Macroeconomic causes/ reasons of employment crisis in India/Unemployment prevalent in India

25 Dec Macroeconomic causes/ reasons of employment crisis in India/Unemployment prevalent in India

(This article pertains to a brief summary of the combined editorials of ‘The Economy Times of India’, ‘Oxfom India’, ‘Indian Express’, ‘The Hindu’, ‘Jansatta’, the monthly magazine ‘World Focus’ and ‘PIB’ . The scheme also includes suggestions from the PLUTUS IAS team . This article is specifically from the section ‘Indian Economy, Employment, Growth and Development, Poverty, Education, Skill Development, Human Resources, Employment and Unemployment in India, Types of Unemployment’ section of UPSC Civil Services Examination. This article is related to ‘Macroeconomic causes of employment crisis in India/Unemployment prevalent in India‘ under ‘Daily Current Affairs’ ) .

General Studies-III – Indian Economy, Employment, Growth and Development, Poverty, Education, Skill Development, Human Resources Employment and Unemployment in India, Types of Unemployment.

Why in Discussion / News?

According to a recent study, fewer people are currently employed in agriculture and agriculture-related sectors, yet the change in the unemployment rate has also been weak.

• People leaving agriculture are working in greater numbers in construction sites and unorganized sectors of the economy than in factories.

Unemployment rate in India : Historical data 

The following is the unemployment rate data for the last 10 or 15 years in India, which can be understood from this chart/graph – 

 

Year	Unemployment rate (percentage)
2023	10.05 (in October)*
2022	7.33
2021	5.98
2020	8.00
2019	5.27
2018	5.33
2017	5.36
2016	5.42
2015	5.44
2014	5.44
2013	5.42
2012	5.41
2011	5.43
2010	5.55
2009	5.54
2008	5.41

Source: CMIE

Method of measuring current Unemployment rate in India : 

Currently the following is the way to measure the current unemployment rate in India – 

• The past and present unemployment rate in India is an important economic indicator expressed as a percentage which varies depending on the prevailing economic conditions.
• When job opportunities reduce during economic recession, unemployment starts increasing. Conversely, during periods of economic growth and prosperity, the unemployment rate is expected to decline, with many job opportunities available to the public.
• The formula to calculate the current unemployment rate in India is as follows:
• Unemployment rate = number of unemployed persons/citizen labor force come on

         Unemployment rate = Number of unemployed persons / (Number of employed persons + Number of unemployed persons)

To be classified as unemployed, a person must meet specific criteria:

• They must be at least 16 years of age and available for full-time work in the last four weeks.
• They should actively seek employment during this period.
• Some exceptions include individuals who have been temporarily laid off and are actively seeking to rejoin their previous jobs.

Types of Unemployment: 

Disguised Unemployment :

• This is a situation in which more people are employed than are actually required.
• It is mainly found in agricultural and unorganized sectors of India.

Seasonal Unemployment :

• This unemployment is observed during certain seasons of the year.
• Agricultural laborers in India have very little work throughout the year.

Structural Unemployment : 

• It is a category of unemployment resulting from an imbalance between the jobs available in the market and the skills of workers.

Cyclical Unemployment :

• This is a result of the business cycle, where unemployment increases during recessions and decreases with economic growth.

Technical Unemployment :

• This is the reduction in employment due to changes in technology.

Frictional Unemployment :

• Frictional unemployment refers to the time gap between jobs when a person is looking for a new job or changing jobs.

Vulnerable Unemployment : 

• This means that people are working informally without proper job contracts and thus have no legal protection.
• These individuals are considered ‘unemployed’ because their work is never recorded.

EMPLOYMENT IN AGRICULTURE SECTOR:

• In the year 1993-94, agriculture constituted about 62% of the country’s employed labor force.
• The labor percentage in agriculture (based on data from the National Statistical Office’s Periodic Labor Force Survey) had fallen by about 6% points by 2004–05 and by 9% points over the next seven years.
• This declining trend in labor percentage continued at a slow pace in the subsequent seven years.
• The share of agriculture in India’s workforce declined from 61.9% to 41.4% between 1993-94 and 2018-19.
• It is estimated that as per the per capita GDP level in the year 2018, India’s agriculture sector should employ 33-34% of the total workforce.
• Thus, this 41.4% does not represent a substantial deviation from the average workforce.

EMPLOYMENT TRENDS IN INDIA:

AGRICULTURE:

TREND REVERSAL:

• There has been a continuous change in this trend in the last two years, due to which the share of people employed in agriculture has increased to 44-45% in the year 2020-21.
• This is primarily related to Covid-induced economic disruptions.

