Consumer Protection Act, 2019

Rising Unemployment in India

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Rising Unemployment in India

Unemployment is a situation when a person actively searches for a job and is unable to find work. Unemployment indicates the health of the economy. 

  • The unemployment rate is the most frequent measure of unemployment. The unemployment rate is the number of people unemployed divided by the working population or people working under labour force.
  • Unemployment rate = (Unemployed Workers / Total labour force) × 100

Types of Unemployment in India

In India, there are seven types of unemployment. 

Disguised Unemployment: This is a type of unemployment where people employed are more than actually needed. 

Structural Unemployment: This unemployment arises when there is a mismatch between the worker’s skills and availability of jobs in the market. 

Seasonal Unemployment: That situation of unemployment when people do not have work during certain seasons of the year .

Vulnerable Unemployment: People are employed but informally i.e. without proper job contracts and thus records of their work are never maintained. 

Technological Unemployment: the situation when people lose their jobs due to advancement in technologies. 

Cyclical Unemployment: unemployment caused due to the business cycle, where the number of unemployed heads rises during recessions.

Frictional Unemployment: this is a situation when people are unemployed for a short span of time while searching for a new job or switching between jobs. 

Unemployment Scenario:

  • Just before the Covid crisis at the end of the 2019-20 financial year, India had around 403.5 million employed people.
  • There were around 35 million (or 3.5 crore) openly unemployed people in the country.
  • To this existing pool, each year India adds roughly 10 million (or 1 crore) new job seekers.
  • But over the past year, several million have lost their jobs.
  • As a result, as of January 2021, India had only about 400 million employed.
  • But many seem to have regained employment as the economy has started recovering.

Causes of Unemployment:

  • Large population.
  • Lack of vocational skills or low educational levels of the working population.
  • Labour-intensive sectors suffering from the slowdown in private investment particularly after demonetisation
  • Legal complexities, Inadequate state support, low infrastructural, financial and market linkages to small businesses making such enterprises unviable with cost and compliance overruns.
  • Inadequate growth of infrastructure and low investments in the manufacturing sector, hence restricting the employment potential of the secondary sector.
  • The huge workforce of the country is associated with the informal sector because of a lack of required education or skills, and this data is not captured in employment statistics.
  • The main cause of structural unemployment is the education provided in schools and colleges are not as per the current requirements of the industries. 
  • Regressive social norms that deter women from taking/continuing employment.

Impact Of Unemployment:

  • The problem of unemployment gives rise to the problem of poverty.
  • The government suffers extra borrowing burden because unemployment causes a decrease in the production and less consumption of goods and services by the people.
  • Unemployed persons can easily be enticed by antisocial elements. This makes them lose faith in the democratic values of the country.
  • People unemployed for a long time may indulge in illegal and wrong activities for earning money which increases crime in the country.
  • Unemployment affects the 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 socio-economic costs for the state. For instance, a 1 % increase in unemployment reduces the GDP by 2 %.
  • It is often seen that unemployed people end up getting addicted to drugs and alcohol or attempts suicide, leading to losses to the human resources of the country.

Concern :

  • Data show that the total number of employed people in India had been steadily coming down.
  • It was 407.3 million in 2016-17 and then fell to 405.9 million in 2017-18, and to 400.9 million at the end of 2018-19.
  • In other words, even with India’s economy growing before the Covid crisis, the employment situation was getting worse.
  • That is why the total number of openly unemployed people became 35 million.
  • The total number of employed people has fallen, the total number of unemployed people will be anywhere between 40 to 45 million today.
  • Even this 45 million estimate only captures the openly unemployed people i.e. those who are seeking work and not finding it.
  • The actual problem of unemployment is even bigger.

Why is unemployment a more serious issue?

