Tackling India’s unemployment wave

News: Unemployment in India has undeniably reached a critical stage.

What are the available data that suggests India has undeniably reached a critical stage?

Unemployment rate: India’s unemployment rate has been increasing. It increased to 7.91 percent in December 2021 from 6.3 percent in 2018-2019. It is very critical as 10 million young Indians are entering the job market every year.

Unemployment rate (Urban vs rural): In urban areas, this has gone up to 9.30 percent in December 2021 from 8.09 percent in January 2021. In rural areas, it has gone up to 7.28 percent against 5.81 per cent.

Ruralisation: Between 2019-20 and December 2021, the manufacturing sector has lost 9.8 million jobs; by contrast, agricultural jobs jumped by 7.4 million. Workers are back in their villages, even though urban jobs provide better wages.

Decreasing quality of jobs:  9.5 million people have left the formal sector and have become jobless or part of the informal sector.

India’s Labour Force Participation (LPR) is low compared to other emerging countries: According to the World Bank, India’s LPR stood at 46 percent in 2020, while that of Brazil stood at 59 per cent.

Majority of the Youth’s (20 and 24 years) are unemployed: according to the NSSO, in 2019, when India had the highest unemployment rate in the last 45 years, 34% of youths remained unemployed. This severely affects India’s Demographic dividend.

Inverse relation between Education and Employment: An astonishing fact is that the more educated the people, the more unemployed they were. For instance, 63.4 per cent of graduates falling in the age bracket of 20-24 years were unemployed.

Gender divide: Unemployment among women is higher than men, both in urban as well as rural areas. For women, the average unemployment was 14.28 per cent and for men, it was 7.88 per cent.

LPR for women continues to decline over the years. This is happening even though more and more women are attending school and college in the country.

What are the reasons for decreasing LPR for Women?

The absorption of women in the workforce, as compared to men, is much less due to,

One, most women were involved in agricultural jobs in rural areas. The mechanisation of these jobs has had a huge impact on female labour force participation in the country.

Two, India’s manufacturing sector is not labour-intensive. This has made it difficult to compensate women who got displaced from agricultural jobs.

Three, women’s role as primary caregivers and ownership of domestic chores is a reason for the low participation of women in the workforce.

Four, the cultural norms and deep roots of patriarchy apparently limit women’s labour participation in India.

What are the factors hampering India’s employment generation potential?

Low private investments: The investment rate is declining since 2011. It has dropped from 34.3 percent then to 27 per cent in 2020.

Weak demand: One of the reasons why companies are reluctant to invest. This vicious circle is also fostered by growing inequalities, resulting in the shrinking of the middle class.

Access to credit: Since banks are affected by NPA’s and the ongoing inflation problem have led to increasing in interest rates. This in turn affects business aces to low interest rate capital.

Source: This post is based on the article “Tackling India’s unemployment wave” published in Indian Express on 12^th Jan 2022.