unemployment in India

1. Un-employment
in India
-Dr. Karishma Chaudhary

2. Current rates
Unemployment Rate
27 Sep 2020*
India
6.7%
Urban
8.4%
Rural
5.9%

3. Theunemploymentratein
Indiaroseto7.2percentin
February2019,thehighest
sinceSeptember2016,andalso
upfrom5.9percentinFebruary
2018,accordingtothelatest
datacompiledbytheCentrefor
MonitoringIndianEconomy
(CMIE).
 What is Unemployment?
 Unemployment occurs when a person who is actively searching for
employment is unable to find work. Unemployment is often used
as a measure of the health of the economy.The most frequent
measure of unemployment is the unemployment rate, which is
the number of unemployed people divided by the number of
people in the labor force.

4.  National Sample Survey Organization (NSSO) defines
employment and unemployment on the following activity
statuses of an individual:
 Working (engaged in an economic activity) i.e. 'Employed'.
 Seeking or available for work i.e. 'Unemployed'.
 Neither seeking nor available for work.
 The first two constitutes labour force and unemployment rate is
the percent of the labour force that is without work.
 Unemployment rate = (UnemployedWorkers /Total labour force)
× 100

5. Labour
Participation
Rate
 Labour Participation Rate defines that section of working
population in the economy which is currently employed or seeking
employment.

6. State wise
unemployment
rate(current)
Unemployment Rate (%)
States (India) Aug 2020 States (India) Aug 2020
Andhra Pradesh 7.0 Jharkhand 9.8
Assam 5.5 Karnataka 0.5
Bihar 13.4 Kerala 11.0
Chhattisgarh 5.6 Madhya Pradesh 4.7
Delhi 13.8 Maharashtra 6.2
Goa 16.2 Meghalaya 3.7
Gujarat 1.9 Odisha 1.4
Haryana 33.5 Puducherry 5.0
Himachal Pradesh 15.8 Punjab 11.0
Jammu & Kashmir 11.1 Rajasthan 17.5
Tripura 27.9 Sikkim 12.5
Uttar Pradesh 5.8 Tamil Nadu 2.6
Uttarakhand 14.3 Telangana 5.8
West Bengal 14.9

7. State wise
unemployment
rates(2017- 2018)
 https://www.statista.com/statistics/642853/urban-
unemployement-rate-by-state-india/

8. Types of
Unemployment
in India
 Disguised Unemployment:
 It is a phenomenon wherein more people are employed than actually
needed.
 It is primarily traced in the agricultural and the un-organised sectors of
India.
 Seasonal Unemployment:
 It is an unemployment that occurs during certain seasons of the year.
 Agricultural laborers in India rarely have work throughout the year.
 Structural Unemployment:
 It is a category of unemployment arising from the mismatch between
the jobs available in the market and the skills of the available workers in
the market.
 Many people in India do not get job due to lack of requisite skills and due
to poor education level, it becomes difficult to train them.
 Cyclical Unemployment:
 It is result of the business cycle, where unemployment rises during
recessions and declines with economic growth.
 Cyclical unemployment figures in India are negligible. It is a
phenomenon that is mostly found in capitalist economies.

9.  Technological Unemployment:
 It is loss of jobs due to changes in technology.
 In 2016, World Bank data predicted that the proportion of jobs
threatened by automation in India is 69% year-on-year.
 Frictional Unemployment:
 The Frictional Unemployment also called as Search Unemployment,
refers to the time lag between the jobs when an individual is
searching for a new job or is switching between the jobs.
 In other words, an employee requires time for searching a new job or
shifting from the existing to a new job, this inevitable time delay
causes the frictional unemployment. It is often considered as a
voluntary unemployment because it is not caused due to the
shortage of job, but in fact, the workers themselves quit their jobs in
search of better opportunities.
 Vulnerable Employment:
 This means, people working informally, without proper job contracts
and thus sans any legal protection.These persons are deemed
‘unemployed’ since records of their work are never maintained.
 It is one of the main types of unemployment in India.

