Grappling With the Indian Problem of Unemployment

🔍Insights

Anagha S

Jul 4, 2021 — 8 min read

Since India got independence, unemployment has been one of the biggest banes of India. Unlike many factors that affect the economy, the impact of unemployment on a nation is holistic.

It is because unemployment not only affects one particular person and their family but will also impact the supply and demand of all forms of businesses, inflation, logistics, overall development, health, and whatnot. It is because of all these reasons that the Indian government, like any other economy, has put in a lot of effort to mitigate the issue of unemployment.

However one needs to understand that unemployment can never be completely erased. There will always be at least a small proportion of unemployment prevalent in any kind of society and all that we can do is to ensure that this rate of unemployment is always below a certain point so that it does not adversely affect the economy.

History of Employment
Pandemic and Unemployment in India
The Problem of Informal Sector
Implications of Unemployment
Types of Unemployment
Causes of Unemployment
Government Initiative to Control Unemployment
FAQ

History of Employment

We have all know that employment has evolved as a significant part of human society. In the olden days, things were different. Human settlements were largely for security from external threats. This is because a group of food gatherers can protect themselves against wild animals rather than solitary ones.

As society evolved to be more complex and wide, the nature of society also changed. From food gathering and hunting, it reached into agriculture. However, agriculture was only for subsistence for a large period. One can trace the expansion of agriculture to the later Vedic phase. From agriculture, employment expanded to trade, artworks, metallurgy, defense, administration, and so on.

As kingdoms flourished, the job opportunities created by them also increased significantly. The fact that taxes were introduced was in itself indicative of the health and nature of employment in the respective kingdoms. In earlier times, a lot depended on employment. We have evidence from various instances of history where kingdoms collapsed when their tax revenue decreased due to unemployment and how the population withdrew to rural areas as employment opportunities became skewed in the city.

Clear evidence of the presence of unemployment can be seen during the reign of Firuz Shah Tughlaq who reigned the Delhi Sultanate in the 14th century. It was the time when the Delhi Sultanate was on the verge of collapsing. However, the king made arrangements to take account of the unemployed people in the kingdom and tried to devise state policies to help them.

An unforgettable blow to employment in the history of humanity was the Great Depression of 1929. Spreading across the USA and Europe it crippled the world economy. It resulted in large-scale unemployment, discrepancies in economic activities, demand, and large-scale shutdown of industries.

It was a time when the world realized the extent to which things can go wrong in the face of depression. Rather than abetting employment, one must say that all economies have been trying their level best to avoid another economic depression.

Pandemic and Unemployment in India

Although not a surprise, the pandemic has aggravated the situation of unemployment in India significantly. The Indian economy continues to wriggle out of the hands of unemployment since March 2020 when all economic activities came to a standstill.

According to the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India as of June 2021 stands at 12.8%. In March 2021 the unemployment rates were at 6.5% from where they rose to 8% by April 2021.

To understand the graveness of the issue one must understand that the rate of unemployment in India during 2018 was only 6.1%. India's economy was already slowing down before the pandemic and the worst came along with the lockdown.

The Problem of Informal Sector

One of the main reasons for the booming rates of unemployment in India even without the pandemic was the large population that is dependent on the informal sector for employment.

Apart from all sorts of uncertainties and disguised unemployment that is rampant here, the worst part is that there is no proper data regarding the number of people, the kind of job, and the implications of such jobs with the government.

Even as the productivity of India grew over time the rate of employment generation was inadequate. This means that a very small population contributes to the growth of the Indian economy while more than 75 percent of the working population is confined to the informal sectors like agriculture, small enterprises, construction, etc.

Implications of Unemployment

Unemployment as we all know is a state where a person who is actively searching for a job with all necessary qualifications is still unable to get a proper job. It is an indicator of the health of an economy.

As mentioned earlier unemployment will result in lower demand for goods and will lead to a decrease in purchasing power of citizens. These inadvertently affected the overall business and employment generation of the Indian economy. It further stresses the necessity of the government to be watchful of the rate of unemployment in their respective nations.

