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Why there is a problem of unemployment in India?

By July 25, 2022No Comments

Unemployment is a very serious problem not only in India but all over the world. Hundreds and thousands of people are unemployed. Besides, the problem of unemployment in India is very serious due to the growing population and demand for jobs. Moreover, if we neglect this problem, it will lead to the destruction of the nation.

Our economy has grown and developed but not enough to generate a sufficient number of jobs. Another factor causing unemployment is population growth. Ours is a densely populated country and the population is growing by leaps and bounds. But employment and profitable avenues of employment cannot be generated in equal measure. The number of jobs is limited, but there are many people applying for them. Therefore, a large section of people is left jobless.

The population of our country is constantly increasing. The phenomenal increase in population has exacerbated the problem of unemployment in India. That is why the issue of unemployment is becoming more and more acute every year. It is the responsibility of the state to provide employment to the citizens. But the number of unemployed in India is increasing alarmingly. More than 33% of the total population is still below the poverty line. The number of registered unemployed, not to mention those whose names are not in the register, is quite staggering. The number of job seekers in the register of employment exchange is also increasing by leaps and bounds. There are three categories of employment here. In villages, people who live in agriculture work for four to five months in a year, remaining idle. During that period, they remain practically unemployed. In towns and cities, there is another class of unemployed, who do not find employment due to the installation of large machines in factories. Finally, there is a large number of educated people who are unemployed. The masses, uneducated and illiterate also adopt some means by which they can earn their livelihood. However, educated people cannot do this.

Out of India’s total population of 1.39 billion people, 97 million live in extreme poverty. After the sudden outbreak of Covid-19 in early 2020, many more people in India were pushed into poverty. Some estimates show that 150-199 million additional people could fall into poverty by the end of 2021.

The unemployment rate in India amid the lockdown and restrictions on mobility is 12.81% as of 8th June 2021 based on data provided by CMIE. Earlier, India’s unemployment rate rose to 8 percent in April 2021 from 6.5 percent in March 2021, down to 14.7 percent by the end of May, while the employment rate fell to 36.8 percent in April from 37.6 percent in March. Report of Center for Monitoring Indian Economy.

In 2020, India’s unemployment rate fell to 7% in September 2020 from a record high of 29% in March 2020 when the country went into lockdown. However, it later went up to 9.1 percent in the month of December 2020.

The unemployment rate fell from 9.1 percent in December 2020 to 6.5 percent in January 2021, while the employment rate rose to 37.9 percent from 36.9 percent.

Due to the lockdown due to the outbreak of coronavirus, many industries have been forced to shut down thus increasing unemployment across the country.

Unemployment in India was 6.1% in FY 2018 as mentioned in NSSO – National Sample Survey Organization Report 2019.

According to CMIE, 23% or 8 million of the 35 million unemployed actively looking for work in December 2021 were women. At the same time, of the 17 million who were passively unemployed, 53% or 9 million females were willing to get employed although they were not actively looking for employment.

Citing World Bank data, CMIE said the World Bank had pegged the global employment rate at 55% in 2020 or 58% in 2019 while India’s rate was at a low of 43%. However, CMIE estimated India’s employment rate at 38%.

“India’s issue of unemployment isn’t mirrored in the unemployment rate of the nation. Its problem is its low employment rate and its discouraged young women labor force,” CMIE said.

According to CMIE, India’s path to prosperity lies in finding employment for nearly 60% of the population. “India needs to employ an additional 187.5 million people to reach global employment rate norms,” he said, adding that it was a tall order given the current employment of about 406 million.

According to Center for Monitoring Indian Economy (CMIE) data, unemployment in India was 8.1% in February 2022. While this is an improvement from around 12% unemployment during the peak of the second Covid-19 wave in May 2021, only 40% of Indians were employed or looking for work, compared to around 60% in other countries.

About 26% of Indian men between the ages of 20 and 30, with at least 10 years of education, were not working, compared to 2% for those over 30. The data also shows that India’s informal services and contract labor sector has millions of jobs, but less than 5% of the workforce is formally skilled, compared to 75% in Germany and 96% in South Korea.

Additionally, India now has one of the lowest female labor force participation rates in the world, falling from around 35% in 2005 to 21% today, compared to the world average of 50%. Many of the jobs that recovered with the post-Covid-19 economic recovery went back to male workers, while female workers continued to lose.

According to the India Skills Report launched at the 3rd CII National Conference on Skill Development, 34% of the nearly 1,00,000 candidates were found employable. The report not only reveals the skill levels of the talent pool but also the hiring projections in the country’s major industry sectors. According to the findings of the report, no sector will see bullish recruitment in the coming year. Of the nearly 10 sectors surveyed, most sectors (such as BFSI, BPO/ITES, manufacturing, etc.), do not expect a major change in their hiring numbers. Engineering and core, hospitality and travel, emerged as the only sectors where recruitment numbers would increase significantly. The report also revealed a general trend among employers to look for skills rather than qualifications in candidates. In addition, the report provides an in-depth analysis of the skill pool by gender, age group, and domain along with the states where the largest employment pool can be found. It also shows the domain-wise recruitment trends for the coming year.

