Introduction
Unemployment remains one of the most significant economic challenges faced by India. With its vast and growing population, the country has struggled to provide sufficient employment opportunities for its citizens. Since the election of Narendra Modi as Prime Minister in 2014, his government has introduced several initiatives aimed at reducing unemployment and boosting economic growth. While some of these initiatives have led to progress, challenges persist. This article provides an in-depth analysis of unemployment in India, starting with the Modi government’s policies and extending to future economic strategies that can shape the country’s employment landscape.
The Modi Government’s Approach to Employment Generation
When Narendra Modi assumed office in 2014, he prioritised economic reforms and job creation as key areas of focus. His government introduced several flagship initiatives aimed at addressing unemployment:
1. Make in India
Launched in 2014, the Make in India initiative aimed to transform India into a global manufacturing hub. By encouraging both domestic and foreign investment in manufacturing, the initiative sought to create millions of jobs. Sectors such as automobiles, textiles, electronics, and defence manufacturing were targeted to enhance employment opportunities. While the programme had initial success, challenges such as bureaucratic hurdles, inadequate infrastructure, and global trade issues limited its full potential.
2. Skill India
To tackle the issue of employability, the Skill India programme was launched in 2015. The initiative aimed to train millions of youth in various skills that would enhance their job prospects. However, critics argue that despite training a large number of people, job placement rates have not been as high as expected. Additionally, the lack of alignment between industry demands and skill training remains a concern.
3. Startup India
The Startup India programme was designed to foster entrepreneurship by providing financial incentives, tax exemptions, and simplified regulations. The government aimed to encourage self-employment and job creation through start-ups. While the initiative has supported a growing start-up ecosystem, issues such as funding constraints and market competition have limited its effectiveness in significantly reducing unemployment.
4. Digital India
The Digital India initiative, launched in 2015, aimed to promote digital infrastructure, digital literacy, and online services. The expansion of digital services has created job opportunities in IT, e-commerce, and fintech industries. However, many rural areas still lack internet access, limiting the programme’s reach.
5. MNREGA and Rural Employment
The Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), initiated before Modi’s tenure, continued to play a crucial role in providing employment in rural areas. The Modi government increased funding for MNREGA, especially during the COVID-19 pandemic when rural employment demand surged.
Impact of Economic Reforms on Employment
Despite these efforts, unemployment in India remained a persistent issue. According to reports, the unemployment rate in 2017-18 was at its highest in 45 years. Some of the reasons for this include:
Demonetisation (2016): The sudden banning of high-denomination currency notes led to job losses, especially in the informal sector.
Implementation of GST (2017): While aimed at simplifying taxation, the Goods and Services Tax (GST) caused disruptions, particularly in small and medium enterprises (SMEs), impacting employment.
COVID-19 Pandemic (2020-2021): The pandemic-induced lockdown led to massive job losses, particularly among daily wage labourers and migrant workers.
Government Responses Post-COVID-19
Recognising the employment crisis post-pandemic, the Modi government introduced various measures to revive the economy and job market, including:
Atmanirbhar Bharat Abhiyan (Self-Reliant India Campaign): Launched in 2020, this initiative aimed to boost domestic production and support local businesses, indirectly creating employment opportunities.
Production Linked Incentive (PLI) Scheme: Aimed at attracting large-scale manufacturing investments, especially in electronics and pharmaceuticals.
Increased Infrastructure Spending: The government ramped up investments in roads, railways, and housing to generate jobs.
Future Economic Growth and Employment Policies
Moving forward, successive governments will need to address key areas to ensure sustainable job creation. Some strategies include:
1. Enhancing Manufacturing Growth
India needs to strengthen its manufacturing base to create large-scale employment. Investments in infrastructure, ease of doing business, and reducing bureaucratic bottlenecks are crucial.
2. Encouraging the Gig Economy
The rise of the gig economy, driven by digital platforms, presents an opportunity for employment generation. Policies that support gig workers with social security benefits and skill development will be necessary.
3. Strengthening Education and Skill Development
Aligning the education system with industry requirements can bridge the skills gap. Vocational training, industry partnerships, and digital education can improve employability.