10. Unemployeme
ntTrap
 Unemployment trap is a situation when unemployment benefits
discourage the unemployed to go to work. People find the
opportunity cost of going to work too high when one can simply
enjoy the benefits by doing nothing. Description:While the
purpose of social security and welfare systems is to provide relief
to the unemployed, they end up providing them with an incentive
not to return to work.An unemployment trap arises when
opportunity cost of going to work is higher than the income
received, discouraging people from returning to work and being
productive.

11.  Cycling Un-employment

12. Cyclical
unmeploymen
t
 Cyclical unemployment happens after an economy enters a period
of contraction—that is to say, an economic decline or recession.
 Cyclical unemployment can be described as a chain of events that
starts with a recession.The chain goes as such:
 First, when an economy goes into a recessionary phase, there is a
decrease in demand. As in any recession, consumers are overall
less likely to spend.
 As demand decreases, businesses are forced to lay off workers to
make up for losses in sales and reduce expenses.
 They continue to do this until supply decreases to meet the new
demand.

13.  The workers who were laid off as a
direct result of the decreased demand
are the population we look at when
we observe cyclical unemployment.
Consider the following graph:

14. Causes of
Unemployment
problem in India
 Unemployment in India is a complex problem with numerous
overlapping and intertwined causes; however, it is possible to
identify several key causes.
 These causes, which vary from macro-level factors (e.g. overall
slow economic growth as well as population increases) to more
micro-level factors (e.g. the joint family system of business).
 Understanding the causes of unemployment is the first step in
beginning to rectify this major problem and creating a society in
which everyone is able to find a sustainable livelihood for
themselves and their families

15. 1.TheCaste
System
 The caste system—a structure of social stratification that can
potentially pervade virtually every aspect of life in India—is a
major factor in generating unemployment. In some locations,
certain kinds of work are prohibited for members of particular
castes.
 This also leads to the result that work is often given to members of
a certain community rather than to those who truly deserve the
job—those who have the right skills.The result is higher levels of
unemployment.

16. 2. Increased
Population
Growth
 Increases in population have been considerable over the half-
century.The country’s overall population is made up of more than
1.38 billion people, second only to that of China. It will be the most
populous country for the entirety of the 21st century. As the
country’s economic growth cannot keep up with population
growth, this leads to a larger share of the society being
unemployed.

17. 3.Slow
Economic
Growth
 Because the Indian economy is relatively underdeveloped,
economic growth is considerably slower than it might otherwise
be.This means that as the population increases, the economy
cannot keep up with demands for employment and an increasing
share of people are unable to find work.The result is insufficient
levels of employment nationwide.

18. 4.Slow
Industrial
Growth
 4. Slow Industrial Growth
 Similarly, while industrialization has been considerable, its rate of
growth is nevertheless fairly slow.There is a major emphasis on
industrialization nationwide, which has elevated the Indian
economy; however, industrial growth continues to generate
relatively few new jobs overall as compared to increases in
population.

19. 5.Seasonality
ofAgricultural
Occupations
 5. Seasonality of Agricultural Occupations
 Agriculture offers unemployment for a large segment of the
population, but only for several months out of the year.The result
is that for a considerable portion of the year, many agricultural
workers lack needed employment and income. More stable
sources of income are essential to permit the fulfillment of basic
needs.

20. 6. Joint Family
System
 6. Joint Family System
 Large family businesses may often involve family members who
depend on the family’s joint income but do not contribute
substantive work. Although these individuals may appear to be
working, they may not actually add anything to the business.The
result is that their unemployment is “disguised.”
 Thus the joint family system may contribute to low productivity.
However, this system also offers numerous positive benefits as a
social and economic safety net in which those who cannot find
work elsewhere can derive support from their families and
contribute to their business. It’s likely, then, that this system may
offer more benefits than drawbacks.

21. 7. Loss of
Small-
Scale/Cottage
Industries
 Industrial development has made cottage and small-scale
industries considerably less economically attractive, as they do
not offer the economies of scale generated by large-scale mass
production of goods. Oftentimes the demand for cheap, mass-
produced goods outweighs the desire for goods that are
handcrafted by those with very specific skill and expertise.The
result is that the cottage and small-scale industry have
significantly declined, and artisans have become unemployed as a
result.

