Unemployment in India – Types, Causes, Impact and Steps to Overcome

A situation where an individual is actively looking for a job but is unable to find it is unemployment. It is a major criterion to measure the economy’s health i.e. growth and development. The unemployment rate is the main outcome that indicates the situation in the country.

You get it by dividing no. of unemployed individuals by the no. of individuals in the labor force. The current unemployment rate in India is 3.5% according to the International Labour Organization. The formula to calculate it is –

Unemployment rate = (Unemployed Workers / Total labour force) × 100

The National Sample Survey Organization categorizes employment and unemployment based on an individual’s activity. A person is employed when he is actively engaging in economic activity. He is unemployed when he is looking for work but is unable to find it.

And the third category is neither looking for work nor available for it. This is to measure the GDP at the end of every financial year. Because the first two categories make it to the total labor force while the last one is not counted.

Types of Unemployment in India

Disguised Unemployment

• This situation is when the number of employed individuals is more than needed. 
• This is common in agricultural sectors. 
• Even the unorganized sector of India faces the same problem. 

Seasonal Unemployment

• This type of unemployment is according to different seasons of the year. 
• An example would be farmers working in harvest season only. 
• The agricultural laborers in India face this problem every year. 

Structural Unemployment

• This is a situation that arises when the employment opportunities available don’t match with an Individual’s skill.
• An example would be the availability of a bank manager post but the individual only possesses marketing skills. 
• This may be because of a lack of education or training in India. 

Cyclical Unemployment

• This is common in a capitalist economy and thus not a case in India.
• This is a citation when the employment increases in a recession and falls during the growth of the economy. 

Technological Unemployment

• This is a classic example of what happened during the Industrial revolution
• The machines replaced manual labor and thus led to unemployment.
• This kind of unemployment is due to changes in technology.
• Like the World Bank’s assumption of India losing 69% of jobs due to automation. 

Frictional Unemployment

• It is the search for unemployment where the individual is unemployed for some time only.
• This may be between job hunts or between graduation and job positioning.
• This is voluntary as they are making their own decision to leave and join. 

Vulnerable Employment

• This is a situation when there is no legal proof to back up job security.
• This is common in wage workers where there is no record of them working thus they are unemployed.
• India faces this at large as the number of people in unorganized sectors is high. 

Unemployment Trap and Harmonized Unemployment 

This is a situation when a person gets used to not working. The benefits of being unemployed get heavier and the individuals feel demotivated to work again. This is a common case when the income is low and the efforts needed to work are high. 

Harmonized unemployment rates refer to unemployed individuals in their working age who are looking to find work. This estimate of the unemployment rate is more relevant internationally as it calculates the % of the labor force seasonally. 

Measurement of Unemployment in India

The Ministry of Statistics and Programme Implementation monitors the National Sample Survey Office. They follow certain approaches to measure unemployment in India. They are –

1. Usual Status Approach – This approach only considers individuals unemployed who have been majorly not working during the 365 days before the survey date. 

2. Weekly Status Approach – This approach considers individuals unemployed if they have not been working for hours or a day before the survey date. 

3. Daily Status Approach – This approach considers an individual unemployed even if he did not work for an hour on a particular day. 

Latest Unemployment stats

• February 2019 saw the highest unemployment rate of 7.2 % since September 2016.
• 5.9 % was the unemployment rate in February 2018.
• The employed individuals in February 2019 were approx 400 million.
• The labor participation was 42.7% in February 2019.

Causes of Unemployment in India

• The increasing population of the country.
• Low emphasis on educational and vocational skills of the working class. 
• Less government support with legal complexities and low infrastructure.
• Less financial and market support to small scale industries. 
• A large amount of workforce working in unorganized sectors.
• Lack of educational skills for relevant employment.
• More focus on theoretical knowledge than practical knowledge.
• Complex licensing on business and lower investments.
• Low productivity of the agricultural sector which is the backbone of the Indian economy.
• Less participation of women in the workforce. 

