Unemployment in India | Timeline

Epic Magazine – January Month

(1) Unemployment rate: India’s unemployment rate has increased to 7.91% in December 2021 from 6.3% in 2018-2019. 10 million young Indians enter the job market every year and rising proportion of unemployed youth means that more and more young Indians are idle;

(2) Unemployment rate (Urban vs rural): In urban areas, unemployment has gone up to 9.30% (December 2021) from 8.09% (January 2021). In rural areas, it has gone up to 7.28% from 5.81%;

(3) Ruralisation: The manufacturing sector has lost 9.8 million jobs in the last 1 year and jobs in agricultural sector jumped by 7.4 million. Workers are back in their villages, even though urban jobs provide better wages;

(4) Decreasing quality of jobs: 9.5 million people have left the formal sector and have become jobless or part of the informal sector;

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

(6) Large number of the Youth between 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;

(7) Inverse relation between Education and Employment: The more educated the people, the more unemployed they were e.g., 63.4% of graduates falling in the age bracket of 20-24 years were unemployed;

(8) 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% and for men, it was 7.88%. 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.

Tackling India’s unemployment wave – Indian Express – 12th Jan

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 labor-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 labor participation in India.

Epic Magazine – January Month

Some economic analysts suggest that the unemployment metric is not a correct parameter for analyzing the health of the economy;

(1) The unemployment rate merely tells the proportion of the working-age population that wants to be employed to earn some wages. The unemployment rate of 7.9 % does not mean that the remaining 92.1% were employed. It does not take into account those who do not want to be employed and those who do not try to find work. Many adult Indians simply don’t express any desire to work to earn wage.

(2) The employment rate is a more useful indicator. It is a ratio of the employed to the total working-age population. The employment rate is a measure of success.

(3) India’s success rate on this count is low. The global employment rate was 55% in 2020 (58% in 2019) compared to 43% in India. Only West Asia and North Africa by World Bank classification have a lower employment rate than India.

(4) The implications are that almost 60% of the working-age population does not want to work. India’s path to prosperity is in finding employment for this population. To reach global employment rate standards, India needs to employ an additional 187.5 million people.

(5) Out of the 60%, 9 million women were willing to work, although they were not actively looking for work. There is a need to investigate why so many women are not looking for work, though they are willing to work.

(6) The immediate challenge is to provide employment to the 7.9% (35 million) who were not employed and were actively looking for employment.

Epic Magazine – January Month

(1) Low private investments: The investment rate has been declining since 2011. It has dropped from 34.3% in 2011 to 27% in 2020;

(2) Weak demand: Most companies are reluctant to invest. There has been a decrease in consumer demand, especially from the middle class;

(3) Access to credit: Banks are affected by NPA’s and the ongoing inflation problem have led to an increase in interest rates. This in turn affects business aces to low interest rate capital.

Epic Magazine – January Month

According to a Senior Academic in IIM Ahmedabad there is strong empirical evidence that more jobs in India are created by young, small and local firms, and not large established ones. However, this is not strong enough to provide work to India’s large workforce. India has to promote entrepreneurship opportunities in Tier-2, 3 cities. This would require:

(1) Scaling up investments in human and physical infrastructure in smaller cities to improve connectivity, access to electricity etc.;

(2) There is an urgent need to dramatically improve the reach, quality, and timeliness of access to education and health. This could be done by promoting and forming global partnerships with leading education and health institutions;

(3) Huge distortions in factor markets have made it difficult for young enterprises to access land, labour and capital, as they are often crowded out by established firms. Recent reforms in labour regulations will encourage start-ups and job creation, but more reforms are needed in land acquisition and access to finance through capital markets;

(4) Focus has to be on generating jobs in the services sector. These include tourism, entertainment and leisure, IT Services, health-care etc.;

(5) India’s energy sector especially the green energy initiatives have large potential to create livelihood opportunities.

A hazy picture on employment in India – Business Standard – 1^st Feb. 2022

First, labor laws should be amended to encourage industries to adopt labor-intensive production and provide employment-linked production incentives.

Second, the prime minister’s economic advisory council should include corporate and business data analysts with access to real-time data from not only government sources but also private players.

Third, the government should increase investments in information flows about jobs and skilling. For example, releasing monthly payroll information to know formal jobs.

Fourth, the government should first understand how the economy works and how jobs are created, what skills are in demand, then only better policy responses can follow.

Let’s universalize India’s employment assurance – 25th Jan – Live mint

Recently, the head of Hindustan Unilever has suggested that it’s time for the government to launch an urban job guarantee along the lines of India’s rural employment scheme.

What is the need urban employment scheme?

First, India’s rural employment scheme helped village-dwellers during the covid crisis.

Second, service sector has been severely affected by the pandemic and the livelihoods of large numbers in cities depend on this sector.

For example, restaurants, hotels, tourism-reliant businesses, and proximity-based services were hit so severely that only a few could sustain their payrolls. Jobs in cities remain scarce, which has ultimately resulted in income loss.

Third, acute distress was witnessed in 2020 when people started moving away from urban centers to the interiors after an all-India lockdown.

Fourth, According to ICE360 Survey (2021) conducted by People’s Research on India’s Consumer Economy, the country’s poorest 20% saw their household incomes decline by 53% over the last five years. On the other hand, the richest fifth saw a 39% increase.

Fifth, the burden of formalizing the economy through GST rollout and demonetization was also borne by informal-sector workers. Similarly, COVID restrictions also targeted informal workers.

What are the challenges associated with the urban job guarantee schemes?

One, the fiscal strain is one of the major concerns, and opponents argue that it will attract jobless to cities, which will create a further burden on public infrastructure.

Two, urban living is costlier, and it would be difficult for migrants if wages are kept the same as for rural jobs.

What is the way forward?

First, rural jobs were discussed in the 2000s on the ground that an emergent economy must not let anyone go hungry for want of work. Hence, the safety net must cover everyone to ensure minimal welfare conditions.

Second, post-covid circumstances have pushed up the rural employment scheme’s annual allocation to over ₹1 trillion. Now, additional resources must be made available for urban coverage.

Third, a job guarantee should be available for all adults, with proof of identity as the sole requirement. It may prove fiscally expensive, but it would also help in increasing consumption among those with a high tendency to spend. Hence, it will help in the revival of the economy.