UNEMPLOYMENT IN INDIA: PRE AND POST

LIBERALIZATION; AND CURRENT SITUATION

Introduction:
What is Unemployment?
Unemployment occurs when a person who is actively
searching for employment is unable to find work.
Unemployment is often used as a measure of the
health of the economy. The most frequent measure of
unemployment is the unemployment rate, which is the
number of unemployed people divided by the number
of people in the labor force.
National Sample Survey Organization (NSSO) defines
employment and unemployment on the following
activity statuses of an individual:
 Working (engaged in an economic activity) i.e.
'Employed'.
 Seeking or available for work i.e. 'Unemployed'.
 Neither seeking nor available for work.
The first two constitutes labour force and
unemployment rate is the percent of the labour force
that is without work.
Unemployment rate = (Unemployed Workers / Total
labour force) × 100
Types of Unemployment in India
 Disguised Unemployment:
o It is a phenomenon wherein more people are
employed than actually needed.
o It is primarily traced in the agricultural and the
unorganised sectors of India.
 Seasonal Unemployment:
o It is an unemployment that occurs during
certain seasons of the year.
o Agricultural labourers in India rarely have
work throughout the year.
 Structural Unemployment:
o It is a category of unemployment arising from
the mismatch between the jobs available in
the market and the skills of the available
workers in the market.
o Many people in India do not get job due to
lack of requisite skills and due to poor
education level, it becomes difficult to train
them.
 Cyclical Unemployment:
 o It is result of the business cycle, where
unemployment rises during recessions and
declines with economic growth.
o Cyclical unemployment figures in India are
negligible. It is a phenomenon that is mostly
found in capitalist economies.
 Technological Unemployment:
o It is loss of jobs due to changes in technology.
o In 2016, World Bank data predicted that the
proportion of jobs threatened by automation
in India is 69% year-on-year.
 Frictional Unemployment:
o The Frictional Unemployment also called as
Search Unemployment, refers to the time lag
between the jobs when an individual is
searching for a new job or is switching
between the jobs.
o In other words, an employee requires time for
searching a new job or shifting from the
existing to a new job, this inevitable time
delay causes the frictional unemployment. It is
often considered as a voluntary
unemployment because it is not caused due
to the shortage of job, but in fact, the workers
 themselves quit their jobs in search of better
opportunities.
 Vulnerable Employment:
o This means, people working informally,
without proper job contracts and thus sans
any legal protection. These persons are
deemed ‘unemployed’ since records of their
work are never maintained.
o It is one of the main types of unemployment
in India.
Measurement of Unemployment in India
National Sample Survey Office (NSSO), an organization
under Ministry of Statistics and Programme
Implementation (MoSPI) measures unemployment in
India on following approaches:
 Usual Status Approach: This approach estimates
only those persons as unemployed who had no
gainful work for a major time during the 365
days preceding the date of survey.
 Weekly Status Approach: This approach records
only those persons as unemployed who did not
have gainful work even for an hour on any day of
the week preceding the date of survey.
  Daily Status Approach: Under this approach,
unemployment status of a person is measured for
each day in a reference week. A person having no
gainful work even for 1 hour in a day is described
as unemployed for that day.
Unemployment stats (based on findings from CMIE’s
latest data):
 The unemployment rate in India rose to 7.2
percent in February 2019, the highest since
September 2016, and up from 5.9 percent in
February 2018.
 The total number of employed persons in February
2019 is estimated at 400 million against 406
million in the year-ago period and 407.5 million
employed in February 2017.
 The labour participation rate fell from 43.2% in
January 2019 to 42.7% in February 2019.
o Labour Participation Rate defines that section
of working population in the economy which
is currently employed or seeking employment.
PRE-LIBERALISATION:
While liberalisation arrived on the Indian stage only in
1990s, unemployment in India has not only existed but
had been rampant and growing dangerously since the
beginning of twentieth century. During the last
hundred years or so, the situation improved at times,
while at other times it worsened, the worst situation
being in the 1970s when the oil shocks devastated the
economy, while exploding population added millions to
the workforce.
The main factor behind unemployment in India is a
high rate of population growth that exceeds the
growth of jobs. Almost two third of Indian workforce is
employed in agriculture which contributes only about a
third of GDP. This is largely a legacy of agrarian
economy of the past. For thousands of years, the
population has been more or less static, and there was
sufficient opportunity for every worker to earn his
livelihood by working in agriculture.
Then, after 1919 – also referred as the ‘year of the
great demographic divide’, the population started
growing at a high rate because of the improved
medical facilities. The rising workforce could not be
accommodated in the limited land available, and soon
there were more workers than what could be fed by
earning from land.
During the same time, the world went at war, and the
economies crashed.
In India, as independence movement also took off, the
growth of industrialization was limited. Same situation
continued even after independence. The growing
workforce could never get fully accommodated in
agriculture, so the surplus labor migrated to cities. But
even there, the jobs were less than those seeking
them, leading to fall in wages to subsistence level. The
creation of new jobs by way of industrialization never
kept pace with the rise in workforce.
POST-LIBERALISATION:
In 1991, India opted for liberalizing the controls and
regulations that had been preventing the growth of
entrepreneurship and which were responsible for slow
economic growth. Since agriculture was already
saturated, new growth could come only in
manufacturing and services. The economic rules and
regulations were relaxed to make it feasible for a
person to indulge in business or trading. Business
transactions with outside world were also allowed, and
flow of foreign direct investment as well as investment
by foreign investors in securities and equity of
domestic companies was also encouraged.
Liberalization was a basic change in direction that has
gradually helped in economic growth to rise from 4-5%
per annum to 8-9% per annum during the last ten
years. Thanks to it, the demand for skilled workers in
the private sector has grown substantially and resulted
in massive rise in their wages.
However, even though the demand of unskilled labor
has risen, it has still been less than what would be
required to solve the problem of unemployment.
However, one needs to remember that during the last
one and a half decade, India has seen significant
urbanization, and a substantial rural to urban migration
of unskilled workers. This resulted in a supply of labor
that was higher than the creation of jobs for unskilled
labor.
Wages for skilled and unskilled labor have seen
unprecedented rise since liberalization, primarily
indicating the rise of demand for such workers due to
economic and industrial growth. Unemployment
continues to exist, but underemployment has reduced
substantially as rising incomes has improved income
for small scale self-employed workers.
CURRENT SITUATION:
The impact of the lockdown was so severe on those at
the bottom of the pyramid including migrant workers
that “almost 8 in 10 people were eating less food than
earlier, an equal number did not have money for rent,
more than 6 in 10 in urban areas did not have money
for a week’s worth of essentials, and more than a third
had taken loans to cover expenses during the
lockdown,” the survey found.

