Real Picture on Unemployment in India
India’s unemployment rate has historically been high and is predicted to rise in the
next years.
However, The Ministry of Statistics and Programme Implementation (MoSPI)
released, on February 24, 2023, the fourth Annual Report of the Periodic Labour
Force Survey (PLFS), stating that unemployment fell significantly from 7.5 per
cent to 6.6 per cent. The survey was conducted from July 2021 through June 2022.
This is India’s official labour survey. Its results differ from estimates from the
privately conducted Consumer Pyramids Household Survey (CPHS) of CMIE.
The use of data based on liberal definitions of unemployment as given by usual
status (US) and the current weekly status (CWS) understates India’s employment
challenges. The headline numbers from PLFS can mislead us into understating
India’s employment challenge although they may adhere to international standards.
The definitions are thus so as to align employment statistics with the official
production (national accounts) statistics. But, such an alignment is neither the
concern of an anxious and unemployed population nor should it be the concern of
policy-makers who are to address India’s employment challenge.
CPHS classifies a person to be employed only if the person was employed for a
better part of the day of the survey. This is a far more realistic definition.
According to the PLFS, the unemployment rate defined by the usual status was 4.1
per cent in 2021-22. It was higher, at 6.6 per cent, by the current weekly status.
According to CMIE’s CPHS, it was 7.5 per cent during the same July 2021
through June 2022 period.
All three measures agree that the unemployment rate declined in 2021-22
compared to 2020-21. According to US, the rate fell marginally from 4.2 per cent
to 4.1 per cent; according to CWS it fell significantly from 7.5 per cent to 6.6 per
cent and according to CPHS it fell from 7.7 per cent to 7.5 per cent.
Specifically, the unemployment rate has fallen for men and for women and it has
fallen in urban and rural regions.
The unemployment rate for urban women fell sharply from 12.2 per cent in 2020-
21 to 9.9 per cent in 2021-22 The unemployment rate for rural women dropped
from 4.8 per cent to 4.3 per cent in the same time comparison.
Pandemic impact on labour force
The Economic Survey 2022-23 had said employment levels in urban and rural areas
have recovered to pre-Covid levels. But the PLFS data reveals that the workforce
continues to remain under pressure, with a large number of people still in agriculture
and self-employed.
The share of workers earning a regular wage of salary, which is considered to be the
best form of employment, was at 21.5% in 2021-22, only marginally higher than
21.2% in 2020-21. It was much higher at 23.8% in the pre-pandemic year of 2018-
19.
The share of self-employed has risen to 55.8% in 2021-22 from 55.6% in 2020-21
and 52.1% in 2018-19. The share of helpers in household enterprises has also risen,
indicating more unpaid family work. This is likely to have impacted women more
as their share of unpaid work would have gone up.
Government Initiatives
Employment generation coupled with improving employability is the priority of the
Government. Accordingly, the Government of India has taken various steps for
generating employment in the country.
• The Government of India has announced Aatmanirbhar Bharat package to
provide stimulus to business and to mitigate the adverse impact of Covid 19.
Under this package, the Government is providing fiscal stimulus of more than
Rs. Twenty Seven lakh crore. This package comprises of various long term
schemes/ programmes/ policies for making the country self-reliant and to
create employment opportunities.
• Pradhan Mantri Mudra Yojana (PMMY) is being implemented by the
Government for facilitating selfemployment. Under PMMY, collateral free
loans upto Rs. 10 lakh, are extended to micro/small business enterprises and
to individuals to enable them to setup or expand their business activities. Upto
11.03.2022, 34.08 crore loans were sanctioned under the scheme
• Government had launched the Garib Kalyan Rojgar Abhiyaan (GKRA) of 125
days on 20th June, 2020 to boost employment and livelihood opportunities for
returnee migrant workers and similarly affected persons including youth in
rural areas
• PM GatiShakti is a transformative approach for economic growth and
sustainable development. The approach is driven by seven engines, namely,
Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics
Infrastructure. This approach is powered by Clean Energy and Sabka Prayas
leading to huge job and entrepreneurial opportunities for all.