4. Agricultural and Rural Employment Reforms
India’s rural economy still employs a significant portion of the workforce. Policies that support agricultural diversification, agribusiness, and rural entrepreneurship can help reduce disguised unemployment.
5. Green Jobs and Renewable Energy
Investing in renewable energy, electric vehicles, and sustainability projects can create new job opportunities while addressing environmental concerns.
Causes of Unemployment in India
Unemployment in India stems from socio-economic challenges like caste-based discrimination, sluggish growth, and overpopulation. Seasonal agriculture, informal sectors, flawed education, skill gaps, automation, and limited accessibility further hinder job creation, reflecting the complex dynamics of India's labour market. The detailed explanation of these factors is provided below:
- Sluggish Economic Growth: The underdeveloped economy fails to generate sufficient jobs to meet the demands of a rapidly growing population, resulting in widespread unemployment.
- Overpopulation: Rapid population growth exacerbates job scarcity, with the unemployment rate reaching concerning levels, such as 11.1% during the 10th Five-Year Plan period.
- Seasonal Nature of Agriculture: The agriculture sector is largely seasonal and offers only temporary employment, leaving a significant part of the rural population jobless during off-seasons.
- Underemployment: Limited access to production resources, such as raw materials and energy, prevents many individuals, especially in rural areas, from working full-time.
- Informal Sector Challenges: The majority of the workforce (Gig Workers) operates in unorganized sectors with low wages and poor job security, which makes them perceive their employment as inadequate.
- Underperforming Service Sector: Despite contributing significantly to GDP, the service sector in India employs only a small fraction of the workforce compared to developed countries.
- Flawed Education System: Education systems fail to equip students with industry-relevant skills, rendering a large number of graduates unemployable.
- For example, 80% of India's 1.5 million engineering graduates lack employable skills.
- By 2026, India may face a shortage of 1.4–1.9 million tech professionals (NASSCOM).
- For example, 80% of India's 1.5 million engineering graduates lack employable skills.
- Skill Gaps in Emerging Industries: Job seekers often lack the technical and soft skills needed for new-age industries like IT, data analytics, and robotics, limiting their employability.
- The Economic Survey 2024 highlights AI's potential to disrupt India's job market, urging strategies to mitigate its risks while leveraging its benefits. It emphasizes government intervention to ensure job security across sectors.
- Limited Accessibility: Barriers such as illiteracy, poor communication skills, inadequate childcare, and lack of transportation hinder workforce participation, particularly among marginalized groups.
- Impact of Automation: Automation and AI have reduced traditional jobs while creating demand for specialized skills in machine learning, blockchain, and similar technologies.
- Region-Caste Based Discrimination: To some extent this also leads to job allocation based on regional basis and societal affiliations rather than merit, reducing employment opportunities for deserving candidates.
Unemployment Rate in India
The unemployment rate in India, as per CMIE, rose to 9.2% in June 2024, marking an eight-month high compared to 7% in May 2024 and 8.5% in June 2023, reflecting persistent challenges. The status of unemployment in India is as follows:
- According to recent Reserve Bank of India (RBI) data, India's unemployment rate has declined, with the employment growth rate rising to 6% in FY2024 from 3.2% in FY2023, indicating significant job additions.
- This estimate, derived using the KLEMS database, measures productivity across 27 industries and key inputs like Capital, labour, Energy, Materials, and Services.
- The database aggregates data from sources like NSO, NSSO, and ASI for sectoral analysis.
- The India Employment Report 2024, jointly prepared by the Institute for Human Development and the ILO, highlights that India's working population grew from 61% in 2011 to 64% in 2021 and is projected to reach 65% by 2036.
- However, youth participation in economic activities declined to 37% in 2022.
- According to data the Centre for Monitoring the Indian Economy (CMIE), the unemployment rate rose to 9.2% in June 2024, an eight-month high, up from 7% in May 2024. This marks an increase compared to 8.5% in June 2023.
- Rural Unemployment: Rural areas experienced a significant rise in unemployment 9.3% in June 2024, up from 6.3% in May 2024 and 8.8% in June 2023.
- Gender Disparities:
- Female Unemployment Rate: Rose to 18.5% in June 2024 from 15.1% in June 2023, higher than the national average.
