In a broad sense, a state of unemployment appears when labour does not obtain employment opportunities despite a willingness to work on the existing wage rate. India is a developing economy where the nature of unemployment is entirely different from that of developed nations.

Lord J.M. Keynes diagnosed unemployment in developed economies to be the result of a deficiency in effective demand. It implied that such demand for labour falls because the demand for industry products is no longer there. According to Keynes, such unemployment can be removed from the economy by increasing effective demand which in turn will increase labour demand to give motion to the machines in the economy. 

Contrary to it developing economies like India face the unemployment situation, which arises due to different reasons. The labour force in India is rapidly increasing due to the high rate of population growth. 

Unemployment-related statistics in India

From 1991 till 2019, the unemployment rate in India kept churning at around 5.5%. In 2020, when the lockdown was imposed in India in the wake of the COVID-19 pandemic, it climbed up to 8.3%. In 2021 again it fell to 5.98%. On the basis of the Periodic Labour Force Survey (conducted by the National Statistical Office) Annual Report (July 2020-June 2021), the employment-related statistics in India are given below:

Some Important Features of Unemployment in India

1. Unemployment rate is higher in women than in men.
2. Unemployment in the agricultural sector is higher in comparison with that in the industrial and service sector.
3. The incidence of unemployment is higher in urban areas than in rural areas.
4. The incidence of unemployment is higher among the educated than the overall unemployment.
5. There is more structural unemployment in India.
6. More disguised unemployment prevails in the agricultural sector.

Labour Force Participation Rate

• It is an estimate of an economy's active workforce.
• It is calculated as the labour force divided by the total working-age population.
• The work-age population refers to people aged 15 years to 64 years.
• According to OECD statistics, the Labour Force Participation Rate of OCED in 2021 was 78%, while that of India in 2021 was 62.8% and the highest Labour Force Participation Rate among OECD countries was that of Sweden at 89.1%.

Factor Responsible for Unemployment in India

Different Types of Unemployment

Structural Unemployment

This type of unemployment is associated with the economic structure of the country.  When demand for labour falls short of the supply of labour due to the rapidly growing population and their immobility, the problem of unemployment appears in the economy.  Besides, due to the growing population, the rate of capital formation falls down which again limits employment opportunities.  This type of structural unemployment is of long-run nature.  Indian unemployment is basically related to this category of unemployment.

Underemployment

Those labourers are underemployed who obtain work but their efficiency and capability are not utilised at their optimum and as a result, they contribute to production up to a limited level.  A country having this type of unemployment fails to exploit the efficiencies of its labourers.

Disguised Unemployment

If a person does not contribute anything to the production process or in other words, if he can be removed from the work without affecting the productivity adversely, he will be treated as disguisedly unemployed.  The marginal productivity of such an unemployed person is zero.  The agricultural sector of underdeveloped/developing economies possesses this type of unemployment on a large scale.

Frictional Unemployment

The unemployment generated due to changes in market conditions (change in demand and supply) is called frictional unemployment. Agriculture is the main occupation in India. The supply conditions still depend on the weather’s mood and similarly demand conditions depend on the availability of resources. Any change arising from either or both creates a diversion from the equilibrium which results in frictional unemployment.

Seasonal Unemployment

Seasonal unemployment appears due to a change in demand based on seasonal variations. Labourers do not get work round the year. They get employment in the peak season of agricultural activities and become unemployed when these activities are over. Indian agriculture ensures employment for only 7-8 months and labourers remain unemployed in the remaining period. This temporary type of employment gives birth to seasonal unemployment.

Cyclical Unemployment

Cyclical unemployment occurs due to trade cycles - during the recession, depression, and deflation. During downswings in the business cycle, unemployment occurs. Though it is short-living and temporary. It is more common in developed economies.

Measurement of Unemployment in India

• The Planning Commission set up M.L. Dantewala Committee in 1960.
• The Committee recommended three methods of unemployment measurement - 

1. Usual Principal Status
2. Current Weekly Status
3. Current Daily Status

• These are the three methods used by the NSSO for the measurement of unemployment in India.

Usual Principal Status

• Measures chronic unemployment in a country.
• Those persons are considered chronically unemployed who had remained without work for a major part of the reference period (i.e. 1 year) preceding the date of the survey.

Current Weekly Status

• It measures unemployment with respect to one week.
• A person is said to be unemployed if s/he is unable to work even for an hour in a week preceding the date of the survey.

Current Daily Status

• Unemployment using this method is measured with respect to whether a person is employed or unemployed or outside the labour force in the day preceding the date of the survey.
• Using this method, individuals are categorized into employed, half-day employed, or unemployed on the following bases:

Among the above three measures, the Current Daily Status is considered the best measure of unemployment in a country because it is the broadest and more inclusive one. Moreover, it takes care of seasonality also.

