Unemployment in India | 13 Mar 2024

Source: MOSPI

Why in News?

According to the Periodic Labour Force Survey (PLFS), conducted by the National Sample Survey Office (NSSO), in 2023, India’s unemployment rate has dropped significantly, marking the lowest in the past three years.

• The PLFS gives estimates of Key employment and unemployment Indicators like, the Labour Force Participation Rates (LFPR), Worker Population Ratio (WPR), Unemployment Rate (UR), etc and the Activity Status- ‘Usual Status’ and ‘Current Weekly Status’.

What are the Key Highlights of the Report?

• India’s Unemployment Rate:
  • India’s unemployment rate for individuals aged 15 and above has dropped to 3.1% in 2023, marking the lowest in the past three years.
    • The unemployment rate was at 3.6% in 2022 and 4.2% in 2021.
  • There is a decline in the unemployment rate among females to 3% in 2023 from 3.3% in 2022 and 3.4% in 2021.
    • Similarly, for males, it decreased to 3.2% in 2023 from 3.7% in 2022 and 4.5% in 2021.
• Recovery in Employment Scenario:
  • There is a recovery in the employment scenario post the impact of the Covid-19 pandemic, with increased economic activity after the lifting of lockdowns by the Centre and states.
• Urban and Rural Unemployment:
  • Urban areas witnessed a reduction to 5.2% in 2023 from 5.9% in 2022 and 6.5% in 2021, while rural areas experienced a decrease to 2.4% in 2023 from 2.8% in 2022 and 3.3% in 2021.
  • The LFPR in Current Weekly Status (CWS) for individuals aged 15 and above in urban areas rose to 56.2% in 2023, showing an upward trajectory from 52.8% in 2022 and 51.8% in 2021.
• Economic Growth:
  • This positive employment data comes on the heels of recent reports indicating India’s economic growth surging to 8.4% in the third quarter of 2023-24.
  • Sectors such as manufacturing, mining & quarrying, and construction played a pivotal role in driving this growth, as per data released by the NSO.
  • The NSO’s second advance estimate pegs India's growth at 7.6% for the entire fiscal year 2023-24, surpassing the initial projection of 7.3% released in January 2024.

What is the Periodic Labour Force Survey?

• About:
  • The National Statistics Office (NSO) is conducting PLFS to produce annual statistics of employment and unemployment characteristics for both rural and urban areas, along with quarterly estimates for urban areas.
    • The first annual report based on the data collected in PLFS during July 2017- June 2018 was published in May 2019.
• Objective of PLFS:
  • To estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only in the ‘Current Weekly Status’ (CWS).
  • To estimate employment and unemployment indicators in both ‘Usual Status’ and CWS in both rural and urban areas annually.

What is Unemployment?

• About:
  • Unemployment refers to the condition where individuals capable of working are actively seeking employment but are unable to secure suitable jobs.
  • An unemployed person is someone who is part of the labour force, and possesses the requisite skills but currently lacks gainful employment.
  • Basically, an unemployed person is someone of working age, jobless, able and available to work, and actively looking for a job.
• Measurement of Unemployment:
  • The unemployment in the country is commonly calculated using the formula:
    • Unemployment rate = [Number of Unemployed Workers / Total Labour Force] x 100.
      • Here, the ‘total labour force’ includes the employed and the unemployed. Those who are neither employed nor unemployed — students, for example— are not considered a part of the labour force.
• Types of Unemployment:
  • Structural Unemployment: Rooted in mismatches between the skills possessed by the workforce and the requirements of available positions, this form of unemployment highlights systemic issues within the labour market.
  • Cyclical Unemployment: Tied to economic cycles, this type escalates during economic downturns and diminishes during periods of expansion, showcasing the sensitivity of job availability to macroeconomic conditions.
  • Frictional Unemployment/Transitional Unemployment: Also called transitional unemployment, arising from the natural transition between jobs, this type reflects the temporary period individuals spend searching for new employment opportunities.
  • Underemployment: While not strictly unemployment, this concept pertains to individuals employed in positions that underutilize their skills or provide insufficient working hours, contributing to a sense of economic inefficiency.
  • Hidden Unemployment: Refers to individuals who are not actively seeking employment due to discouragement or other factors but could potentially enter the job market if conditions improve.
  • Disguised Unemployment: It arises because more labourers work in the factory/land than are required. Hence productivity i.e., production per unit of labour will be less.

What are the Major Causes of Unemployment in India?

• Population Size:
  • India’s substantial population amplifies the competition for employment opportunities, putting additional pressure on the job market.
  • Managing this demographic challenge necessitates a comprehensive approach to economic development and job creation.
• Skills Mismatch:
  • A predominant cause, where the skills possessed by the workforce may not align with the evolving demands of the job market. Addressing this issue requires initiatives focused on enhancing education and vocational training programs.
• Informal Sector Dynamics:
  • The prevalence of the informal sector introduces complexities in tracking and addressing unemployment. Efforts to formalise and regulate this sector can contribute to a more accurate representation of employment conditions.
• Policy Implementation Challenges:
  • Well-intentioned policies may face challenges in effective implementation, impacting their ability to generate employment. Streamlining policy execution and ensuring alignment with ground realities are imperative.
• Global Economic Factors:
  • Influences from the global economy, such as trade dynamics and geopolitical shifts, can impact India’s employment scenario. Crafting policies that enhance economic resilience to external factors is essential.

Way Forward

• Aligning education with the current market demands by updating curricula to impart relevant skills, emphasising vocational training, and promoting lifelong learning to enhance employability.
• Fostering a conducive environment for startups by providing financial incentives, reducing bureaucratic hurdles, and offering mentorship programs to encourage entrepreneurship.
• Formulating and implementing policies that promote job creation, including investment in infrastructure, industry-friendly regulations, and fiscal incentives for businesses generating employment.