Unemployment in India: Challenges, Causes, and Solutions

 

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.
  • NSO 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 constitute the labour force and unemployment rate is the percent of the labour force that is without work.
      • Unemployment rate = (Unemployed Workers / Total labour force) × 100.

What are Different Types of Unemployment?

  • Disguised Unemployment:
    • It is a phenomenon wherein more people are employed than actually needed.
    • It is primarily traced in the agricultural and the unorganised sectors of India.
  • Seasonal Unemployment: 
    • It is an unemployment that occurs during certain seasons of the year.
    • Agricultural labourers 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 jobs due to lack of requisite skills and due to poor education level, it becomes difficult to train them.
  • Cyclical Unemployment:
    • It is a 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.
  • Technological Unemployment:
    • It is the 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 frictional unemployment.
  • 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.

Why in News?

According to data from the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate touched a four-month high of 7.9% in December 2021.

What are the Causes of Unemployment?

India as a country is on a development path, however, there are few loose ends like unemployment that barricades the growth of total population. Here are some of the causes of unemployment that will help you understand current situation! 


The Caste System: A Social Barrier to Employment

The caste system, deeply ingrained in Indian society, is a significant contributor to unemployment. It is a structure of social stratification that can potentially pervade virtually every aspect of life in India. In some regions, certain types of work are prohibited for members of particular castes. This leads to situations where jobs are often given to individuals from a specific community, rather than to those who genuinely possess the requisite skills. As a result, there is a higher prevalence of unemployment among those who deserve employment opportunities but are denied due to their caste.

Inadequate Economic Growth

India's economy, though steadily growing, faces challenges related to its pace of development. The role of economic growth in generating employment is crucial, and the current rate of growth is inadequate to provide sufficient job opportunities to the burgeoning population. As the population continues to increase, the economy struggles to keep up with the demands for employment. Consequently, a growing number of people find themselves unable to secure gainful employment, leading to inadequate levels of employment nationwide.

Increase in Population

India's population is on track to exceed that of China by the year 2024, making it the most populous country in the 21st century. However, the country's economic growth rate is not commensurate with its population growth. This imbalance results in a larger percentage of the population being unemployed, as the job market cannot absorb the growing workforce effectively.

Agriculture: A Seasonal Occupation

Agriculture, a primary occupation in India, offers employment to a substantial segment of the population. However, it is primarily seasonal, with work available for only a few months each year. This seasonal nature of agricultural work leaves many agricultural laborers without employment and income for a significant portion of the year.

Loss of Small-Scale/Cottage Industries

Industrialization and the rise of large-scale mass production have made small-scale and cottage industries less economically attractive. The demand for cost-effective, mass-produced goods often overshadows the appreciation for handcrafted, skill-intensive products. Consequently, cottage and small-scale industries have suffered, leading to the unemployment of skilled artisans.

Low Rates of Saving and Investment

India faces a shortage of capital and low rates of savings and investment. Investment, which relies on savings, remains insufficient to create new job opportunities and stimulate economic growth. Moreover, there is a notable lack of investment in rural areas and tier 2 and tier 3 cities, leaving untapped employment potential unexplored.

Ineffective Economic Planning

One of the critical issues exacerbating unemployment in India is the absence of comprehensive national plans to bridge the significant gap between labor supply (abundant) and labor demand (lower). A well-balanced labor market is essential to ensure that those seeking jobs can secure them. Without such planning, the job market becomes highly competitive, with numerous individuals vying for a limited number of positions.

Labor Immobility

Cultural values that prioritize maintaining proximity to family play a significant role in labor immobility in India. Many individuals avoid long-distance travel for employment, as attachment to family is a top priority. Language, religion, and climate also contribute to the low mobility of labor. When potential job seekers are unable to relocate for work, unemployment rates rise.

Job Specialization and Skilling

In today's globalized economy, jobs have become highly specialized. However, India's education system often falls short in providing the necessary training and specialization required for these roles. As a result, many willing workers become unemployable due to a lack of essential skills. A study has shown that 33% of educated youth in India are unemployed because they lack the skills demanded by the job market. This highlights the urgent need for educational reforms and skill development programs.

What are the Impacts of Unemployment?

  • The problem of unemployment gives rise to the problem of poverty.
  • Young people, after a long time period 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 the 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 the economy of the country as the workforce that could have been gainfully employed to generate resources gets dependent on the remaining working population, thus escalating socioeconomic costs for the State. For instance, 1% increase in unemployment reduces the GDP by 2%.

What are the Steps Taken by the Government?

  • Integrated Rural Development Programme (IRDP): was launched in 1980 to create full employment opportunities in rural areas.
  • Training of Rural Youth for Self-Employment (TRYSEM): This scheme was started in 1979 with the objective to help unemployed rural youth between the age of 18 and 35 years to acquire skills for self-employment. Priority was given to SC/ST Youth and Women.
  • RSETI/RUDSETI: With the aim of mitigating the unemployment problem among the youth, a new initiative was tried jointly by Sri Dharmasthala Manjunatheshwara Educational Trust, Syndicate Bank and Canara Bank in 1982 which was the setting up of the “Rural Development And Self Employment Training Institute” with its acronym RUDSETI near Dharmasthala in Karnataka.
    • Rural Self Employment Training Institutes/ RSETIs are now managed by Banks with active co-operation from the Government of India and State Government.
  • Jawahar Rozgar Yojana (JRY): By merging the two erstwhile wage employment programme – National Rural Employment programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) the Jawahar Rozgar Yojana (JRY) was started with effect from April, 1, 1989 on 80:20 cost sharing basis between the centre and the States.
  • 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 to Work to people.
  • Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Launched in 2015 has the objective of enabling a large number of Indian youths 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.
    • It also 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.


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