Factors of Unemployment in India

In India the main reasons for unemployment are many. These reasons can be enumerated as
follows:
1) Slow Economic Growth, rising inflation & lack of responsive monetary policy:
Indian economy is a developing economy and the economic growth is highly lop sided.
Not only people who are willing and able to work get work in such a scenario. With
increasing population and wide disparity in distribution of income, various sections of
society are devoid of the benefits of balanced growth. By global standards, the
economic growth in India has been slow and has been unable to promote full
employment generation. In Indian economy for the purpose of employment, the Indian
labour force can be classified into three categories namely – rural sector that includes
the farm labour, urban organized sector, and urban unorganized sector. Approximately
93% of the unemployment in India is caused by the rural and informal sectors. Besides,
that manufacturing sector is still in nascent stage in India. For many years, the
manufacturing sector in India, witnessed jobless economic growth. In India lack of a
robust monetary policy to combat the inflation spiral caused due to demand and supply
shocks. A delayed policy response has led to sacrifice of output and employment.
2) Increasing Population: Population in India, is increasing at an extremely fast pace. As
compared to the world standards, the population in India has grown at a much higher
rate. Further adding to the comprehension, the rate of economic growth has been much
slower than the population growth. India has a total population of 1.3 Billion people,
second to China. It is expected that Indian population growth will exceed the Chinese
population growth by the 2024. This phenomenal growth in population, leads to slower
economic growth in India. The thing which further adds to apprehension is the legacy
of primitive perception about social roles of fairer sex and perception about
employment. The proclivity of people in India to treat unemployed and unskilled
homemakers more than the skilled workforce is another reason for unemployment.
3) Mismatch between skills and demands of industry: Our nation faces the dual
problem of unemployment of conventionally educated youth and paucity of trained
workforce. On demand side, a skill gap study has been conducted by NSDC over 2010-
2014, which indicates that there is an additional net incremental requirement of 109.73
million skilled manpower by 2022 in twenty four key sectors. Indian Government has
recently launched the National Policy for Skill development and Entrepreneurship to
meet the challenges of skilling as per the demand of the industry. In reality, our
education system emphasis more of theoretical knowledge, which does not have
practical implementation. Despite demographic dividend, millions of youth capable of
employment do not find job. 62% of our population is in working age group (15-59
years) and more than 54% of population is below 25 years of age. There is a need to
create education programmes that address the needs of the emerging economies. On
supply side, analysis based on results of 66th and 68th round of NSSO. It is observed
that today the total workforce in the country is estimated at 487 million, of which
approximately 57% is in the non-farm sector. If the workforce with higher education
without formal skill training are excluded, the balance workforce is estimated to be
450.4 million. Of these 256.72 million non-farm workers, a maximum of 5.4% would
be formally trained and skilled
4) Lack of support to Small Scale and Cottage Industry: In India, most of the
manufacturing plants use the capital intensive techniques. MSME (Micro, Small and
Medium enterprise) contributes only 17% to GDP as compared to 85% in Taiwan, 60%
in China, and 50% in Singapore. Availability of the cheap capital sector, tends to
encourage the modern sector firms. As a result of this the Small Sector and Cottage
industries, despite high craftsmanship and ability to create employment, are not able to
survive in the competitive environment. Low interest rates, easy availability of
imported machines have led to increasing attrition of the job. Government has started
various schemes such as Commodity Vikas Yojana, Market Development Schemes,
Credit Guarantee and subsidy programme for Cottage industries and Small Scale sector,
but there implementation has been fairly lackadaisical.
5) Low rates of Savings and Investments: The savings ratio is the biggest indicator of
economic activity. Consumer spending accounts for approximately 63% of the GDP,
besides other sectors such as Government Spending, Investment and Exports. Hence
any kind of measure to increase savings can definitely leads to increase in the economic
activity. Though the first economic plan 1951 – 56, based on Harrod Domar Model was
aimed at increasing the rate of Savings and consumptions, but still in India, the rate of
savings has not risen significantly to warrant unstinted economic growth. The date on
household savings suggest that the rate of household savings has gone down from
23.6% in the year 2012 to 17.2% in the year 2018.Government of India has introduced
various programmes such as Sukanya Smriddhi plan, Atal Pension Yojana and Direct
Money Transfer to promote savings, but the cost of these schemes is very high in the
short run.
6) Restrictive Labour Laws and Labour immobility: In India, labour laws are
numerous and are highly rigid. Employers are unable to select and train the labour and
workforce as per their requirement. Moreover, there is lack of employment protection
legislation. Though the reform activity in the organized sector has been limited to the
area of collective bargaining and wage setting, there are no laws to extend these reforms
to the unorganized sector. The Government has taken various initiatives to subsidize
the employment creation through Direct Money Transfer. However, these measures
have failed to increase productivity or add to the existing pool of workers.. Moreover,
the turnover rate in the unemployed pool is very slow and has led to the situation of
long run unemployment known as hysteresis. In the rural and urban settings, the person
who once becomes unemployed, hardly as another chance to get employed. This has
led to the stagnation and vicious circle of unemployment. The person once if he
becomes unemployment, lack of vocational training can lead to the erosion of skill sets.
Though Government of India has introduced various employment schemes such as
MNREGA (Mahatma Gandhi National Rural Employment Generation), Jawahar
Rozgar Yojana, Employment Assurance Scheme, Swarna Jyanti
7) Gram Swarojgar Yojana, Sampoorna Gramin Rozgar Yojana, National Food for Work
Programme, there is vast discrepancy in real implementation and planning. The record
of Aadhar enrolment for Direct Benefit Transfer is case in point, which has dummy
entries of people who have availed of this scheme running in lakhs.
8) Lack of infrastructure & inequitable distribution of resources: There is lack of
educational machinery and required infrastructure in form of roads, highways, power,
and telecommunication to facilitate employment generation. Government has
 introduced various schemes such as Swach Bharat Abhiyaan, Mega Food Park
schemes, Bharatmala Road creation programme, Pradhan Mantri Rojgar Protsahan
Yojana, Pradhan Mantri Grameen Sadak Yojana, but the implementation of these
schemes will have long gestation period.
9) Lack of support to Entrepreneurs: Indian economy has not yet developed to propel
self-employment through entrepreneurship. Despite more than 50 years of planning,
schemes such as Pradhan Mantrti Kaushal Vikas Yojana, are fairly new and the
impact of these schemes, will depend on effective implementation.
*Source of data: Ministry of Skill Development and Entrepreneurship