  • LFPR - Given India’s population growth, each year there are close to 20 million (or 2 crore) people who enter the working-age population of 15 to 59 years.
  • But not everyone seeks a job.
  • If more and more of India’s youth decide not to seek jobs, India’s labour force participation rate (LFPR) falls.
  • India has an LFPR of just about 40%.
  • In other words, in India just 40% of the 20 million joining the working-age group each year actually come forward looking for a job.
  • Among women, this participation ratio is even lower.
  • In most developed countries, it is around 60%.
  • If 60% of all joining the working-age group looked for a job then India would have added almost 15 million each year to the pool of openly unemployed people.

Growth and employment - Typically, fast economic growth takes care of unemployment worries.

  • However, in India, one cannot assume this to be the case.
  • In other words, just fast economic growth will not automatically resolve India’s unemployment problem.
  • This is because, even when India’s GDP has grown rapidly in the past, it produced only a very small number of well-paying jobs.
  • In the ten years from 1999-2000 to 2009-10, India’s total workforce increased by 63 million.
  • Of these 44 million joined the unorganised sector, 22 million became informal workers in the organised sector.
  • Also, the number of formal workers in the organised sector fell by 3 million.

How does the future look?

  • In the coming financial year, India’s GDP growth will show a sharp rebound, given a massive base effect.
  • This offers some hope.
  • However, that does not change the lop-sided manner in which India grows.
  • The GDP can continue to go up as more and more companies become more productive by replacing labour with capital (machinery).
  • But this will only deepen India’s unemployment problem.
  • There is another reason that may aggravate the problem at least in the short to medium term.
  • The Union Budget for 2021-22 suggests that the government would not be the prime mover in the economy.
  • The principle of “minimum government” essentially undercuts the government’s role in directly creating new jobs.
  • While on paper this makes sense, the timing is questionable. That’s because –
  • the Indian economy is quite weak
  • the private sector has already shown its preference by choosing to cut jobs and boost its profits
  • The private sector is likely to hold back from recruiting in big numbers in the next couple of years, waiting for Indians to regain their purchasing power.
  • But, in the meantime, the unemployed will continue to swell up by the millions each passing month.
  • All this remind that it is the rising unemployment, and not GDP growth, that is the biggest challenge before India now.

Government Initiative To Control Unemployment

  • In 1979 the government launched TRYSEM – Training of Rural Youth for Self-Employment .
  • The Government launched the IRDP – Integrated Rural Development Programme (IRDP) in the year 1980 to create full employment opportunities in rural areas.
  • A new initiative was tried namely RSETI/RUDSETI in 1982 :The aim of RUDSETI, the acronym of Rural Development And Self Employment Training Institute was to mitigate the unemployment problem among the youth. 
  • The Jawahar Rozgar Yojana (JRY) was started in April 1989 by merging the two existing wage employment programme i.e. RLEGP – Rural Landless Employment Guarantee Programme and NREP – National Rural Employment Programme on an 80:20 cost-sharing basis between the state and centre.
  • MNREGA – Mahatma Gandhi National Rural Employment Guarantee Act launched in 2005 providing the right to work to people. An employment scheme of MGNREGA aimed 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. For details on MNREGA check the link provided. 
  • PMKVY – Pradhan Mantri Kaushal Vikas Yojana was launched in 2015. The objective of PMKVY was to enable the youth of the country to take up industry-relevant skill training in order to acquire a secured better livelihood. For further details on Pradhan Mantri Kushal Vikas Yojana check the given link. 
  • Start-Up India Scheme in 2016: The aim of Startup India programmes was to develop an ecosystem that nurtures and promotes entrepreneurship across the nation. Check detailed information on Startup India Scheme in the given link. 
  • Stand Up India Scheme also launched in 2016 aimed to facilitate bank loans to women and SC/ST borrowers between Rs 10 lakh and Rs. 1 crore for setting up a greenfield enterprise. Details on Stand-Up India is given in the linked page.
  • National Skill Development Mission was set up in November 2014 to drive the ‘Skill India’ agenda in a ‘Mission Mode’ in order to converge the existing skill training initiatives and combine scale and quality of skilling efforts, with speed. Check the National Skill Development Mission in detail.