Employment & Unemployment in India

Employment & Unemployment in India

Unemployment in India

In common parlance, anybody who is not gainfully employed in any productive activity is called unemployed. However, it can be of two kinds:

• Voluntary unemployed

• Involuntary unemployed

Here, we are concerned with the second category of unemployed persons. Hence, unemployment can be defined as a situation when persons able and willing to work are seeking jobs at the prevailing wage level, but they are unable to get the same.

Unemployment in developing economies like India is not the result of a deficiency of effective demand in the Keynesian sense, but a consequence of a shortage of capital equipment or other complementary resources.

In India, unemployment is structural in nature due to a lack of productive capacity and resources.

Types of Unemployment

Cyclical unemployment:

• It is the result of depression in an economy.

Frictional unemployment:

• This kind of unemployment is temporary. It is the result of a situation when new industries drive out old ones and workers change over to better jobs.

Open unemployment:

• It refers to those who have no work to do, even though they are able and willing to do work.

Seasonal unemployment:

• It means the unemployment of the farmers and farm labourers during non-crop seasons.

For example, in the period between the past harvest and the next sowing, agricultural labourers are unemployed.

Educated unemployed:

• This is mainly found in urban areas. Those educated persons who are unable to get work come under this category.

Under-employment (Disguised unemployment):

• It results when a person contributes to production less than what he or she is capable of.

For example, an engineer working as a clerk is underemployed.

Compulsory unemployment:

• It means the labour power that is ready to work at the current rate but does not get the work.

Development and Employment Programmes: At a Glance

During the Ninth Plan, a total of 3.6 crore fresh unemployed began to look for employment.

Data Collection on Unemployment in India

Before its replacement by the 'NITI Aayog', the Planning Commission had to collect data on unemployment based on the 'Lakadawala Formula' effective from 11th March, 1997, and before this, the process to collect data was based on surveys of the National Sample Survey Organisation (NSSO).

In India, the data relating to unemployment is collected by the National Sample Survey Organisation (NSSO). This organisation has the following concepts about unemployment:

• General status of unemployment: In this category, generally, those unemployed for more than one year are included. As such, it is a long-term unemployment.

• Weekly-unemployment: The persons who have not had work for even one hour in a week are included in this category.

• Daily unemployment: It is considered the best concept of unemployment.

The main reasons for unemployment in India are slow economic development, population explosion, outdated techniques, an improper education system, and the limited effect of government planning.

Unemployment Trends

India’s unemployment rate among people aged 15 years and above fell to 7.7% in May 2023 from 8.5% in April 2023, due to a decline in labour participation at 441.9 million, according to data from the Centre for Monitoring Indian Economy (CMIE).

• Compared to April, the labour participation rate (LPR) fell by 1.1 percentage points to 39.6% in May 2023.

[Source: The ET, 10 June 2023]

Rising Employment Trends in 2023

• According to the Periodic Labour Force Survey (PLFS), calendar year-wise unemployment rate declined from 3.6% in 2022 to 3.1% in 2023.

• The Labour Force Participation Rate (LFPR) also expanded from 56.1% to 59.8% over the same period.

• The expansion in LFPR was underlined by:

  • Rural female LFPR rising from 37.5% in 2022 to 47.3% in 2023.

  • Urban female LFPR rising from 24.7% to 27.2%.

Long-Term Employment Trends

RBI’s KLEMS database updated up to 2021-22 points to a revival of the structural transformation of the Indian labour market after a brief reversal attributable to the Covid pandemic.

• The KLEMS database compiled by RBI covers 27 industries comprising the entire Indian economy.

• The labour data from 2017-18 onwards is updated using the Periodic Labour Force Survey of NSO, MoSPI.

• As per the database:

  • Employment increased by 8.2 crore in the five years from FY18 to FY22.

  • 53% of employment was created in non-agriculture sectors, primarily the services sector.

• The COVID pandemic reversed the declining trend of agricultural share in employment (2013-14 to 2016-17), as reverse migration to rural areas pumped up agricultural employment, along with rising female employment in agriculture (as noted by PLFS data).