• The Government of India is encouraging various projects involving
substantial investment and public expenditure on schemes like Prime
Minister’s Employment Generation Programme (PMEGP) of the Ministry of
Micro, Small & Medium Enterprises, Mahatma Gandhi National Rural
Employment Guarantee Scheme (MGNREGS) & Pt. Deen Dayal Upadhyaya
Grameen Kaushalya Yojana (DDUGKY) of the Ministry of Rural
Development, Deen Dayal Antodaya Yojana-National Urban Livelihoods
Mission (DAY-NULM) of the Ministry of Housing & Urban Affairs etc. for
employment generation.
• Besides these initiatives, various flagship programmes of the Government
such as Make in India, Start-up India, Digital India, Smart City Mission, Atal
Mission for Rejuvenation and Urban Transformation, Housing for All,
Infrastructure Development and Industrial Corridors are also oriented towards
generating employment opportunities.
In spite of all these initiatives, the unemployment rate in India is predicted to rise
over the next decade, the reasons lie in the challenges faced by the Indian Economy.
Challenges with Indian Economy
• Low per capita income
o Usually, developing economies have a low per-capita income. The per
capita income in India in 2014 was $1,560. In the same year, the per-
capita Gross National Income(GNI) of USA was 35 times that of India
and that of China was 5 times higher than India.
o Further, apart from the low per-capita income, India also has a problem
of unequal distribution of income. This makes the problem of poverty
a critical one and a big obstacle in the economic progress of the country.
Therefore, low per-capita income is one of the primary economic issues
in India,
• Huge dependence of population on agriculture
o Another aspect that reflects the backwardness of the Indian economyis
the distribution of occupations in the country. The Indian agriculture
sector has managed to live up to the demands of the fast-increasing
population of the country.
o According to the World Bank, in 2014, nearly 47 percent of the working
population in India was engaged in agriculture. Unfortunately, it
contributed merely 17 percent to the national income implying a low
productivity per person in the sector. The expansion of industries failed
to attract enough manpower either.
• Heavy population pressure
o Another factor which contributes to the economic issues in India is
population. Today, India is the second most-populated country in the
world, the first being China.
o We have a high-level of birth rates and a falling level of death rates. In
order to maintain a growing population, the administration needs to take
care of the basic requirements of food, clothing, shelter, medicine,
schooling, etc. Hence, there is an increased economic burden on the
country.
• The existence of chronic unemployment and under-employment
o The huge unemployed working population is another aspect which
contributes to the economic issues in India. There is an abundance of
labor in our country which makes it difficult to provide gainful
employment to the entire population.
o Also, the deficiency of capital has led to the inadequate growth of the
secondary and tertiary occupations. This has further contributed to
chronic unemployment and under-employment in India.
o With nearly half of the working population engaged in agriculture, the
marginal product of an agricultural laborer has become negligible. The
problem of the increasing number of educated-unemployed has added
to the woes of the country too.
• Slow improvement in Rate of Capital Formation
o India always had a deficiency of capital. However, in recent years, India
has experienced a slow but steady improvement in capital formation.
We experienced a population growth of 1.6 percent during 2000-05 and
needed to invest around 6.4 percent to offset the additional burden due
to the increased population.
o Therefore, India requires a gross capital formation of around 14 percent
to offset depreciation and maintain the same level of living. The only
way to improve the standard of living is to increase the rate of gross
capital formation.
• Inequality in wealth distribution
o According to Oxfam’s ‘An economy for the 99 percent’ report, 2017,
the gap between the rich and the poor in the world is huge. In the world,
eight men own the same wealth as the 3.6 billion people who form the
poorest half of humanity.
o In India, merely 1 percent of the population has 58 percent of the total
Indian wealth. Also, 57 billionaires have the same amount of wealth as
the bottom 70 percent of India. Inequal distribution of wealth is
certainly one of the major economic issues in India.