Types of Unemployment

There are different kinds of unemployment and each one of them is equally dangerous and requires the supervision of an independent organization to prevent the numbers from going out of hand. A few of them are mentioned below

Disguised Unemployment

This form of unemployment as the name suggests is in disguise and almost invisible to the eyes of the observer. Disguised unemployment refers to a situation where an excess number of people are employed for a particular task. In this case, they look employed but in fact, it is a form of unemployment.

Technological Unemployment

Technological unemployment refers to those forms of unemployment that are a result of technological advances that humanity achieves. According to certain surveys, job losses due to technological advances are increasing by 30% every year.

Seasonal Unemployment

It refers to those kinds of unemployment where the labourers are unemployed for a certain period of the year while they find work during the rest of the year.

Vulnerable Unemployment

A person is said to be under vulnerable unemployment when they have a job but they are appointed without any job contracts or securities. It is one of the most prevalent forms of unemployment in India.

Causes of Unemployment

Various factors cause unemployment. Although a small amount of unemployment is inevitable, a large fraction of it can be avoided through careful planning and efficient implementation. Here are a few causes of unemployment in India.

Lack of Skilled Population

Due to the lackadaisical state of most of the educational institutions in India, there is a significant deficit in the number of skilled population for doing a particular job.

Most of the companies share their experience where they have to additionally train the employees to make them understand and adjust to the job that they are supposed to do. India can mitigate this problem only if the quality of education right from school to higher education is improved.

Large population

The population in India is the second-largest in the world. And it is anticipated that in a few years they will surpass the population of China. The population is a boon to a nation. But in India, the problem is that this valuable resource is not properly used.

We must not forget that India has the biggest working population in the world. And imagine the impact that India could have had over the world economy if it actually put enough effort to develop each individual in the best way possible. Since that is not happening, the large population continues to be a burden that worsens the situation of unemployment in India.

Low Productivity

India is an economy whose prime moving force in agriculture. Ideally, India was supposed to slowly switch from an agricultural economy to an industrial economy or a service sector economy. However, India is caught in a unique situation where more than half of the population is dependent on agriculture but with only a minuscule contribution to the economy.

The lack of productivity in the agricultural sector and the unavailability of enough alternatives have also resulted in rampant unemployment especially in rural India.

Improper Infrastructure

Proper infrastructure and adequate investments in the manufacturing and service sectors are integral parts of generating employment in any nation. But things were grim for India in this regard and the situation had contributed its part in increasing unemployment in India.

It is mainly because of the lack of proper infrastructure and investment that the growth of industries in secondary sectors especially is restricted.

Social norms that deter Women and marginalized groups from taking decisions regarding employment and access to education have kept a large part of the Indian population in the darkness of unemployment.

Although a lot of changes are coming up in this regard, there is still a lot to be done to improve the situation of women and other marginalized communities in society.

Government Initiative to Control Unemployment

TRYSEM – Training of Rural Youth for Self-Employment - 1979
IRDP – Integrated Rural Development Programme (IRDP) - 1980
RUDSETI — Rural Development And Self Employment Training Institute - 1982
MNREGA – Mahatma Gandhi National Rural Employment Guarantee Act - 2005
PMKVY – Pradhan Mantri Kaushal Vikas Yojana - 2005
National Skill Development Mission - 2014
Start-Up India Scheme - 2016
Stand Up India Scheme - 2016
PMGKY - Pradhan Mantri Garib Kalyan Yojana - 2016

FAQ

What is the cause of unemployment in India?

The major causes of unemployment in India are Large population, low educational levels of the working population, Inadequate growth of infrastructure and low investments in the manufacturing sector.

Which state in India has highest unemployment?

With a 26.4% unemployment rate, Haryana has recorded the highest unemployment rate in the country, as per the data released by the Centre for Monitoring Indian Economy for February 2021.

What is the unemployment rate in India?

India's unemployment rate sharply rose to 7.11 per cent in 2020 from 5.27 per cent in 2019.

Must have tools for startups - Recommended by StartupTalky

Convert Visitors into Leads- SeizeLead
Payment Gateway- Razorpay
Spy on your Competitors- Adspyder
Manage your business smoothly- Google Workspace