female, the employment rate stood at 13.63% in 2017-18 versus 4.81% in 2011-12. According to Labour Bureau statistics, in 2011, 9.3 lakh jobs were generated whereas only 1.35 lakh were created in 2015 in labour intensive sectors.

Why the Job Crisis Is Increasing?

Three facets might be taken into consideration here. Firstly, a primary reason behind this escalation is due to the rise in proportion of people primarily engaged in studying from 64%-72%. Under circumstances of rising enrolments in schools and colleges, unemployment rate is considered as a degree of substandard conduct of the economy, it pigments an erroneous depiction. Secondly, experienced younger generation who are jobless prefers to wait for well-paying jobs before being inescapable from accepting any work. Thirdly, people with secondary or higher education faces the greatest challenge of unemployment as increasing education levels escalate unemployment challenges. Other than these, rising population, overburden on agriculture sector with low productivity and absence of alternative opportunities for unskilled workforce, agriculture being a seasonal occupation, caste system of India, fall of small and cottage industries, sluggish industrialisation, inadequate investments, under employment due to shortage of raw materials, coal & electricity, immobility of labour etc. also sums up to the reason for this unemployment scenario in India. Madam Sabanavis, chief economist at Care Rating said, “The youth is moving away from the agricultural sector to urban areas because of low remuneration. On sectorial front, construction sector which was one of the biggest employers in urban areas observed major mayhem in the sector”.

Between 2004 & 2012, there were generation of about 7.5 million new non-agricultural jobs every year. The percentage of unemployment was only 2.2%. Until 2011-12, the rate of open unemployment remained constant (about 10 million) but it sharply rose to 16.5 million by the end of 2015-2016. This sudden hike of open unemployment after 2011-12 insinuates that youths who were pursuing education prior to 2011 became inclined towards formal and non-agricultural jobs but failed to find them. This situation exacerbated further during 2017-18 according to NSSO report. The rate of unemployment among graduates increased to 11% from 6.9%, among post-graduates it increased to 7.7% from 5.7% and among vocationally trained people the rate increased from 4.9% to 7.9%.

Drop was even noticed in manufacturing jobs. There was a whopping 10.6 million drop from 58.9 million to 48.3 million between 2011-2 and 2015-16. This fall is due to the sluggish growth in the Index of Industrial Production (IIP) which consists of mining, manufacturing and electricity.

The figure of new entrants, especially the educated entrants into the labour market will be on increase until 2030. Thereafter the increase will be at a decelerated pace. The demographic dividend of India – which comes only once in a lifetime to a country – shall be over by 2040. Within 2040, India must design an effective industrial policy and employment strategy (underpinning skill and education policy) like China to eradicate poverty and unemployment.

Wage Crisis

A job with proper wage rate is a confusing debate in present day. It should be noted that even in this crisis situation jobs are available but not with desired wages. This is because people working in the unviable sectors which consists of 48% of the labour force, contributes only 13% to GDP; the unviable firms which comprises of around 6.3 crore enterprises, only 19500 companies among them have a paid-up capital more than ?10cr; the unviable entrepreneurship which consists of our 50% labour force are actually not self-employed rather self-exploiting; the unviable geographies where there are 6 lakh villages but less than 200 people live in 2 lakh villages.

India’s labour market has been the shock absorber since 1947 with subsistence wage employment or self-employment but it no longer works because present generation expects a living wage that fulfils their aspirations rather than a minimum wage that helps in keeping their body and soul together. These expectations of higher wages can only be satisfied by transitioning people to higher firms, geographies and productivity sectors.

Effect Of Demonetisation & GST

The impact of demonetisation and the GST on jobs as employment status of individuals between July2017- June 2018 was mapped by CWS (Current Weekly Status). According to CWS approach of the NSSO’s LFPS, unemployment rate for male was 8.8% versus 9.1% for females which was higher in comparison to the usual status which showed females at 5.7% and males at 6.2%. The CWS is a better measure for mapping as it takes into account the status of seven days whereas the usual approach considers 365 days. The labour force participation rate (LFPR) for both male and female showed downward trend from 2011-12 to 2017-18. However, from the given data it can be concluded that more female are exiting the labour force in India than male that are willing to work. Labours who are willing to work but are dropped forcefully due to challenged labour market is termed as discouraged worker effect in macroeconomics.