STRUCTURAL CHANGES:

• The migration of labor out of agriculture that India has seen over the past three decades or more does not qualify as what economists call “structural change.”
• Structural change involves the shift of labor from agriculture to sectors, particularly manufacturing and modern services, where productivity, value added and average incomes are higher.
• Along with agriculture, their share in total employment in sectors like manufacturing (and mining) has also declined.
• Surplus labor from agriculture is being absorbed into manufacturing and services on a large scale.
• The process of structural change in India has been weak and flawed.
• Despite the temporary halt due to Covid, labor movement into non-agricultural sectors continues, but that surplus labor is not moving towards higher value-added non-agricultural activities, especially manufacturing and modern services.
• Labor transfer is taking place within the low-productivity informal economy.

SERVICE AREA:

• The service sector includes relatively well-paying industries such as information technology, business process, outsourcing, telecommunications, finance, health care, education and public administration.
• Most of the jobs are related to service sector employment like small retailing, small eateries, domestic help, sanitation, security staff, transportation and other similar informal economic activities.
•  The low share of employment in organized enterprises, defined as those employing 10 or more workers, also shows that the employment situation in India is pathetic.

GROWING EMPLOYMENT OPPORTUNITIES IN INFORMATION TECHNOLOGY SECTOR:

• The combined headcount of India’s top five IT companies (Tata Consultancy Services, Infosys, Wipro, HCL Technologies and Tech Mahindra) has increased from 55 lakh to 15.69 lakh between 2020-22.
• This is an increase of 4.14 lakh or about 36% over the post-Covid pandemic period, when most other sectors except agriculture were losing jobs and wages.
• The number of combined employment in these five companies is higher than the combined employment of Indian Railways and the three defense services.
• Much of the recent success in the IT sector has been a result of exports, which have led to job creation.
• India’s net exports in software services have increased from $84.64 billion in 2019-20 to $109.54 billion in 2021-22. Which is also related to the issue of employment generation in many ways.

POSSIBLE MEASURES TO CURB UNEMPLOYMENT:

TO PROVIDE SKILL TRAINING TO WORKERS ENGAGED IN AGRICULTURE:

• The government should give priority to schemes that enhance the skills of the workforce engaged in the agricultural sector.
• This will provide a dual benefit by promoting skills and knowledge in the agriculture sector and at the same time it will help the workers to look for other better areas of employment.

PROMOTION OF LABOUR-INTENSIVE INDUSTRIES:

• There are many labour-intensive manufacturing sectors in India such as food processing, leather and footwear, wood products and furniture, apparel, textiles and clothing etc.
• Every industry requires a special package to generate employment.

DECENTRALIZATION OF INDUSTRIES:

• To provide employment to people in every region, it is necessary to decentralize industrial activities.
• Development of rural areas will help in reducing migration of rural people to urban areas thereby reducing pressure on employment in urban areas.

GOVERNMENT INITIATIVES TO REDUCE UNEMPLOYMENT RATE:

To reduce India’s huge population and the current unemployment rate, the following initiatives or schemes are also being run by the government to solve the problem of unemployment and to provide employment to maximum people –  

• ‘Support for Marginalized Persons for Livelihood and Enterprise (SMILE) Scheme .
• PM Daksh Yojana .
• Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) .
• Prime Minister Skill Development Scheme .
• Startup India Scheme .

THE WAY FORWARD TO SOLVE THE PROBLEM OF UNEMPLOYMENT: 

• According to the National Sample Survey Survey (NSSO) , the unemployment rate for persons aged 15 years and above in urban areas declined to 6.8 per cent during January-March 2023 from 8.2 per cent a year ago . This positive development suggests a possible turnaround in the job market amid the current economic complexities. However, continued vigilance and effective policy measures are critical to promote sustainable job growth and secure the country’s future prosperity.
• Unemployment remains a serious concern in India, with fluctuations being seen across various sectors of employment in India. According to a recent report by Bloomberg, which references Center for Monitoring Indian Economy (CMIE) data for July, the overall unemployment rate in India stands at 7.95 percent by July 2023.

QUESTIONS FOR PRELIMINARY EXAM: 

Q.1. The unemployment found in the agricultural sector in India in which more people are employed than required is called? 

(a) Seasonal unemployment. 

(b) Disguised unemployment.

(c) Structural unemployment.

(d) Marginal unemployment .

Answer – (b) 

PRACTICE QUESTIONS FOR MAIN EXAM: 

Q.1. What do you understand by unemployment and unemployment rate? Explaining the current situation of unemployment in India, discuss the major initiatives and programs being run to solve the problem of unemployment.