Garvita Srivastava

PRN : 20020441089
Roll number : B-18
MBA, Symbiosis Institute of Management Studies, Pune
Word count in assignment: 3,208 (without references)
Assignment 1 : Managerial Economics

UNEMPLOYMENT SCENARIO IN INDIA

INTRODUCTION
India faces many problems but one of the major problems is unemployment, which results
in other problems such as poverty, malnutrition, economic underdevelopment, corruption
etc. The unemployment rate is defined as percentage of the number of persons unemployed
to the persons in the labour force (which includes both the employed and the unemployed).
This, in effect, gives the unutilised portion of the labour force. It is a more refined indicator
of the unemployment situation in a population than the number of the unemployed per
thousand persons in the population as a whole.

WHAT IS UNEMPLOYMENT?

Unemployment is a term referring to individuals who are employable and seeking a job but
are unable to find a job. Furthermore, it is those people in the workforce or pool of people
who are available for work but do not have a suitable job. It serves as one of the indicators
of an economy’s situation. Unemployment occurs when workers who want to work are
unable to find jobs, which lessens economic output and high rates of unemployment show
economic distress and extremely low rates may signal an overheated economy.
HISTORY OF UNEMPLOYMENT IN INDIA

 1951-1971

According to Labour and Employment Minister in the Parliament, there was about 35 million
unemployed person’s in-spite of 42.5 million new jobs created during 1951 and 1969. As per
the estimates of unemployment made in the Five Year Plan the backlog of unemployment
which was 5.3 million at the end of First Plan gradually increased to 7.1 million, 9.6 million
and then to 23 million at the end of Second, Third and Three Annual Plans respectively. In its
report (1973) that total number of unemployed in 1971 was 18.7 million out of which 16.1
million unemployed were in rural areas and the rest 2.6 million existed in urban areas.
Moreover, unemployment as percentage of total labour force was to the extent of 10.9 per
cent in 1971 for the whole country.

 1972-1993

The number of educated job seekers increased from 5.90 lakh in 1961 to 230.0 lakh in the
end of March 1994, which constituted nearly 62 per cent of the total job seekers of the
country. The employment in the modern sector in India grew only by 1.6 per cent per annum
in 1980s, Underemployment in the rural areas also remained high. It is possible that the
drought relief works started by several state governments during 1987-88 had contributed
to a reduction in the level of rural underemployment among males.
  1993-2010

The annual percentage increase in total employment registered an increasing trend from
1.00 per cent in 1991-92 to 2.18 per cent in 1992-93 and thereafter registering a decline of
2.29 per cent in 1994-95, the rate of increase in employment further increased to 2.47 per
cent in 1996-97.

As on 1st April, 1997, total number of unemployed persons in India was 7.5 million. The
International Labour Organisation (ILO) report World Employment 1995 observed that 22
per cent of all male workers were underemployed or unemployed and the country
experienced an increasing trend in additional employment generation, i.e., from 3.00 million
in 1990-91 to 7.18 million in 1994-95 due to the LPG policy.

In 2008, the total employment in all sectors had come down from 16.2 million in September
to 15.7 million by December with total job losses of 5 lakh. Employment opportunities in
2009-10 were affected by the global financial crisis and economic slowdown in
India. However, the situation has improved in India in recent years due to stimulus packages
provided by the government and improvement in global scenario.

TYPES OF UNEMPLOYMENT

 Open Unemployment
Open unemployment is a condition in which people they are able to work and are also
willing to work but there is no work for them. Such employment can be seen and counted in
terms of the number of such persons.

 Structural Unemployment
It occurs due to structural changes in the economy - A change in technology or change in the
pattern of demand. In a developing country like India, structural unemployment exists both
in the rural and the urban areas.
  Frictional Unemployment
It is a temporary phenomenon - Frictional unemployment is the time period between jobs
when a worker is searching for, or transitioning from one job to another.

 Cyclical Unemployment
It occurs because of cyclical fluctuations in the economy - Phases of boom, recession,
depression and recovery. Recession and depression phases marked with low demand results
in more unemployment.

 Under-employment
It is a situation under which employed people are contributing to production less than they
are capable of. It can be in terms of time (visible under-employment) or type of work
(invisible under-employment).

 Disguised Unemployment
A disguisedly unemployed person is the one who seems to be employed but actually he is
not. His contribution to the total output is zero or negligible. It is mostly seen in rural areas.

 Seasonal Unemployment
It occurs only during seasonal months of the year. It is very common in agriculture sector.
Disguised unemployment and seasonal unemployment are two most common
unemployment found particularly in farm sector.

 Technological Unemployment
Technological unemployment is the unemployment caused by technical progress; the skills
of particular types of worker are made redundant because of changes in the methods of
production, usually by substituting machines for manual services.