22. 8. Low Rates
ofSaving and
Investment
 8. Low Rates of Saving and Investment
 India lacks sufficient capital across the board. L
 ikewise, savings are low and the result is that investment—which
depends on savings—is also low.Were there higher rates of
investment, new jobs would be created and the economy would
be kickstarted.
 Most of population in India works in informal sector with salaries
merely to subsistence level.This is also reason of smaller number
of tax payer in India. Income level has not increased in India, so
poor savings or no savings.

23. 9.Shortage of
Means of
Production
 9. Shortage of Means of Production
 Production is, quite simply, limited by the amount of materials,
equipment, and energy available to fuel it. Shortages of raw
materials, facilities, fuel, and electricity means decreased
production of goods, which logically results in decreased
availability of jobs.

24. 10. Ineffective
(or absent)
Economic
Planning
 10. Ineffective (or absent) Economic Planning
 This is a major source of unemployment in India. Problematically,
there were no nationwide plans to account for the significant gap
between labor supply (which is abundant) and labor demand
(which is notably lower). It is crucial that the supply and demand of
labor be in balance to ensure that those who need jobs are able to
get them; otherwise, many individuals will compete for one job.

25. 11. Expansion
ofUniversities
 11. Expansion of Universities
 The numbers of white-collar workers have increased as well.This
is due in part to the fact that the number of universities in India
has increased in recent decades—currently, there are roughly 385
universities throughout the country.The result is that more people
are educated and become white-collar workers, while
unfortunately, the supply of white-collar jobs does not match their
numbers

28. 12.
Inadequate
Access to
Irrigation
 12. InadequateAccess to Irrigation
 In recent years, less than half—only 39%—of India’s total cultivable
land has access to irrigation.This means, then, that large areas of
land can only grow one crop per year. Many farmers are
unemployed for the majority of the year, during this off-season,
due to lack of irrigation facilities.

29. 13. Labor
Immobility
 13. Labor Immobility
 Culturally, attachment and maintenance of proximity to family is a
major priority for many Indian citizens.The result is that people
avoid traveling long distances from their families in pursuit of
employment. Additionally, language, religion, and climate can also
contribute to low mobility of labor.As one might expect, when
many of those who might otherwise be suited to jobs are unable
to travel to reach them, unemployment is magnified.
 *Immobility of labour is not 100 % true, in covid-19 one must have
seen huge number of migrated labourers.

30. Contractualiza
tion

31. Summary
 Large population.
 Low or no educational levels and vocational skills of working population.
 Inadequate state support, legal complexities and low infrastructural, financial
and market linkages to small/ cottage industries or small businesses, making
such enterprises unviable with cost and compliance overruns.
 Huge workforce associated with informal sector due to lack of required
education/ skills, which is not captured in any employment data. For ex:
domestic helpers, construction workers etc.
 The syllabus taught in schools and colleges, being not as per the current
requirements of the industries.This is the main cause of structural
unemployment.
 Inadequate growth of infrastructure and low investments in manufacturing
sector, hence restricting employment potential of secondary sector.
 Low productivity in agriculture sector combined with lack of alternative
opportunities for agricultural worker which makes transition from primary
to secondary and tertiary sectors difficult.
 Regressive social norms that deter women from taking/continuing
employment.

32. Impact
 Impact
 The problem of unemployment gives rise to the problem of
poverty.
 Young people after a long time of unemployment indulge in illegal
and wrong activities for earning money.This also leads to increase
in crime in the country.
 Unemployed persons can easily be enticed by antisocial
elements.This makes them lose faith in democratic values of the
country.
 It is often seen that unemployed people end up getting addicted
to drugs and alcohol or attempts suicide, leading losses to the
human resources of the country.
 It also affects economy of the country as the workforce that could
have been gainfully employed to generate resources actually gets
dependent on the remaining working population, thus escalating
socioeconomic costs for the State. For instance, 1 percent
increase in unemployment reduces the GDP by 2 percent