• Poor Quality of Human Capital
o In the broader sense of the term, capital formation includes the use of
any resource that enhances the capacity of production.
o Therefore, the knowledge and training of the population is a form of
capital. Hence, the expenditure on education, skill-training, research,
and improvement in health are a part of human capital.
o To give you a perspective, the United Nations Development Program
(UNDP), ranks countries based on the Human Development Index
(HDI). This is based on the life expectancy, education, and per-capita
income. In this index, India ranked 130 out of 188 countries in 2014.
• Low level of technology
o New technologies are being developed every day. However, they are
expensive and require people with a considerable amount of skill to
apply them in production.
o Any new technology requires capital and trained and skilled personnel.
Therefore, the deficiency of human capital and the absence of skilled
labor are major hurdles in spreading technology in the economy.
o Another aspect that adds to the economic issues in India is that poor
farmers cannot even buy essential things like improved seeds,
fertilizers, and machines like tractors, investors, etc. Further, most
enterprises in India are micro or small. Hence, they cannot afford
modern and more productive technologies.
• Lack of access to basic amenities
o In 2011, according to the Censusof India, nearly 7 percent of India’s
population lives in rural and slum areas. Also, only 46.6 percent of
households in India have access to drinking water within their premises.
Also, only 46.9 percent of households have toilet facilities within the
household premises.
o This leads to the low efficiency of Indian workers. Also, dedicated and
skilled healthcare personnel are required for the efficient and effective
delivery of health services. However, ensuring that such professionals
are available in a country like India is a huge challenge.
• Demographic characteristics
o According to the 2011 Census, India had a population density of 382
per square kilometer as against the world population density of 41 per
square kilometer.
o Further, 29.5 percent was in the age group of 0-14 years, 62.5 percent
in the working age group of 15-59 years, and around 8 percent in the
age group of 60 years and above. This proves that the dependency
burden of our population is very high.
• Under-utilization of natural resources
o India is rich in natural resources like land, water, minerals, and power
resources. However, due to problems like inaccessible regions,
primitive technologies, and a shortage of capital, these resources are
largely under-utilized. This contributes to the economic issues in India.
• Lack of infrastructure
o The lack of infrastructural facilities is a serious problem affecting the
Indian economy. These include transportation, communication,
electricity generation, and distribution, banking and credit facilities,
health and educational institutions, etc. Therefore, the potential of
different regions of the country remains under-utilized.
Plausible solutions
• Employment and Labour Reforms:
o The necessary condition for employment generation is economic growth.
o Fully codify central labour laws and enhance Female Labour Force
Participation to 30%
o The employability of labour needs to be enhanced by improving health,
education and skilling outcomes and a massive expansion of the
apprenticeship scheme.
• Technology & Innovation:
o Establish an empowered body to holistically steer the management of
science
o Create a non-lapsable District Innovation Fund
• Industry:
o Develop self-sufficient clusters of manufacturing competence, with plug &
play parks for MSMEs
o Impetus to Labour Intensive Export firms
o Launch a major initiative to push industry to adopt Industry 4.0
o Introduce a “single window” in states providing a single point of contact
between investor & government
• Doubling Farmers Income:
o Modernize technology, increase productivity & agroprocessing and diversify
crops
o Abolish acts like APMC -Adopt Model APLM Act, Model Contract Farming
Act & Model Land Leasing Act
o Create modern rural infrastructure & an integrated value chain system
o Link production to processing, set up village-level procurement centres
• Energy:
o Bring oil, natural gas, electricity & coal under GST to enable input tax credit
o Promote smart grid & smart meters
o Ports, Shipping & Inland Waterways:
o Double the share of freight transported by coastal shipping & inland
waterways
o Complete Sagarmala project. Open up India’s dredging market