 Demographic Unemployment
Demographic unemployment occurs when the number of new workers entering the labour
force through natural increase or inward migration exceeds the number leaving the
workforce - The number of job-seekers is more than the opportunities of employment
available in the country.

CURRENT EMPLOYMENT AND UNEMPLOYMENT SITUATION

According to the ICRA, businesses have been compromised by the nationwide lockdown
declared to prevent the spread of coronavirus and their operations have ceased. The Covid-
19 problems have been reduced to a domestic and foreign market shock due to the impact
of imports from China with social separation and lockdowns in some areas leading to
shutdowns in manufacturing and job losses. At the national level, the impact of Covid-19
pandemic may have a longer-term effect on some other industries, especially where
demand is at a discretionary stage, resulting in deflation of domestic needs, fall of
purchasing power due to job losses or wage reductions.

A sharp 190 basis points rise in unemployment rate in rural India to 8.37% has pushed the
country’s overall unemployment rate to a five-week high of 8.67% in the week ended
August 9. Urban areas saw unemployment rate rise from 8.73% to 9.31% during the period,
according to the Centre for Monitoring Indian Economy (CMIE).

The employment rate, as per the private think-tank, also fell to 37.09% for the week from
overall 37.6% in July. In June, the employment rate was 35.9%, 29.2% in May and 27.2% in
April. In March, India’s employment rate was 38.2% and in January, it was
39.8%.Unemployment rate in February and March 2020 was 7.8% and 8.8%, respectively.
According to CMIE, the labour participation rate for the week ended August 9 stood at
40.62%, which was overall at 40.7% in July. The average labour participation rate for the
whole of 2019-20 was 42.7%. India's unemployment rate fell to 11 percent in June 2020
from a record high of 23.5 percent in the previous two months, as many businesses
resumed operations following weeks of closures due to the coronavirus pandemic. The
unemployment rate in urban areas dropped to 12.0 percent from 25.8 percent, while that in
rural areas was down to 10.5 percent from 22.5 percent.
 GRAPH DEPICTING UNEMPLOYMENT RATES IN RECENT TIMES

CAUSES OF UNEMPLOYMENT IN INDIA

The following are the main causes of unemployment:

 Population Explosion:
The population growth since the early 1950s and the consequent increase in its labour
force. It was estimated that with the 2.5 per cent annual rate of population growth, nearly 4
million persons are added to the labour force every year.

 Underdevelopment:

Indian economy continues to be underdeveloped even as a vast quantity of unutilized and

underutilised natural resources is prevailing in the country. The scale and volume of
economic activities are still small with slow rate of capital formation. The non-agricultural
sector especially modern industrial sector which could generate huge number of
employment is growing very slowly.

 Inadequate Employment Planning:

Less effort has been made for balancing the manpower needs and supplies in various
production sectors, indifferent regions of the country and also indifferent skills. This has
resulted to large imbalances in the sphere of educated and trained personnel like engineers,
technicians, cost accountants, plain graduates and port graduates, administrators etc.

 Slow Rate of economic Growth:

In India the rate of growth of the economy is very poor and even the actual growth rate lies
far below the targeted rate. Thus the increased employment opportunities created under
the successive plans could not keep pace with the additions to the labour force taking place
in the country every year leading to a huge and larger backlog of unemployment at the end
of each plan.

 Agriculture is a Seasonal Occupation:

Agriculture is underdeveloped in India. It provides seasonal employment. Large part of

population is dependent on agriculture. However, agriculture being seasonal provides work
for a few months. Therefore, this gives rise to unemployment.

 Insufficient Industrial Development:

Due to dearth of capital, lack of proper technology, scarcity of industrial raw materials,
shortage of electricity and lack of labour intensive investment, industrial sector could not
gain its momentum and also could not generate sufficient employment opportunities in the
country.

 Prevailing Education System:

The prevailing education system in India is full of defects as it fails to make any provision for
imparting technical and vocational education. Huge number of matriculates,
undergraduates and graduates are coming out every year leading to a increasing gap
between job opportunities and job seekers among the educated middle class.

 Caste System and Joint Family system:

In India, since the caste system is prevalent, the work is prohibited for specific castes in
some areas. In many cases, the work is not given to the deserving candidates but given to
the person belonging to a particular community. In big joint families having big business,
many persons do not do any work and seem to be working but they do not add anything to
production.

 Less Savings and Investment:

There is inadequate capital in India. Above all, this capital has been judiciously invested.
Investment depends on savings. Savings are inadequate. Due to shortage of savings and
investment, opportunities of employment have not been created.