33. Schemes
 Mahatma Gandhi National Rural Employment Guarantee Act
(MNREGA): It is an employment scheme that was launched in
2005 to provide social security by guaranteeing a minimum of 100
days paid work per year to all the families whose adult members
opt for unskilled labour-intensive work.
 This act provides Right toWork to people.
 Pradhan Mantri KaushalVikasYojana (PMKVY), launched in
2015 has an objective of enabling a large number of Indian youth
to take up industry-relevant skill training that will help them in
securing a better livelihood. Start Up India Scheme, launched in
2016 aims at developing an ecosystem that promotes and
nurtures entrepreneurship across the country. Stand Up India
Scheme, launched in 2016 aims to facilitate bank loans between
Rs 10 lakh and Rs. 1 crore to at least one SC or ST borrower and at
least one women borrower per bank branch for setting up a
greenfield enterprise.

34. MahatmaGandhi
National Rural
Employment
GuaranteeAct
(MGNREGA)
 National Rural Employment Guarantee Act 2005 (or, NREGA No
42, later renamed as the “MahatmaGandhi National Rural
Employment Guarantee Act”, MGNREGA), is an Indian labour
law and social security measure that aims to guarantee the ‘right
to work’.
 It aims to enhance livelihood security in rural areas by providing at
least 100 days of wage employment in a financial year to every
household whose adult members volunteer to do unskilled manual
work.
 The act was first proposed in 1991 by P.V. Narasimha Rao. In 2006,
it was finally accepted in the parliament and commenced
implementation in 625 districts of India. Based on this pilot
experience, NREGA was scoped up to covered all the districts of
India from 1 April 2008.The statute is hailed by the government as
“the largest and most ambitious social security and public works
programme in the world”.In itsWorld Development Report 2014,
theWorld Bank termed it a “stellar example of rural
development”.

35.  The MGNREGA was initiated with the objective of “enhancing
livelihood security in rural areas by providing at least 100 days of
guaranteed wage employment in a financial year, to every
household whose adult members volunteer to do unskilled manual
work”.Another aim of MGNREGA is to create durable assets (such
as roads, canals, ponds, wells). Employment is to be provided
within 5 km of an applicant’s residence, and minimum wages are
to be paid. If work is not provided within 15 days of applying,
applicants are entitled to an unemployment allowance.Thus,
employment under MGNREGA is a legal entitlement.
 MGNREGA is to be implemented mainly by gram
panchayats (GPs).The involvement of contractors is banned.
Labour-intensive tasks like creating infrastructure for water
harvesting, drought relief and flood control are preferred.
 Apart from providing economic security and creating rural assets,
NREGA can help in protecting the environment, empowering rural
women, reducing rural-urban migration and fostering social
equity, among others.

36. Way Forward
 Way Forward
 There are number of labour intensive manufacturing sectors in India such as
food processing, leather and footwear, wood manufacturers and furniture,
textiles and apparel and garments. Special packages, individually designed
for each industry are needed to create jobs.
 Public investment in sectors like health, education, police and judiciary can
create many government jobs.
 Decentralisation of Industrial activities is necessary so that people of every
region get employment.
 Development of the rural areas will help mitigate the migration of the rural
people to the urban areas thus decreasing the pressure on the urban area jobs.
 Entrepreneurs generate employments to many in a country; therefore
government needs to encourage entrepreneurship among the youth.
 Concrete measures aimed at removing the social barriers for women’s
entry and their continuous participation in the job market is needed.
 Government needs to keep a strict watch on the education system and
should try to implement new ways to generate skilled labour force.

37. Way Forward
Contd…
 Effective implementation of present programs like Make in India, Skill India, Start
up and Stand-Up India.
 There is a need for National Employment Policy (NEP) that would encompass a
set of multidimensional interventions covering a whole range of social and
economic issues affecting many policy spheres and not just the areas of labour and
employment. The policy would be a critical tool to contribute significantly to
achieve the goals of the 2030 Agenda for Sustainable Development.
 The underlying principles for the National Employment Policy may include
 enhancing human capital through skill development;
 creating sufficient number of decent quality jobs for all citizens in the formal and
informal sectors to absorb those who are available and willing to work;
 strengthening social cohesion and equity in the labour market;
 coherence and convergence in various initiatives taken by the government;
 supporting the private sector to become the major investor in productive enterprises;
 supporting self-employed persons by strengthening their capabilities to improve their
earnings;
 ensuring employees’ basic rights and developing an education training and skill
development system aligned with the changing requirements of the labour market.