Demonetization may have been beneficial in raising direct tax compliance but it had caused demoralization among the unemployed youths of the country who are giving up their hopes in finding employment. During January 2016-October 2016, the rate of labour participation in India was 47% whereas 66% was the world average. This rate dropped to 45% after demonetisation in November 2016. This 2% of the labour force which is almost 13 million, escaped from the labour market. This shows that a huge number of people despite their willingness to work decided not to work further. But why? According to reports, the employed retained their jobs but the unemployed who were searching for jobs, lost their hope of getting a job seeing the vitiated condition of labour market in the aftermath of demonetisation. Hence, with the unemployed moving out of the labour market, there was a fall in the unemployment rate because unemployment rate is nothing but the ratio of those who are not employed to the total labour force. This fall was misinterpreted and taken in positive sense whereas the reality was something different. This fall was actually a reflection of an exodus of the unemployed from the labour markets, i.e. a reduction in the rate of labour participation. This shows how much important is labour participation rate.

According to various surveys conducted on labour participation rate, it was found that female’s participation in labour force is very low and even shrinking more in India. Reports from the surveys conclude that there are three key reasons behind this reduction. First, women’s education has reached a new level. Number of enrolment for higher education among women has increased enormously. Completion of higher education delays their entry into the labour force. Secondly, with the increase in household income, the need for participation for women in labour force decreases. India’s orthodox nature does not allow a woman to participate in labour force unless and until there is a severe crisis in the family. Thirdly, factors such as security and culture vehemently obstruct women from participating in labour force. Moreover, it is apparent that employers remain biased against recruiting women as labours.

The Consumer Pyramids Household Survey (CPHS) unveils that the situation in respect of women’s participation in the labour market is extremely poor. Women had borne the entire paroxysm of demonetisation. The women labour participation rate plummeted in comparison to men’s.

Just after the jolt of demonetisation came the shock of GST (Good &Service Tax) on July 2017. Many small enterprises were driven away as they could not compete in the tax-compliant business environment. Consequently, there was a huge loss of jobs. It was estimated that more than 11 million had lost their jobs in 2018. Again the paroxysm was largely borne by the women though impact was also seen on men. It was found that the unemployment rate for men was 4.9% in comparison to 14.9% for women in 2018.

This high rate of women unemployment despite low rate of participation connotes biasness employing women. Engaging women into labour market by eliminating the encumbrances they encounter to at least drive their contribution levels within the ace of global standards is pivotal for India in gaining from its demographic dividend opportunity. Unless an effective data monitoring mechanism is adopted, the government of India will be keeping itself and its citizen in the darkness.

What NSSO Report Says?

NSSO at first admits that household works such as cooking, washing and cleaning are missed out. 50% of rural women who works outside their homes were treated as underemployed since they work less than thirty six hours a week. 68%-70% of the urban employees and 52%-55% of rural employees works more than forty-eight hours a week. In urban areas, on an average a worker works for 53-54 hours a week and in rural areas average working hours is 46-47 hours a week. The legal limit of working hours as prescribed by International Labour Organization and followed by India is 48 hours a week. Working in excess of 48 hours is optional according to Indian law. If overtime work becomes essential or necessary, the worker must be given overtime wages or compensation in the form of ex-gratia payments or extra holidays. A survey conducted on 1800 employees found that 55% of the employees are not satisfied with their working hours. Most of them claimed that they are not paid for overtime while a few claimed that they are paid very less overtime.

The report says that the additional work done by the workers are neither done voluntarily nor are accordingly rewarded financially. The workforce remains dissatisfied which results in low productivity. Employers remain reluctant to indemnify the workers even when wages are low in comparison and inequalities are high. Lastly, there are no crusades for workers & assertion of rights has become a history.

According to the World Employment and Social Outlook, the rate of unemployment has been stabilizing after a hike in 2016, with more than 192 million unemployed persons around the world. The North African region tops the list of global unemployment. Around 8.7 million people are unemployed despite being a strong growth in labour force. In Sub-Saharan region one out of three workers are facing extreme poverty while three in four workers are unemployed. In Arab states more than 5 million people were unemployed in 2018 out of which one-third accounted women population. In Northern, Southern and Western Europe unemployment rate had declined in 2017 but is likely to increase in 2019. There was a slight decrease in unemployment rate in the Eastern European countries as the economy had rebounded considerably except for the Czech Republic. In Central and Western Asia employment remains vulnerable affecting around 30% of the workers in 2017 but it was estimated to decline slightly in 2019.