Central Government's Schemes

Sukanya Samriddhi Account is a part of the 'Beti Bachao Beti Padhao' Programme. Girls of less than 10 years may be named for opening this account. Minimum Rs. 1,000 and maximum Rs. 1.5 Lakh can be deposited in this account.

Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS)

The National Rural Employment Guarantee Bill was passed by Parliament on September 7, 2005. It secured Presidential assent later in 2005 and became an Act (MNREGA).

• The Act provides for at least 100 days of employment for one able-bodied person in every rural household every year.

• The Act (NREGA) came into force on Feb. 2, 2006. Initially, 200 districts have been selected for the enforcement of the scheme.

• The Gov of India, on October 2, 2009, renamed the NREGA as the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA).

• The Central government and the State governments bear 75% and 25% of the cost of material, wages of skilled and semi-skilled workers.

• Daily wage increased from Rs. 182 to Rs. 202 to benefit 136.2 million households.

• In response to increasing work demand under MGNREGA since April 2020, more than 105 crore person days of work have been created in FY 2020-21 so far.

• The Ministry of Railways has identified a number of railway works to be executed through MGNREGS.

Employment Guarantee Act, 2005 – Main Features

• Every household in rural India will have a right to at least 100 days of guaranteed employment every year for at least one adult member. The employment will be in the form of casual manual labour at the statutory minimum wage, and the wages shall be paid within 7 days of the week during which work was done.

• Work should be provided within 15 days of demanding it, and the work should be located within 5 5-kilometer distance.

• If work is not provided to anybody within the given time, he/ she will be paid a daily unemployment allowance, which will be at least one-third of the minimum wage.

• Workers employed on public works will be entitled to medical treatment and hospitalization in case of injury at work, along with a daily allowance of not less than half of the statutory minimum wage. In case of death or disability of a worker, an ex gratia payment shall be made to his legal heirs as per the provisions of the Workmen's Compensation Act.

• 5% of wages may be deducted as a contribution to welfare schemes like health insurance, accident insurance, survivor benefits, maternity benefits, and social security schemes.

• For non-compliance with rules, strict penalties have been laid down.

• For transparency and accountability, all accounts and records of the programme will be made available for public scrutiny.

• The District Collector/Chief Executive Officer will be responsible for the programme at the district level.

• The Gram Sabha will monitor the work of the Gram Panchayat by way of social audit.

Important Development and Employment Programmes

AIM (Atal Innovation Mission)

• AIM is a flagship initiative of the Central Government, set up by NITI Aayog to promote innovation and entrepreneurship across the country.

• AIM is also envisaged as an umbrella innovation organisation that would play an instrumental role in the alignment of innovation policies between Central, state, and sectoral innovation schemes at various levels to establish an ecosystem of innovation and entrepreneurship.

Aatmanirbhar Bharat Rojgar Yojana (ABRY)

ABRY was announced as a part of the Aatmanirbhar Bharat 3.0 package to boost the economy, increase the employment generation in the post-COVID recovery phase, and incentivize the creation of new employment jobs with social security benefits and restoration of lost employment during the pandemic. This scheme is being implemented through the Employees Provident Fund Organisation (EPFO).

Till September 2023, 1,52,454 establishments have claimed benefits amounting to 9,881,89 crore in respect of 60.47 lakh beneficiaries.

[Source: INDIA 2024]

Final Thoughts

Unemployment in India is not just a matter of numbers—it reflects deep structural challenges linked to population growth, education gaps, and limited resources. Over the years, the government has introduced multiple programmes like MNREGA, ABRY, and Digital India to generate jobs, empower rural households, and promote innovation.

While unemployment trends show gradual improvement, especially with rising female participation in the labour force, issues like disguised and educated unemployment remain critical. The success of schemes depends not only on strong implementation but also on skill development and infrastructure growth.

For India to truly overcome unemployment, a balance between rural job security and modern sector opportunities is essential. Sustainable employment creation will be the real driver of inclusive growth and poverty reduction.