On the basis of gender, it was found that the quality of female candidates is better than that of males. These and many more such insights are part of the first India Skills Report, an attempt to capture supply-side skill levels and demand-side talent needs and matchmaking between the two ends. Reaching out to over 1,00,000 students spread across the country alongside nearly 100 employers spread across 10 industry sectors, the India Skills Report has helped create an agenda that can work to address the country’s talent supply-demand challenge. The Report was published by Mr. Shikhar Agrawal. Mr. Shikhar Agrawal is the Director General of Employment & Training Ministry of Labour and Employment (India).

Causes of Unemployment Problem in India

No single reason can be attributed to the widespread unemployment in India but the leading causes of the problem in India are as follows:

Theoretical education

This chronic unemployment is attributed in some quarters to the education system prevailing in our country. Our education is very theoretical. It produces too many arts graduates and too few engineers. To meet this deficiency, the government has opened many technical institutes in different parts of India. However, this effort, as good as it is, will not solve the problem of unemployment. Already there are more technically trained men than there are jobs for them.

Lack of alternative opportunities for agricultural workers

The picture in rural India is equally dismal. The main occupation of the majority of the rural population is agriculture. However, agriculture keeps the farmers engaged for a limited part of the year. For several months every year, the peasant remains idle and leads a miserable life.

The poor condition of cottage industries

There is unemployment due to a lack of cottage industries in villages. Cottage industries are closed. They provide full-time employment to only a fraction of the people who depend on them.

Rapid Increase in Population

The current increase in population in India has created a demand and supply imbalance in the labor market. The increase in technology, capital formation, natural resources, etc. is not keeping up with the rate of population growth, due to which additional people are not getting employment and unemployment is increasing.

Uncertainty of Agriculture

Even after the development of science, agriculture in India depends on the mercy of nature. Every year, millions of laborers lose their jobs due to droughts, floods and other natural calamities causing uncertainty and unemployment in agriculture.

Improper Attitude

One of the main reasons in this country is that educated people want jobs. They don’t want to start their own manufacturing unit. Unemployment has also increased due to this inappropriate attitude.

Wide Gap between Wages and Productivity

Inflation in the country is continuously increasing due to which the prices are continuously growing. Influenced by this, laborers demand higher wages and incentives which causes the cost and price of goods to rise, but demand falls. This reduces production and thus, increases unemployment.

Defective Planning

Planning has been going on in the country since independence, but this planning has been flawed. Scholars believe that unemployment has also increased due to this.

Irrational Mechanization

In view of the development of heavy industries, the government has deliberately encouraged labor substitution activities, which has led to difficulties in the advancement of employment opportunities. It is certain that the substitution of labor by irrational mechanization will naturally increase unemployment.

Lack of an Extensive Employment Policy

India has always lacked a comprehensive and short-term employment policy. It is true that unless a solid employment-oriented development policy is developed and implemented by a stable government of the country, solving the problem of unemployment is difficult. Apart from this, constraints in productive activities, social environment, social evils, religious superstitions, political instability and industrial unrest are adding to the problem of unemployment.

Solution of Unemployment

Every country is trying to solve the problem of unemployment in its own way. 

Establishment of vocational and technical training institutes: Government should open technical and vocational colleges and make manual labor compulsory. Big factories should be attached to these colleges in order to provide necessary training and more emphasis has to be given to the practical side.

Increase investment in heavy industries: Investment in heavy and basic industries and consumer goods industries should be increased to provide more employment with more production.

Encourage the revival of the cottage and small-scale industries: Cottage and small-scale industries should be developed, and subsidies and other incentives must be given to the private sector to encourage the revival.

Modernization of Agriculture: Agriculture should be modernized and mechanized. Wasteland should be used.

Improvement of transport and communication: Rural works programs should increase the means of transport and develop communication.

Encouragement to the self-employment: Government must take initiatives to promote self-employment. Young entrepreneurs should be helped with hassle-free loans. Unemployment is a major concern for the government.

The government tried to provide some relief to the unemployed, especially ex-servicemen, by opening employment exchanges, and machinery for finding suitable employment for youth and women. Some universities also have employment boards to help their graduates (and graduates) secure employment.

Increase in national wealth through industrialization: The real solution is to increase the production of industrial goods, in addition to the increase in national wealth. If there are more industries, there will be more avenues for employment, especially with vocational and technical training for men and women. Already river valley projects and power-plant projects are finding employment for large numbers of men.

However, this is not a perfect solution. They may have found employment for some talented people.