Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key phrases: Unemployment Rate, LFPR, urban, rural, women unemployment.

Why in News?

• Over the last few months, the Government of India and the mainstream media have highlighted the return of economic growth. However, very little attention has been paid to the job market. India’s unemployment rate has been soaring.

What is Unemployment Rate?

• The unemployment rate is calculated by expressing the number of unemployed persons as a percentage of the total number of persons in the labour force.
• The labour force (formerly known as the economically active population) is the sum of the number of persons employed and the number of persons unemployed.
• Thus, the measurement of the unemployment rate requires the measurement of both employment and unemployment.
• The unemployed comprise all persons of working age who were:
  1. without work during the reference period, i.e. were not in paid employment or self-employment;
  2. currently available for work, i.e. were available for paid employment or self-employment during the reference period; and
  3. seeking work, i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment

India’s Unemployment Rate:

• India’s unemployment rate has been soaring. It went up to 7.91 per cent in December 2021 from 6.3 per cent in 2018-2019 and 4.7 per cent in 2017-18, when the trend started to change a sign that this phenomenon is not just due to Covid.
• In urban areas, this has gone up to 9.30 per cent in December 2021 from 8.09 per cent in January 2021. In rural areas, it has gone up to 7.28 per cent against 5.81 per cent.
• Clearly, unemployment is more in the urban areas as compared to the rural areas.
• Between 2019-20 and December 2021, the manufacturing sector has lost 9.8 million jobs; by contrast, agricultural jobs jumped by 7.4 million.
• The percentage of salaried people has dropped from 21.2 per cent in 2019-2020 to 19 per cent in 2021, which means that 9.5 million people have left the salaried and become jobless or part of the informal sector.
• But the informal sector itself has shrunk, so much so that to return to aggregate figures the employed population, over the same period, has decreased from 408.9 million people to 406 million, at a time about 10 million young Indians were entering the job market.
• Certainly, there are variations among Indian states. As per CMIE data, the unemployment rate in December 2021 was the highest in Haryana (34.1 per cent), followed by Rajasthan (27.1 per cent), Jharkhand (17.3 per cent) and Bihar (16 per cent).
• There are also variations age-wise. Based on the data from CEDA-CMIE (between January 2019 and July 2021), the year 2020-21 saw 42.4 per cent fewer 15-19-year-olds employed in comparison to 2019-20. The age group of 20-29-year-olds saw the average monthly employment numbers go down by 15.6 per cent.

Why Tackling India’s unemployment rate is important?

• The problem of unemployment gives rise to the problem of poverty.
• Young people after a long time of unemployment indulge in illegal and wrong activities for earning money. This also leads to increase in crime in the country.
• It is often seen that unemployed people end up getting addicted to drugs and alcohol or attempts suicide, leading losses to the human resources of the country.
• It also affects economy of the country as the workforce that could have been gainfully employed to generate resources actually gets dependent on the remaining working population, thus escalating socioeconomic costs

What India needed to decrease unemployment rate?

To reduce unemployment, government has to take following steps:

• Inviting more investments in all sectors of economy. (Including Make in India)
• RBI is reducing repo rate so that purchasing power of common man will increase, which in turn will boost demand and thus companies go for more recruitment.
• Among the many alternatives available, it needs to first fix the demand side, which has been adversely affected by the pandemic. That needs to be supplemented with accelerated infrastructure investment,
• Promoting capitalism, entrepreneurship and reducing participation of govt in business.
• Entrepreneurs generate employments to many in a country; therefore government needs to encourage entrepreneurship among the youth.
• Concrete measures aimed at removing the social barriers for women’s entry and their continuous participation in the job market is needed.
• Government needs to keep a strict watch on the education system and should try to implement new ways to generate skilled labour force.
• Effective implementation of present programs like Make in India, Skill India, Start up and Stand-Up India.

Way Forward:

• Unemployment in India has undeniably reached a critical stage and perhaps, raises serious questions on the quality of the economic recovery.
• India’s labour force participation rate is declining, especially among urban youth (15- to 29-year-olds) and women.
• So there is a need to take action for combating the problem of rising unemployment rate.

Source: Indian Express

Mains Question:

Q. What do you understand by Unemployment rate? What are the reasons behind this rise in unemployment rate? How unemployment can be reduced in India? Critically examine.