7 PM | Creating jobs for young India | 1st October, 2019

Context:Unemployment in India – reasons and some measures.

More in News: The government’s Periodic Labour Force Survey carried out in 2017-18 revealed that unemployment in the country reached an all-time high rate of 6.1%.

Unemployment Rate (UR) is the ratio of number of unemployed persons/person-days to the number of persons/person-days in labour force.

Three sets of estimates of unemployment rates are obtained based on the estimates of unemployment obtained by the three different approaches used for classification of the activity statuses of persons.

The different estimates of unemployment are:

  1. number of persons usually unemployed based on ‘usual status’ approach,
  2. number of persons unemployed on an average in a week, based on the current weekly status (CWS) approach,
  3. Number of person-days unemployed on an average during the reference period of seven days preceding the date of survey, based on the current daily status(CDS) approach. 

Unemployment rate Fact-Sheet:

  • The Periodic Labour Force Survey (PLFS) of the National Sample Survey Office (NSSO) showed the unemployment rate in the country in financial year 2017-2018 was at 6.1%.
  • In 2018, there were 471.5 million persons employed and 30.9 million unemployed in India.
  • For the rural areas, the unemployment rate was 5.3 per cent, while in the urban areas it was 7.8 per cent.
  • Among the rural men, the unemployment rate was 5.8 per cent while among the women it was 3.8 per cent.
  • Among the urban men it was 7.8 per cent and 5.7 per cent among urban women. 
  • The report notes that the youth (between 20-24 years), who constitute around 40 per cent of India’s labour force, have an unemployment rate of 32 per cent.
  • The unemployment rate among the educated is worse. The rate among people with at least a graduate degree was 13.17 per cent in September-December 2018, up from 10.39 per cent in May-August 2017.
  • Estimates show that the potential non-agricultural workforce in India grew at the rate of 14.2 million a year between 2005 and 2012, which rose further to 17.5 million a year between 2012 and 2018.

Reasons of Sudden rise in numbers of job seekers:

  • Expansion of working age population: The size of labour supply in India is getting a boost from the rapid expansion of the working-age population in the country. The population of 15-59-year-olds increased at the rate of 14 million a year in the 2000s.
  • Nature of labour Force: The nature of labour supply is changing. 31% of female in the age group of 15-29years were attending school/college in 2018 as against 16.3 in 2005.
  • Agricultural and allied sector: The size of the workforce engaged in agriculture (and allied activities) has been declining in India from 258.8 million in 2005 to 197.3 million in 2018.
  • Fall in construction sector: New employment opportunities in construction created in rural India amounted to 18.9 million between 2005 and 2012, which fell sharply to 1.6 million between 2012 and 2018.
  • Manufacturing sector: The size of the manufacturing workforce in India declined by one million between 2012 and 2018, with micro and small firms in the informal sector suffering severe setbacks.
  • Demand-supply mismatch:
  • From 2005 to 2012, job creation in industry, construction and services in India (at the rate of 6.3 million a year) was inadequate to absorb the increase in potential job seekers into these sectors (at the rate of 14.2 million a year).
  • Between 2012 and 2018, while the supply of potential workers into the non-agricultural sectors accelerated (to 17.5 million a year), actual labour absorption into these sectors decelerated (to 4.5 million a year). 
  • Women withdrawalfrom labour market: Of all 15-59-year-old women in India, only 23% were employed in 2018, down from 42.8% in 2005.
  • Young menof age group 15-29 years were indeed the main contributor to the sudden increase in overall unemployment in India. There was an unprecedented increase in the number of the unemployed, from 6.7 million in 2012 to 21.1 million in 2018.

Measures to Solve Unemployment Problem in India:

  • A Change in the pattern of investment: The planning process in the initial stages gave importance to an investment-allocation pattern with a high capital-labour ratio. Therefore, a shift in the emphasis to mass consumer goods industries would generate more employment to absorb the unemployed labour force. 
  • Encouragement to small enterprises as against big enterprises: The employment objective and the output objective can be achieved, if greater investment is directed to small enterprises rather than to large enterprises. Now that the Government wants to undertake decentralised development with emphasis on small-scale enterprises, it would be desirable to reorient credit, licensing, raw material allocation and other policies in such a manner that both employment and output are enlarged simultaneously.
  • Problem of Choice of technique: During the period of rapid growth in the labour force, it would be advisable to adjust the choice of techniques consistent with the employment objective. Intermediate technology would be more suited to Indian conditions.
  • Encouragement of New Growth Centres in Small Towns and Rural Areas: Experience of planning has revealed that the overcrowded metropolitan centres have received a large share of investment. Therefore, the smaller towns should be developed as new growth centres for the future. The establishment of small industrial complexes can increase employment opportunities and provide flexibility to the economy.
  • Reorientation of Educational Policy: One great defect of our educational system is that it leads one to take up the professional degree only. The high degree of unemployment among the educated signifies the urgent need to reorient our educational system to greater employment opportunities. Development of quality education is a prerequisite for the development of a nation as it is the remedy for all problems including the problem of unemployment in the country. Hence, a high priority needs to be accorded for education in public expenditure.
  • Underemployment in Rural Areas: Failure of implementation of Rural Works Programme underlines the relatively low importance given to the rural sector to provide additional employment to millions of landless labourers and small and marginal farmers. Urgent action is needed in this direction so that work opportunities grow in the rural areas. This will raise the level of income and employment in rural areas and reduction in poverty levels.


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