- Male Unemployment Rate: Marginally increased to 7.8% in June 2024 compared to 7.7% in June 2023.
- Periodic Labour Force Survey (PLFS) 2024: Data pertains to individuals aged 15 and above for 2023 and 2024.
- Labour Force Participation Rate (LFPR)
- Overall: Increased from 49.3% to 50.4%.
- Male: Increased from 73.8% to 75.0%, showing a positive trend.
- Female: Increased from 24.0% to 25.5%.
- Labour Force Participation Rate (LFPR)
- Worker Population Ratio (WPR): Overall increased from 46.0% to 47.2%.
- Unemployment Rate (UR)
- Overall: Decreased from 6.6% to 6.4%.
- Male: Decreased from 6.0% to 5.7%.
- Female: Decreased from 8.6% to 8.4%.
The government has implemented several programs to increase female employability, including:
Measuring Unemployment in India
India employs various methodologies to measure unemployment, reflecting its complex labour market dynamics across formal and informal sectors. Multiple agencies and surveys provide insights into employment trends and labour force engagement.
Primary Agencies
Primary agencies responsible for collecting and analyzing unemployment data are as follows:
- Ministry of Labour and Employment: Through the Labour Bureau and Directorate General of Employment and Training (DGE&T) collect data on organized sector employment and unemployment under various labour laws.
- National Sample Survey Office (NSSO): This office conducts annual and quinquennial surveys on employment and unemployment, providing detailed data on labour force dynamics.
- Central Statistical Organisation (CSO): Conducts Economic Census, collecting employment data across agricultural and non-agricultural enterprises.
Key Methodologies Used to Measure Unemployment in India
The following methodologies collectively provide a comprehensive picture of employment and unemployment trends in India's complex labour market, addressing both formal and informal sectors.
- Periodic Labour Force Survey (PLFS): Conducted annually by the Ministry of Statistics and Programme Implementation (MoSPI) since 2017-18. Measures Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and unemployment rates using "usual status" and "current weekly status."
- Usual Status (UPSS): It categorizes individuals based on their primary economic activity over the last year, distinguishing between principal and subsidiary activities to capture long-term employment trends.
- Current Weekly Status (CWS): Identifies employment or unemployment based on activities during the seven days preceding the survey, effectively capturing short-term unemployment trends.
- Worker Population Ratio (WPR): This represents the proportion of the working-age population that is currently employed, providing insights into overall workforce utilization.
- Labour Force Participation Rate (LFPR): Measures the proportion of the working-age population that is either employed or actively seeking employment, reflecting overall workforce engagement.
- Census Data (Decennial): Conducted every 10 years by the Registrar General and Census Commissioner, offering insights into workforce distribution, unemployment levels, and main and marginal workers.
- Economic Census by CSO: Gathers employment data periodically across agricultural and non-agricultural enterprises, providing a broad understanding of enterprise-based workforce dynamics.
- NSSO Employment-Unemployment Surveys: Conducted quinquennially and annually, provide detailed employment and unemployment data, analyzing labour market dynamics using demographic, social, and economic parameters.
- Employment Exchange Data: The Employment Market Information Programme (EMIP), collects statistics on job vacancies and registrations, reflecting trends in the organized sector but limited to formal employment.
- Centre for Monitoring Indian Economy (CMIE): Conducts frequent surveys with shorter reference periods, offering real-time insights into unemployment trends, particularly in informal and dynamic labour markets.
Challenges in Measuring Unemployment In India
Measuring unemployment in India is fraught with challenges due to the informal nature of jobs, short-term employment patterns, and socio-economic factors. These complexities often hinder the accurate representation of the labour market. The key challenges in measuring unemployment in India are as follows:
- Informal Nature of Jobs: A large informal sector complicates consistent employment classification as individuals often work intermittently across various activities.
- Short-Term Employment: Workers may alternate between casual labour, seasonal jobs, and unemployment within a year, making accurate categorization challenging.
- Exclusion of Willing Workers: Social norms, especially for women, prevent many from actively seeking work.
- For example, several rural women reported willingness to work if jobs were available at home, yet they remain excluded from the labour force.