38. Rate of
Unemployment
in India

39.  COVID-19 Lockdown Effect: Unemployment Rate Over 23%

40.  How years of jobless growth have come back to haunt India
during Covid-19 pandemic
 Millions of Indians have lost jobs in the formal sector since April
due to the economic stress caused by novel coronavirus.
However, the pandemic is not the only reason behind the
ongoing job crisis in the country.

41. GROWTH
HURDLE
 Five months into the lockdown, India has witnessed a sharp
decline in the number of jobs in the formal sector — the largest
source of salaried employment in the country.
 Even after unlocking the economy, there has been no
improvement in the salaried jobs space.The government has cited
the unprecedented economic crisis behind the job situation in the
country.
 However, the coronavirus pandemic may not be the only reason
why salaried jobs — one of the most secure forms of employment
— are losing prominence in India.
 Unemployment in the country had been a problem since 2017-18.
A government job survey, whose publication was delayed just
ahead of 2019 Lok Sabha election, showed how the country’s
unemployment reached a four-decade high of 6.1 per cent in 2017-
18.

42.  The report noted that unemployment was higher in urban areas in
comparison to rural areas — an indication that salaried jobs have
been dwindling in India for at least three years.

43.  Data show that despite India’s rapid growth before 2019, salaried
jobs grew at a snail’s pace. Salaried jobs grew from 21.2 per cent in
2016-17 to just 21.6 per cent in 2017-18. It inched to 21.9 per cent
in 2018-19.
 But the period of jobless growth hit a roadblock in 2019-20 when
salaried employment fell to 21.3 per cent.
 The CMIE explained that the stagnation in the salaried job market
in spite of India’s economic growth in recent years is not the only
anomaly.The CMIE found it “equally odd” that India has been
witnessing a rapid increase in entrepreneurship without any
increase in salaried jobs.
 It is no secret that entrepreneurship has been rising in India over
the past years. By FY20, India had over 7.8 crore entrepreneurs.
But surprisingly, the increase in entrepreneurship did not add
more salaried jobs which remained steady at 8.6 crore.
 This indicates that much of the entrepreneurship growth in India
was self-employed and consisted only of very small-scale
businesses.

44.  THE URBAN JOB MELTDOWN
 The fact that all salaried jobs put together account for just 21-22
per cent of total employment in India is worrying as it directly
impacts a large share of private consumption.
 “There are many more farmers than salaried jobs. And, there are
even more daily wage labourers. Farmers and daily wage earners
together account for nearly two-thirds of the Indian working
population,” said CMIE.

45.  It indicates that a large part of India’s workforce is employed by
the informal sector, where it is easy comparatively easier to get
jobs. However, such form of employment heavily depends on
demand originating from the urban economy, comprising mostly
of salaried jobs.
 With the sudden meltdown of salaried jobs in India, the informal
economy is also feeling the heat with thousands of small-scale
traders and hawkers shutting shop.

46.  Only the rural economy has seen a steady rise during the
lockdown period as farming became the last resort for those who
lost their urban jobs. Most daily wage labourers who were forced
to return to their native places were the main reason behind a 14
million rise in farm employment.
 However, rural growth is not enough for an economy which needs
at least 10 lakh formal jobs to be created every year to support the
country’s rising youth population.
 Salaried job holders working in urban areas are among the worst-
hit workers during the coronavirus pandemic in India.

49. Un-Employement
Rate
January to May
2020(CoVID 19)

50.  According to the latest report by think-tankCentre for Monitoring
Indian Economy (CMIE) the employment rate had fallen to an all-
time low of 38.2 percent in March 2020. It stated, “The fall since
January 2020 is particularly steep – almost spectacular. It seems to
have nosedived in March after having struggled to remain stable
over the past two years.Then, there is a precipitous fall.”
 Further, CMIE also pointed out that the labour participation rate in
March this year was 41.9 percent, as compared to 42.6 percent in
February, suggesting the fall happened even before the lockdown.