 Immobility of labour:

Mobility of labour in India is low. Due to attachment to the family, people do not go too far
off areas for jobs. Factors like language, religion, and climate are also responsible for low
mobility. Immobility of labour adds to unemployment.
EMPLOYMENT GENERATORS IN INDIA: PUBLIC AND PRIVATE
As part of its national agenda to promote growth, enhance productivity and international
competitiveness, the Government of India framed policies for industrial growth, monetary,
trade and foreign investment to achieve the country's overall development which divided
economy into two sectors: Public and Private.

Major Public sector employers are:

 Indian Railways – 12.3 Lakhs

 Indian armed forces - 14 lakhs
 India Post – 4.5 Lakhs
 SBI – 2.5 lakhs

Major Private sector employers are:

 Tata Consultancy Services (TCS) - 4.46 Lakhs Employees
 Quess Corporation - 3.83 Lakhs
 Infosys - 2.43 Lakhs
 Reliance Industries Limited (RIL) - 1.94 lakhs
SECTORS PROVIDING EMPLOYMENT IN INDIA
 Primary Sector (Agriculture & Allied)

Agriculture & Allied sector is also known as the primary sector of the economy. At the time of Indian
independence, this sector had the biggest share in the Gross Domestic Product of India. However,
year-by-year its contribution goes on declining. Agriculture's contribution to the GVA fell from 18.2
% in 2014-15 to 16.5% in 2019-20. This was primarily due to a decline in crop GVA share from
11.2%in 2014-15 to 10% in 2017-18. It has decreased due to relatively higher non-agricultural sector
growth output.

 Industry Sector (Secondary)

Industry sector is also known as the secondary sector and basically includes Manufacturing, Water
supply, Construction, Gas, and Electricity of the economy. It was contributing around 29.6 % to GDP
in 2018-19. The overall growth in the secondary sector is predicted at 2.5% in 2019-20 as compared
to 6.9% in 2018-19.

 Services Sector (Tertiary)

This sector includes the services that are carried out in the country namely hotels, trade, transport,
communication services related to broadcasting. This sector is also known as the tertiary sector.
Presently, this sector is the most supportive sector to the economy. In 2019-20, the manufacturing
sector is expected to rise at 6.9 percent compared to 7.5 percent in 2018-19. During the present
situations, sub-sectors under services such as hotels, retail, transportation, Media communication &
services, financial and real estate services have seen a decline.

GRAPH DEPICTING PERCENTAGE OF WORKFORCE IN P RIMARY , SECONDARY AND TERTIARY SECTOR .

REMEDIES BY GOVERNMENT PROPOSED STEPS TO TACKLE UNEMPLOYMENT IN INDIA

 Training of Rural Youth for Self-Employment (TRYSEM):

Initiated on 15th August 1979, National Rural Youth Self-Employment Training Scheme
(TRYSEM), the key goal of this initiative is to reduce youth unemployment. About 11.6 lakh
youth were given training and financial help under the Program during the Seventh
Programme. Arrangements are being made to get them financial aid from the banks.
Composite Rural Training and Technical Centres (CRTTC) were developed under this
program in the Seventh Plan to impart training to rural youth. Under this programme,
training was to be provided to 2.8 lakh rural youth in 1995-96.

 Integrated Rural Development Programme (IRDP)

The Indian Government launched IRDP in 1978-79 to establish maximum employment

opportunities in rural areas. In all 5111 development blocks, agriculture, animal
husbandry, forests, fisheries, small and cottage industries, road and canal construction,
etc. are to be developed under this programme. In addition, in the Seventh Plan a total of
Rs.312 crores were spent on this initiative to provide more jobs.

 RSETI/RUDSETI:

With the aim of mitigating the unemployment problem among the youth, a new initiative
was tried jointly by Sri Dharmasthala Manjunatheshwara Educational Trust, Syndicate Bank
and Canara Bank in 1982 which was the setting up of the “Rural Development And Self
Employment Training Institute” with its acronym RUDSETI near Dharmasthala in
Karnataka.

 Jawahar Rozgar Yojana:

On 28 April 1989, the Jawahar Rozgar Yojana was launched and its aim is to provide
employment to at least one member of each poor rural family at a workplace near his
residence for fifty to a hundred days a year. There is a reservation of 30% for women under
this yojana. The central government will fund 80% of the system and just 20% of the cost of
this scheme will have to be borne by the state government. National Rural Employment
Program and the Rural Landless Jobs Guarantee Programs merged into yojana in 1989.

 Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA):

It is an employment scheme that was launched in 2005 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. This act provides Right to Work to
people.
  Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

Launched in 2015, It has an objective of enabling a large number of Indian youth to take up
industry-relevant skill training that will help them in securing a better livelihood.

