UNEMPLOYMENT IN INDIA
Unemployment is a situation where people who are actively seeking employment are unable to find work. The unemployment rate is calculated as the percentage of the labor force that is unemployed.
The labor force is defined as the number of people who are either employed or unemployed.
2.1. Unemployment rate
The unemployment rate in India is the percentage of the labor force that is unemployed
The unemployment rate in India has been fluctuating in recent years.
In 2020, the unemployment rate was 10.20%, which was the highest it had been in decades.
The unemployment rate then declined to 7.71% in 2021
Where:
- Number of Unemployed Individuals: The total number of people who are able and willing to work but are currently unemployed and actively seeking employment.
- Labor Force: The total number of people who are either employed or actively seeking employment.
The formula to calculate the employment rate is:
Employment Rate = (Number of Employed Individuals / Working-Age Population) x 100
Where:
- Number of Employed Individuals: The total number of people who are currently employed.
- Working-Age Population: The total number of people within a specified age range (typically those considered to be of working age).
Some common types of unemployment include:
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Structural Unemployment: This type of unemployment occurs when there is a mismatch between the skills possessed by workers and the skills demanded by available job opportunities. It can result from changes in technology, shifts in industries, or changes in consumer preferences.
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Frictional Unemployment: Frictional unemployment arises due to the natural process of workers moving between jobs or entering the workforce for the first time. It occurs when there is a temporary gap between the end of one job and the start of another.
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Cyclical Unemployment: Cyclical unemployment is caused by fluctuations in economic activity and demand. It increases during economic downturns or recessions when businesses reduce production and lay off workers due to decreased consumer spending.
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Seasonal Unemployment: Seasonal unemployment is linked to seasonal changes in demand for specific industries. For example, agricultural or tourism-related jobs might experience temporary unemployment during off-seasons.
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Long-Term Unemployment: This refers to individuals who have been unemployed for an extended period, often for more than six months. It can lead to skill erosion and decreased employability.
- The deterioration in the employment scenario can be tracked at many levels
- One, over the years, there has been a sharp fall in the labour force participation rate in India
- Data from CMIE suggests that the labour force participation rate has fallen to around 40 per cent. For comparable countries, it is significantly higher.
- This decline suggests that despite India’s young population, many have simply opted out of the labour force, perhaps feeling let down by the absence of remunerative, productive jobs
- The situation is even more dire for women who had a considerably lower participation rate to begin with. India’s female labour force participation is not only lower than the global average, but also lower than countries like Bangladesh
- Two, even as the unemployment rate has declined from the highs observed during the initial phase of the pandemic, it remains elevated, suggesting that among those looking for jobs, those unable to find jobs remains high
- Three, the unemployment rate is higher among the younger and more educated. As per the periodic labour force surveys, the unemployment rate is higher among those in the 15-29 age group (22.5 per cent in September 2019), and those educated up to at least the secondary level (11 per cent).
- Four, while there are signs of increasing formalisation as indicated by the EPFO data, a substantial share of the labour force continues to remain employed in the informal sector, lacking a safety net
CMIE's role is to provide economic data, analysis, and forecasts for India and the world. It does this through a variety of products and services, including:
- Economic data: CMIE collects and publishes economic data on a variety of topics, including GDP, inflation, employment, and trade.
- Economic analysis: CMIE provides analysis of economic data and trends.
- Economic forecasts: CMIE provides forecasts of economic growth, inflation, and other economic indicators.
- Business information: CMIE provides information on businesses in India, including financial data, company profiles, and industry reports.
- Market research: CMIE provides market research on a variety of topics, including consumer behavior, retail trends, and industrial production.
- Training: CMIE provides training on economic data analysis and forecasting.
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For Prelims: Unemployment, Types of Unemployment, Periodic Labour Force Survey
For Mains: 1.Discuss the different types of unemployment prevalent in India and analyze their causes. How do these types of unemployment impact the country's labor market and overall economic growth?
2.India's demographic dividend has the potential to drive economic growth, but the challenge of youth unemployment persists. Analyze the factors contributing to youth unemployment and propose policy interventions to address this issue effectively.
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Previous Year Questions
1.Disguised Unemployment generally means
A. Large number of people remain unemployed
B. Alternative Employment is not available
C. Marginal Productivity od Labour is Zero
D. Productivity of Workers is Zero
Answer -C
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