51.  Lockkdown impact: Every fourth person in India is unemployed
 Urban India is ailing more with 26.3 per cent of unemployment
while rural parts of the country have reported 23.7 per cent of the
unemployment rate
 ban India is ailing more with 26.3 per cent of unemployment while
rural parts of the country have reported 23.7 per cent of the
unemployment rate.

52.  Rural unemployment was expected to increase as the industries
were allowed to restart as well as MNREGA works to have started
after May 17.
 The states with more industrial units like Maharashtra, Karnataka,
and Gujarat saw a steep decline in employment post lockdown.
Gujarat had an unemployment rate of 6.7 in March which shot up
to 18.7 inApril.
 Maharashtra saw more than a three-fold increase from 5.8 to 20.9
per cent. Karnataka, on the other hand, reported 29.8 per cent of
unemployment inApril from a mere 3.5 per cent in March.The
state has one of the best track records in keeping the
unemployment rate low for years.

53.  The migrant source states – Bihar (46.6) and Jharkhand (47.1) –
have reported more than 50 per cent unemployment for the
current month. Odisha reported a 23.8 per cent rate while UP
reported 21.5 per cent of the unemployment rate.Tamil Nadu has
the highest rate of unemployment for the current month at 49.8
per cent.
 The ground reality could be worse.The reason could be the
‘disguised unemployment’ which gets slipped off during the
normal calculation.
 Disguised unemployment means when the labour is employed
within a company or institution but is not actually contributing to
the output of the organization.This had been the case for many
industries for over two months.Thus, the crisis looks much bigger.

54. Reasons of fall
DuringCOVID
19
 Reductions in trade
 As countries face enduring lockdowns across the globe,
unemployment is rising each day as quality of life decreases for
many.Aside from this, loss of livelihood is a loss of access to
goods, as many nations have experienced reduced availability of
products due to stricter border controls and trading mechanisms.
 Many across the developing world are employed via the informal
sector in marketplaces that are now closed due to social
distancing efforts and lockdowns. Hence more needs to be done
to not only boost employment but to restock the marketplace
domestically.

55. Solution
 Investing locally
 To remedy this, the panel spoke about the need for governments
to invest in local production of goods via innovation and
industrialization.
 This increase in domestic production has the potential to not only
to support and formalize the work done by many in the informal
sector but also bides against future shortages given that the
supply of goods would be domestic, thereby lessening the chance
of supply side disruptions.

56.  Looking out for the most vulnerable
 With growing unemployment, more and more people are being
pushed into poverty, reversing the global progress on ending
poverty back to pre-1998 levels.With a totalizing effect on society,
governments must make a real effort to look after the most
vulnerable.
 The panel pointed to the need for development of tailor-made
fiscal policies specifically intended to help certain subsets of the
population, such as youth and women.These relief efforts present
an opportunity for countries to address the underlying issues in
society such as gender pay inequality, and youth
underemployment.
 As vulnerable subsets of the population are dealing with unique
obstacles in attaining economic agency, the policies to remedy
them must be equally unique to create true change.

57.  Building back better
 Lastly, in the fight againstCOVID-19 the panel spoke about the
need for coordination and collaboration amongst countries. In this
new world order, unprecedented action needs to be taken in
ensuring no country is left to languish in their fight against the
virus.

58. Current
 The unemployment rate fell to its pre-lockdown level of 8.5% in
the week ended June 21, led by big gains in the rural areas,
economic think tank Centre for Monitoring Indian Economy
(CMIE) said.
The rate had gone up from 8.75% in March to 23.5% in April and
May. It had peaked at 27.1% in the week ended May 3.The CMIE
survey showed the gains in rural areas may even be bigger in the
months ahead.The latest data on the jobs front provides huge
relief to the government which has been grappling with job losses
due to the coronavirus pandemic.

59. Current

60.  https://timesofindia.indiatimes.com/business/india-
business/cmie-unemployment-rate-back-to-pre-lockdown-level-
of-8-5/articleshow/76540727.cms

61.  https://unemploymentinindia.cmie.com/