 Start Up India Scheme and Stand Up India Scheme

Start Up India Scheme launched in 2016 aims at developing an ecosystem that promotes
and nurtures entrepreneurship across the country. Stand Up India Scheme launched in
2016 aims to facilitate bank loans between Rs.10 lakh and Rs.1 crore to at least one SC or
ST borrower and at least one women borrower per bank branch for setting up a greenfield
enterprise.

SUGGESTIONS TO CREATE MORE JOBS IN INDIA

1. Improve quality of education

The government and educational institutions must work together to ensure quality
education is accessible to all regardless of distance, language or time and this could only be
possible with the help of technology. Quality education will certainly create skilled and well-
informed youth who can create businesses that can generate employment opportunities.

2. Invest in technology
Investing in technology will lead to the creation of many prestigious and well-paying jobs.
It's evident that technology, particularly big data, AI, IoT, cloud computing and digital
payments will play a central role in its vision to become the dominant global power and
serve as multipliers of productivity which creates wealth and jobs.

3. Invest in physical infrastructure

With world-class physical infrastructure like freeways, larger ports and airports, power
plants, dams, and high-speed rail - India will become closer to becoming a global player and
this will also put millions to work, design and build infrastructure projects that will facilitate
commerce.

4. Structural reforms by lower taxes

Our government needs to implement structural reforms to create a favourable environment

for businesses maintaining a healthy competition among the players. Lowering taxes or
providing short time concessions to the businesses can stimulate the economy by
encouraging more people to enter the industry and create jobs.

5. Lower interest rates

To create jobs, the government should consider further lowering the reverse repo rate, so
banks are encouraged to lend more to consumers. When banks earn less by parking money
with the RBI, they will be incentivised to lend. When consumers have to pay less interest for
borrowing money, they will be encouraged to borrow more money. They will subsequently
purchase more goods and make investments in real estate. More purchases and
investments will lead to higher demand and lead to companies investing more and hiring
more people. Eventually, this will lead to the creation of more jobs.

MY OPINION
The current unemployment situation in our country has only worsened due to the covid-19
pandemic and has left many more people from different professions as unemployed or
underemployed - the human resources of India are being wasted. In a country with such a
large population, unemployment is expected to be significantly high, but further reforms
and remedies must be implemented by the government to reduce the unemployment levels
of India.

The government must inspire people to have small families as this would control the issue of
rising population. The Indian government has started initiatives to control the population
but the population continues to grow which is only leading to more unemployment due to
limited jobs. The Indian education standard must be revamped. The present education
system isn't up to the mark and Government must closely regulate the education system
and try to implement new methods of generating skilled labour which will be important for
further economic development projects.

Government must encourage and expand the rural-based industries to deter rural
applicants from commuting to urban areas. More jobs for the seasonal unemployed should
be created in rural areas as this will lead to rural growth would halt rural people's migration
to urban cities - that won't bring further pressure on urban city jobs. This would halt the
migration of rural people to urban cities, and this would not bring additional strain to urban
employment. Government should allow more foreign firms to open their factories/units in
India as that would create more employment opportunities.
REFERENCES
 https://www.rediff.com/getahead/report/career-5-ways-india-can-create-more-
jobs/20200121.htm
 https://www.indiastat.com/LabourandWorkforce/380987/specimen.aspx
 https://unemploymentinindia.cmie.com/
 https://officechai.com/news/8-biggest-employers-in-india/
 https://www.financialexpress.com/economy/indias-unemployment-rate-rises-to-five-week-
high-check-latest-numbers/2050858/
 https://economictimes.indiatimes.com/nation-world/indias-eight-biggest-
employers/slideshow/47861071.cms
 https://www.nextbigbrand.in/tcs-quess-corp-are-the-largest-private-sector-employers-in-
india/
 https://timesofindia.indiatimes.com/business/india-business/cmie-unemployment-rate-
back-to-pre-lockdown-level-of-8-5/articleshow/76540727.cms
 https://tradingeconomics.com/india/unemployment-
rate#:~:text=Unemployment%20Rate%20in%20India%20averaged,percent%20in%20Novem
ber%20of%202018.
 http://www.ilo.int/wcmsp5/groups/public/@ed_emp/documents/publication/wcms_12023
3.pdf
 https://shodhganga.inflibnet.ac.in/bitstream/10603/24233/9/09_chapter%202.pdf
 https://www.gktoday.in/gk/types-of-unemployment/
 https://www.toppr.com/guides/economics/employment/unemployment-and-employment-
generation/
 https://www.drishtiias.com/to-the-points/paper3/unemployment-in-india
 https://www.economicsdiscussion.net/essays/unemployment-essays/essay-on-
unemployment-in-india/17631