The International Labour Organisation had flagged this

off early. The pandemic and lockdown crisis would
mean nearly 400 million workers in India—given that
almost 90% work in the informal economy—are at risk
of falling deeper into poverty, it had stated. For India, a
joint ILO-Asian Development Bank report estimated on
Tuesday that 41 lakh youth have already lost their jobs
due to the pandemic.
STEPS TAKEN BY GOVERNMENT:
 In 1979 the government launched TRYSEM –
Training of Rural Youth for Self-Employment The
objective of this scheme was to help unemployed
youth of rural areas aged between 18 and 35 years
to acquire skills for self-employment. The priority
under this scheme was given to women and youth
belonging to SC/ST category.
 The Government launched the IRDP – Integrated
Rural Development Programme (IRDP) in the year
1980 to create full employment opportunities in
rural areas.
 A new initiative was tried namely RSETI/RUDSETI
in 1982 jointly by Sri Dharmasthala
Manjunatheshwara Educational Trust, Canara
Bank and Syndicate Bank. The aim of RUDSETI, the
acronym of Rural Development And Self
Employment Training Institute was to mitigate the
unemployment problem among the youth. Rural
Self Employment Training Institutes/ RSETIs are
now managed by Banks with active cooperation
from the state and central Government.
 The Jawahar Rozgar Yojana (JRY) was started in
April 1989 by merging the two existing wage
employment programme i.e. RLEGP – Rural
Landless Employment Guarantee Programme and
NREP – National Rural Employment Programme on
an 80:20 cost-sharing basis between the state and
centre.
 MNREGA – Mahatma Gandhi National Rural
Employment Guarantee Act launched in 2005
providing the right to work to people. An
employment scheme of MGNREGA aimed to
provide social security by guaranteeing a minimum
of 100 days paid work per year to all the families
whose adult members opt for unskilled labour-
intensive work.
 PMKVY – Pradhan Mantri Kaushal Vikas Yojana
was launched in 2015. The objective of PMKVY was
to enable the youth of the country to take up
industry-relevant skill training in order to acquire a
secured better livelihood.
 The government launched the Start-Up India
Scheme in 2016. The aim of Startup India
programmes was to develop an ecosystem that
nurtures and promotes entrepreneurship across
the nation.
 Stand Up India Scheme also launched in 2016
aimed to facilitate bank loans to women and SC/ST
borrowers between Rs 10 lakh and Rs. 1 crore for
setting up a greenfield enterprise.