- Economic Disruptions: Events like the 2020 lockdown led to temporary job losses not fully captured by PLFS due to aggregation over time.
Impact of Unemployment in India
Unemployment in India has far-reaching consequences, impacting individuals, society, and the economy. It leads to exploitation, social unrest, and underutilization of human resources, hindering national development. The key consequences of Unemployment in India are as follows:
- Under-utilization of Human Resources: The potential of the workforce remains unutilized, resulting in a loss of valuable human resources. Proper utilization of these resources could significantly contribute to national economic growth.
- Rising Poverty: Lack of income due to unemployment leads to increased poverty, higher debt burdens, and a rise in economic hardships for affected individuals and families.
- Social Issues: Unemployment fuels societal problems such as corruption, gambling, and unethical behaviour. These issues undermine law and order and disrupt societal harmony.
- Industrial Disputes: Unemployment contributes to increased disputes between employers and employees, disrupting workplace harmony and further escalating joblessness.
- Exploitation of labour: Unemployed individuals are compelled to accept low wages and work under poor conditions, leading to their exploitation.
- Political Instability: Joblessness breeds dissatisfaction with the government, prompting individuals to engage in disruptive activities and weakening political stability. This, in turn, hinders economic progress.
Unemployment in India Government Initiatives
The Government has launched several initiatives to tackle unemployment, focusing on skill development, job creation, and livelihood enhancement. These programs address urban and rural employment challenges while boosting employability across sectors. Key Employment Schemes and Initiatives are as follows:
- National Career Service (NCS) Project: Transforms employment services with job matching, career counselling, skill development info, apprenticeships, and internships via the NCS Portal, Model Career Centers, and Employment Exchanges.
- Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Guarantees 100 days of annual wage employment for rural households, offering unskilled manual work to enhance rural livelihoods.
- Aajeevika - National Rural Livelihoods Mission (NRLM): Empowers rural poor by building institutional platforms for sustainable livelihoods and offering placement-linked skill development for youth under DDU-GKY.
- Deendayal Antyodaya Yojana - National Urban Livelihoods Mission (DAY-NULM): Reduces urban poverty by enabling self-employment and skill development, providing shelters for urban homeless, and strengthening grassroots institutions.
- Prime Minister’s Employment Generation Programme (PMEGP): A credit-linked subsidy scheme promoting self-employment by helping artisans and unemployed youth establish non-farm micro-enterprises.
- Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Under the Ministry of Skill Development and Entrepreneurship, PMKVY facilitates skill certification and industry-relevant training for youth, enhancing their employability.
- National Apprenticeship Promotion Scheme (NAPS): This scheme promotes apprenticeships through financial incentives, covering employers' 25% stipend (up to ₹1500) and basic training costs (up to ₹7500).
- Future Skills PRIME: A MeitY initiative for reskilling IT professionals in emerging technologies like AI to boost employability in the digital age.
Unemployment in India Way Forward
Addressing unemployment in India requires a multifaceted approach focusing on skill development, rural diversification, private sector engagement, and creating quality jobs. These measures aim to build a sustainable and inclusive workforce as explained below:
- Skill Development: Vocational training must align with industry needs, and partnerships between academia and industries should be strengthened to address skill gaps and enhance workforce employability.
- Diversify Rural Employment: Promoting rural manufacturing and entrepreneurship can reduce reliance on agriculture and create diverse, sustainable job opportunities, reducing unemployment and underemployment in rural areas.
- Encourage Private Sector Involvement: Simplifying regulations and offering incentives can boost private sector job creation while encouraging investments in skill development initiatives to enhance employment opportunities.
- Quality Job Creation: Focus on creating stable and secure jobs that offer financial stability, career growth, and emotional well-being, addressing unemployment challenges holistically.
Conclusion
Unemployment in India remains a complex issue, requiring continuous policy intervention and structural reforms. While the Modi government introduced several employment-focused initiatives, challenges such as economic slowdowns, structural inefficiencies, and external disruptions have hindered progress. Future governments must focus on long-term strategies that promote sustainable economic growth, improve education and skills, and create an inclusive job market. With the right policies, India has the potential to leverage its vast workforce and drive economic prosperity for all its citizens.