Daily News Analysis

Unemployment in India

5th January, 2022 Economy

Figure 4: No Copyright Infringement Intended

Context:

  • According to the India Economic Monitoring Center (CMIE), India's unemployment rate reached a high of 7.9% in four months.

 About the latest trends

  • Declining Trends: Figures show a clear downward trend, even before economic activity is affected by the new Covid 19 restrictions imposed in many states.
  • Latest unemployment rate: The unemployment rate has risen to 7.9%. Last year it was 7%. The unemployment rate in urban areas has risen from 8.2% to 9.3%.
  • Rural unemployment has risen from 6.4% to 7.3%.
  • India's Labor Participation Rate (LPR): This fell from more than 46% in 2016 to just over 40% in 2021.
  • LPR is a measure of how many employable people in the economy have or are looking for a job.
  • This means that 60% of the working population is either inactive or not looking for a job and is dropping out of the labor market.
  • World Inequality Report 2022: India is a "poor and highly unequal country with a wealthy elite," explaining that by 2021, the bottom 50% will have only 13% of national income.

Challenges:

  • High-Paying Jobs in the Organized Sector: Urban employment is an indicator of high-paying jobs, and the decline in these numbers reflects the impact on high-paying jobs in the organized sector.
  • Low Consumption Levels: Economic activity and consumption levels are affected as Covid19 cases increase in the threat of Omicron variants and many states impose new restrictions.
  • $ 5 trillion target: This is not suitable for the $ 5 trillion target set by the economy or government unless the course can be modified to create more jobs.
  • Employment Security: However, Indians are worried about unemployment and employment security concerns are at the top of their list.
  • Spillover: The effects of unemployment are perceived by both workers and the economy and can cause spillover.
  • Suffering from financial difficulties: Unemployment puts workers in financial difficulties that affect their families, relationships and communities. When this happens, consumer spending, one of the key growth drivers of the economy, declines and, if left untouched, leads to a recession or even a recession.
  • Demographic dividend: There was a time when the demographic dividend in India was advertised as its greatest strength.

Causes of employment:

 Jobless Growth

  • Economic growth is usually expected to generate employment.  However, in India, most of the economic growth has been jobless.
  • Economic growth could not create many jobs in India.

Increase in Labour Force

  • Over the years, the mortality rate has declined rapidly without a corresponding fall in birth rate and the country has, thus, registered an unprecedented population growth.  This was naturally followed by an equally large expansion in the labour force.

Inappropriate Technology

  • In India, while capital is a scarce factor, labour is available in abundant quantity.
  • Under these circumstances, the country should have labor-intensive techniques of production not only in industries but also in agriculture. In western countries, where capital is in abundant supply, use of automatic machines is both rational and justified, while in India, on account of the abundance of labour, this policy results in large unemployment.

Inappropriate Education System

  • The education system in India is defective and it does not aim at the development of human resources.  The curriculum and syllabus taught in schools and colleges, is not as per the current requirements of the industries.

Way Forward:

  • Positive Feedback: About 70% of urban Indians believe the country is heading in the right direction.
  • Changes in investment patterns: The early planning process focused on investment allocation patterns with a high capital-labor ratio. Therefore, a shift in focus to the consumer goods industry will create more jobs to absorb the unemployed.
  • Promoting SMEs and Large Enterprises: Making large investments in SMEs rather than large enterprises can help you reach your employment and production goals.
  • Rural Underemployment: Rural work programs need to be organized. The failure to implement rural work programs emphasized that the rural sector has a relatively small role to play in providing additional employment to millions of landless workers and small, marginalized farmers.