Impact of Unemployment in India

• There is a direct connection of poverty to unemployment in the country.
• Indulgence in illegal activities due to money shortage and thus increase in crime. 
• They become antisocial elements and start losing faith in the government.
• Loss of human resources of the nation.
• Falling of GDP due to an imbalance between the demand and supply in the market.
• Increasing the socio-economic cost of the state government by bearing their expenses. 

Impact of Globalisation on the Employment rate

The LPG Policy of 1991 led to increasing competition between the foreign and local brands. This led to the transformation of organized sectors into unorganized. This led to a cut in eagles and a high level of unemployment for the workers. 

Steps Taken by Government to Boost Employment Rate

The government came up with several schemes to boost the employment rate in the country. Some of them are – 

1. Integrated Rural Development Programme, an initiative to create employment opportunities in rural areas. This became official in 1980 intending to provide full employment. 

2. Training of Rural Youth for Self-Employment was another focusing on youth. The aim was to help unemployed rural youth from age of 18 till 35 years to adopt skills for self-employment opportunities. Though the emphasis was on SC/ST Youth and Women of the rural areas.

3. RSETI/RUDEST was an initiative by Sri Dharmasthala Manjunatheshwara Educational Trust, Syndicate Bank, and Canara Bank. The idea was to mitigate the unemployment problem among the youth. This became official in 1982 with the setting up of the Rural Development and Self Employment Training Institute. The acronym for it is RUDSETI and is looked after by banks with coordination with the Government of India and the State.

4. National Rural Employment program and Rural Landless Employment Guarantee Programme merged to form the Jawahar Rozgar Yojana. The JRY became official in 1989 with a cost ratio of 80:20 between the center and the States.

5. Mahatma Gandhi National Rural Employment Guarantee Act is a 2005 scheme for creating employment. The schemes make sure to provide 100 days of paid employment to individuals from families willing to do unskilled labor-intensive work. The RIght to work act comes under this scheme. 

6. Pradhan Mantri Kaushal Vikas Yojana is a 2015 scheme to enable Indian youth to move towards industry-relevant skill training. This is to help them in securing a better livelihood for the future.

7. Start-Up India Scheme is another 2016 launched scheme for developing entrepreneurship opportunities. It aims to create an environment to promote and support entrepreneurship opportunities across the country.

8. The Stand-Up India Scheme is a banking scheme that provides loans between Rs 10 lakh to 1 crore to SC/ST and women borrowers. The target of each bank is to assign loans to each of the categories setting up a greenfield enterprise.

9. National Skill Development Mission is a 2014 campaign that promotes the idea of  ‘Skill India’. The main agenda is to improve existing skill training initiatives and combine them. The scale and quality of skilling efforts, with speed, is what they want to work on. 

The Next Step

• Many manufacturers in India have labor-intensive work like food processing, hardware, apparel, and more. They can create special package jobs for individuals. 
• The increase in government jobs in fields like health, police, education, and more. 
• There should be decentralized industrial activities for equal employment opportunities in regions. 
• Rural area development will control migration and reduce urban job pressure too. 
• The youth should remain the center of focus for entrepreneurship projects.
• Women should receive more liberation in workplaces. 
• The education system should focus on skill development more.
• A more effective scheme must be launched like Skill India, Startup, and Stand-Up India.
• The 2020 UN sustainable goals must align with national goals. 
• The enhancement of human capital will help.
• Creation of decent quality of jobs in formal and informal sectors.
• There should be equity in the capital and labor market.
• Self-employment must get support as well as private sectors.

Conclusion

The topic of unemployment is important from an exam point of view. The unemployment data and government measures to control are some relevant subtopics for the exam. The aspirant preparing for exams like UPSC, RRB, SSC, and more must give it a read.

The chances of this topic appearing in exams are high. This may appear as an essay question or in an economics paper. The GS I may also take interest in this. Thus reading the article will make you prepared for such questions in the exam.

You can study the meaning, types, measurement, causes, impact, and step by the government in the article above.