Steps Taken By Government For Increasing Employment Opportunities

  • Integrated Rural Development Programme (IRDP)- It was introduced in 1978-79 to generate employments in rural areas. Under this program, in 5111 development blocks agriculture, animal husbandry, construction of roads, industries etc. were to be developed. This plan had benefited about 21 lakh families in 1995-1996.
  • Drought Prone Area Programme- It was launched to minimise the effects of areas prone to drought. Its objective was to boost overall economic development and revamp the socio-economic positions of the disadvantageous sections residing the program areas. It was successful in removing seasonal unemployment.
  • Jawahar Rozgar Yojana- it was initiated on 28th April 1989 to provide employment for 100 days a year to at least one member of each family in poor rural areas. In this program 30% of the employment generated was kept reserved for women.
  • Self-employment to educated Unemployed Youth- It was initiated in 1983 to provide loans up to Rs 25000 to educated employed youths who had no sources of income.
  • The Make in India initiative- it was launched on 25th September, 2014 with the objective of creating jobs and enhancing skills in 25 sectors of the economy. It was also aimed at transforming India into a manufacturing and global design hub.
  • Pradhan Mantri Kaushal Vikas Yojana – it is a flagship scheme under Ministry of Skill Development & entrepreneurship initiated by National Skill Development Corporation to provide skill training to the Indian Youth and help them in having a better livelihood.
  • Pradhan Mantri Employment Generation Programme- it was implemented to generate sustainable employment opportunities among unemployed youth of the country by establishing micro enterprises.
  • Pradhan Mantri Mudra Yojana- This programme provides collateral-free loans to non-corporate small business enterprises between Rs 50000-10 lakh. [MUDRA- Micro Units Development and Refinance Agency].
  • Pradhan Mantri Rojgar Protshan Yojana- It was launched on August 2016 to incentivise employers who are registered under EPFO ( Employees’ Provident Fund Organisation). Government pays 8.33% contribution of employers to EPS (Employees’ Pension Scheme) and EPF (Employees’ Provident Fund in respect of new employees provided they have Universal Account Number (UAN). A unique feature in this scheme is that workers will have the accessibility to social security benefits of the systematized sector.


Several institutes and agencies conduct surveys on jobs and employment-unemployment status of India. Most dependable reports come from NSSO (National Sample Survey Office). NSSO estimates unemployment using three approaches – Usual Status Approach (considers those individual who do not have gainful work during the major time of the year), Weekly Status Approach (considers those individuals who do not have gainful work even for an hour during the week of survey), Daily Status Approach (considers those individuals who do not have gainful work even for an hour in a day). Other than NSSO, CMIE (Centre for Monitoring Indian Economy) conducts surveys on household, Employees’ Provident Fund Organisation’s (EPFO) data on addition of new subscribers also tells us about the present scenario of employment in India. There are several questions raised on the credibility of these reports. However, there are some conclusions that can be drawn from these data. First, India’s unemployment problem largely lies on youth employment and this is where more efforts must be made. Though several complications have been eased by the Central Government under the Apprentices Act and have allowed offering of fixed-term labour contracts in all sectors yet it seems that employers have not taken the bait. This may be because most of them yet to deleverage and recover from the brunt of demonetisation and GST. Secondly, while there are noticeable improvement on the enterprise data (EPFO, CII, etc.), statistics of household jobs are dependent on NSSO and CMIE, whose 2017-18 reports are filled with controversies. The reason behind government’s reluctance to authorise the report may be because the year (2017-18) had been badly affected from the effects of demonetisation and GST. Thirdly, there is a major drawback in both NSSO and CMIE –the assembling of data takes months to complete, as a result, the data fails to capture a particular point of time. This means if an individual is unemployed in April but gets a job in June, he will still be considered as unemployed in the report. Accurate data can only be compiled if the survey is finalized in a day or within a week. Thus, more number of surveyors will be needed which can only be afforded by the government. However, sources like CMIE and NSSO are essential to maintain the honesty of government data, but they have limited usefulness.

Government should encourage in industrialization and develop agriculture-based industries in rural sectors in order to control migration of rural youths to urban sectors in search of jobs. Another better solution to the unemployment problem may be encouraging the youths to step in as entrepreneurs. Entrepreneurs promote capital formation, generate employments and do better utilization of resources which maximizes the profit of an industry. They do not allow concentration of wealth within a few hands and hence the distribution of wealth is done impartially.

Since majority of the population in India (65%) is below the age of 35 years, young generation stepping into entrepreneurship will eradicate almost half the number of unemployed youths in the country.


Also read:-

1 Trackback / Pingback

  1. MGNREGA - Current Affairs Review

Leave a Reply

Your email address will not be published.