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India’s Unemployment Problem

  • IASbaba
  • February 23, 2021
  • 0
UPSC Articles
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ECONOMY/ GOVERNANCE

Topic:

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

India’s Unemployment Problem

Context: Twitter trend whereby government was asked to provide jobs for unemployed youth of our Country.

Just before the Covid crisis at the end of 2019-20 financial year, India had around 403.5 million employed people and around 35 million (or 3.5 crore) openly unemployed people (those who are seeking work and not finding it) in the country.

Issues

  • Addition of Job Seekers Every Year: Given India’s population growth, each year there are close to 20 million (or 2 crore) people who enter the working-age population of 15 to 59 years.
  • Recovery Post Pandemic: As of January 2021, India had only about 400 million employed (pre-COVID it was 403.5 million). At one level this is good news because far more had lost jobs and many seem to have regained employment as the economy has started recovering. 
  • Steady Decline in number of Employed People: As per CMIE data since 2016, the total number of employed people in India has been steadily coming down. It was 407.3 million in 2016-17 and then fell to 405.9 million in 2017-18, and to 400.9 million at the end of 2018-19.
  • Unemployment has larger Impact on Society: Each unemployed person is part of a larger family — implying millions of families suffering from the lack of employment opportunities.
  • Falling Labour Force Participation rate: Even though people have skills they may not be in position to enter labour market for variety of reasons. For instance, if law and order is poor or if cultural mores can prevent women to seek work. Also, men can give up looking for work after repeated failed attempts. As a result, India’s labour force participation rate (LFPR) falls. India’s LFPR is about 40% (in most developed countries it is 60%)
  • Jobless Growth: Typically, fast economic growth takes care of unemployment worries. However, due to distorted economic structure (service led growth) India’s growth has not translated into jobs. What was required is labour intensive manufacturing led growth providing jobs for millions
  • Technological Advancement & Unemployment: The GDP can continue to go up as more and more companies become more productive by replacing labour with capital (machinery) but that will only deepen India’s unemployment problem.
  • Criticism of Government’s role in Creating Jobs: The mantra of “minimum government” espoused in Union Budget for 2021-22 essentially undercuts the government’s role in directly creating new jobs. While on paper this makes sense, the timing is questionable. That’s because the Indian economy is quite weak and the private sector has already shown its preference by choosing to cut jobs and boost its profits

Conclusion

Typically, fast economic growth takes care of unemployment worries. However, in India’s case, one cannot assume that.

Connecting the dots:

  • Historic Recession: On India’s GDP slump: Click Here
  • Banking Health: NPAs and COVID-19: Click Here

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