State/UT-wise details of the Unemployment Rate for persons of age 15 years and above according to the Usual Status Approach

Source: Annual Report, Periodic Labour Force Survey, M/o Statistics & Programme Implementation

Employment-generation programmes launched in India

MGNREGA

• Guaranteed 100 days wage employment  in every financial year to all those adults who are

1. living in villages;
2. volunteer to do unskilled manual work

Deendayal Antyodaya Yojana - National Rural Livelihood Mission (DAY-NRLM)

• DAY-NRLM was launched in 2011 with an aim to mobilize 9-10 crore rural poor households into Self-Help Groups (SHGs) in a phased manner and to provide them with long-term support such that they diversify their livelihoods, improve their income, and quality of life.
• From April 2013 till 30 November 2021, the scheme has been able to facilitate a total of 4.35 lakh crore of bank loans to SHGs.

Deendayal Upadhyay - Grameen Kaushalya Yojana (DDU-GKY)

• It aims to skill rural youth who are poor and provide them with jobs having regular monthly wages or above the minimum wages.
• It is a part of the National Rural Livelihood Mission (NRLM).

Pradhan Mantri Gram Sadak Yojana (PMGSY)

• Launched in 2000
• Comes under the Ministry of Rural Development
• The scheme was designed to provide road connectivity to all villages.

Shyama Prasad Mukherjee RURban Mission

• It was launched in 2016 by the Ministry of Rural Development.
• It was to deliver integrated project-based infrastructure in rural areas which will also include the development of economic activities and skill development.
• Its objective is to bridge the rural-urban divide.
• It is a successor of the scheme PURA.
• It is a centrally-sponsored scheme.

National Career Service (NCS)

• It is a free online skill training programme launched by the Ministry of Labour and Employment.
• It is to help the learners in enhancing personality development with modules on corporate etiquette, improving interpersonal skill, making impactful presentations including other necessary skills demanded by the industry.

Garib Kalyan Rozgar Abhiyaan (GKRA)

• It was launched in 2020.
• Its purpose was to boost employment and livelihood opportunities for returnee migrant workers and similarly affected persons including youth in rural areas.

Aatmanirbhar Bharat Rojgar Yojana (ABRY)

• ABRY was launched in 2020.
• Its purpose was to incentivize employers for creating new employment along with social security benefits and restoration of employment during the COVID-19 pandemic.
• It is implemented through the Employees' Provident Fund Organization (EPFO).

Pradhan Mantri Mudra Yojana (PMMY)

• A Government of India scheme for facilitating self-employment;
• Under the scheme, collateral-free loans up to Rs.10 lakh are extended to micro/small business enterprises and to individuals to enable them to set up or expand their business activities

PM Gati Shakti Yojana

• It is a transformative approach for economic growth and sustainable development.
• The approach is driven by seven engines namely Road, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure.
• This approach is powered by Clean Energy and Sabka Prayas.?

Periodic Labour Force Survey

• National Statistical Office (NSO) launched the Periodic Labour Force Survey (PLFS) in April 2017.
• PLFS has replaced the Employment-Unemployment Survey (EUS).
• PLFS generates two types of data:

1. quarterly data on labour force participation and employment status for only the urban areas in the Current Weekly Status;
2. annual data to measure the labour force estimates on key parameters in both Usual Status and also the Current Weekly Status, for both rural and urban areas.

PLFS vs. EUS

?Jobless Growth

Sometimes in economies GDP grows at a rate faster than the rate of employment growth. So, a GDP increase in an economy does not cause an appropriate rise in the level of employment. This phenomenon is known as jobless growth. This occurs when employment elasticity, i.e., the ratio of employment growth to growth in output (value added) declines progressively over time.

Falling rate of employment elasticity in India:

In India between 1951 and 2000, the annual GDP growth rate rose from 3.6% to around 8% whereas the rate of employment growth slipped from 1.5% to 1% in the same period and the population kept growing. The combination of these factors has led to jobless growth.

What causes jobless growth to occur in India?

• Replacement of manpower by technology
• In India's case, as we see, the service sector (which creates relatively lesser jobs) outpaced the industrial sector
• Inappropriate system of education which could produce graduates but could not provide them necessary skills to become employable, as consequence, many people are sitting free at homes surviving just on rental incomes of properties including agricultural lands
• A significantly large number of individuals (particularly women) engaged in unpaid work at home such as taking care of elders or kids at home
• Falling rate of employment elasticity in India

Why is jobless growth worrisome?

• It makes us unable to reap the demographic dividend. The unemployment rate among youth in India is much higher than the overall unemployment rate.

• Jobless growth is not sustainable in the long run as it may create many types of social, economic, and political problems which may hinder future growth. We have already seen the social unrest manifested in protests on the launch of Agnipath scheme by the government.
• Jobless growth creates more inequality. Poor people who do not have employment are pushed deeper into poverty, particularly when they do not have any savings to survive in COVID-like situations.
• Economic concentration in few hands and a more non-inclusive model of development kill ambitions and make people indulge in anti-social activities which is make the future of society very dark and insecure.

Though, to address the problem of jobless growth, the government has also taken some initiatives in the recent past. For example, National Education Policy 2020, more emphasis on skill development, focus on financial inclusion, promotion of MSMEs, PLI scheme, Start-Up India, etc. The more government can do is to focus on expanding the social security net, inculcation of entrepreneurial mindset in the Indian youth, addressing administrative inefficiencies, etc.