Unemployment in India

While researching about unemployment rates and statistics for my economics project, I came across a dominant and alarming trend. The unemployment rate in India has been on a constant rise despite the government promises and measures to control it. For instance, the unemployment rate in 2011-2012 was around 3.8% according to the census report, that rate for 2017-2018 has now jumped up to 6.1%. This trend was similar across most Indian states, rural and urban areas, and even genders.

There are a lot of reasons for this increase in unemployment the most prominent ones being: increase in access to education, lack of jobs, demonetization and a transition of employment between the sectors of the economy.

Talking about education, there has been an increase in access to education and an increase in people opting for higher studies. Thus there is a subsequent decrease in people looking for minimum wage or labor-intensive jobs. This increases the number of people searching for credible jobs. However, the fact is that there are not enough high-level jobs in the economy to cater to these qualified people. These people, therefore, are willing to wait longer and stay unemployed until they find a job which is in accordance with their educational qualifications. This trend is prevalent in females and the population between the ages of 20-29. There is another thing to observe here, a plethora of educational institutions have been established across India which don’t provide good quality education. This tells us that even though the population might be “educated” it won’t necessarily have the skill set to compete for the high-level jobs. Educational trends, however, should not deviate us from the fact that there is a general lack of employment generation.

Besides unemployment, there has also been a general decline in jobs and labor force participation rates. Over the past decade, there has been a transition in employment across the sectors of our economy. The primary sector’s share in employment has drastically reduced from 52% to around 43%, while the employment in secondary and tertiary sectors have gone up. The primary sector which employed about half our population has lost an estimated 27 million jobs, however not enough jobs have been created by the other two sectors to accommodate this loss. This has increased joblessness. However, with an increase in education and development in the country this transition is expected.

Before talking about major government policies it is necessary to scrutinize the unemployment trends between the years 2016, 2017, 2018 and 2019. Unemployment in the last quarter of 2016 was as high as 8%, it then suddenly plummeted to about 3.4% in mid-2017. The years 2018 and 2019 however, saw an unfortunate and consistent unemployment rise. The reason behind this short term trend was the heavy implementation of MGNREGA. This policy of the government gave employment by utilizing the unemployed force for labor-intensive work like building bridges, roads, dams, etc. If the government failed to provide assured employment then the unemployed labor force was granted daily unemployment allowances. This policy rapidly decreased the unemployment and increased labor force participation. However, this could not be sustained for long due to an inherent flaw in MGNREGA. This policy didn’t create jobs, it instead utilized the unemployed labor by giving them temporary work. MGNREGA dealt with unemployment rather than solving it. Unemployment was bound to rise because of the temporary nature of this policy. Couple this with demonetization and things get even worse.

Small scale businesses in rural areas rely on cash as their primary method of financial transaction. Due to demonetization, there was a severe cash crunch among small scale businesses, cash flows of the economy were harshly affected. Small and medium businesses ran out of liquidity and were forced to shut down. It is estimated that around 5 million people lost their jobs due to demonetization alone.

To control this emerging trend it is necessary to majorly focus on employment generation. One suggestion that was recently discussed by a professor from UC Berkeley seemed to be very convincing. He explained how the government could provide subsidies on labor. Currently, the government provides subsidies on capital to various industries to uplift them. These subsidies mean that if a business is willing to invest in capital then the government would invest some percentage of that capital in the business. Labor subsidies, however, would pay for some percentage of the labor employed by that particular business. This subsidy, therefore, will increase labor employed by an industry, subsequently creating jobs. With innovative ideas like these, it is also necessary to promote various policies like population control to overcome the fundamental issues of our economy like overpopulation and poverty which directly affect unemployment. The ever increasing Indian population is one reason behind the intense competition for jobs. Promoting population control through key policies and programs throughout the country can be a good way to sensitize the population.

To summarize, the current trend with increasing unemployment is due to factors that commonly prevail in a developing economy, fundamental issues within the economy, and various unsuccessful government policies. The need of the hour is to shift focus towards countering unemployment through concrete programs which focus on employment generation. The current ruling government seems to have ignored the negative growth across the various macro-economic indicators, something that has sparked questions and widespread concern as of lately.