Millions of young, educated individuals in India are impacted by the severe and ongoing jobs crisis, which prevents them from finding acceptable work in the formal sector. The independent research tank Centre for Monitoring Indian Economy (CMIE) reports that India’s unemployment rate hit 7.9% in December 2022 after hovering around 7% for the majority of 2021 and 2022. Compared to the world average and the majority of emerging economies, this is significantly higher.
What are the Types of Employment that Prevail in
India?
In an economy like India, there are two main forms of work: ▪ Wage employment, which results from labour demands made by businesses in an effort to increase profits. It falls under more categories, such as:
Regular Wage Occupations: These are official, organised occupations in which workers are paid a set salary or salaries on a regular basis. These jobs include those in private businesses, multinational organisations, and government agencies.
Casual or Daily Wage Labour: A large number of Indian labourers, particularly in industries like construction, agriculture, and unorganised labour markets, work for daily wages.
- These positions frequently have fluctuating pay and little work stability.
The second is self-employment, in which the worker employs themselves, meaning that labour supply and demand are equal. It is further separated into:
Entrepreneurship: A large number of people in India operate small companies or enterprises, which may include manufacturing facilities, small stores, or neighbourhood services.
Farmers: In India, agriculture is a major source of independent work. Many people, either alone or as a member of a family business, own and run their own farms.
o Freelancing and informal labour: As the gig economy has grown, so too have provisions for freelancing and informal labour.
- This covers those who work part-time, as consultants, or as freelancers.
What are the Reasons behind Unemployment in
India?
flat Employment Growth Rate: The employment growth rate of paid workers in the nonagricultural sector has been essentially flat during the past four decades.
This suggests that prospects for formal employment have not increased much.
3 ▪ Disguised Unemployment: The Indian economy has seen a significant percentage of informal employment, such as self-employed and casual wage workers, as well as open unemployment, or job seekers without jobs.
o Because it mimics open unemployment and indicates a lack of adequate work possibilities in the formal sector, the latter is referred to as “disguised unemployment.”
Determinants of work Demand: Two important elements influence the demand for work in the formal non-agricultural economy.
To start, it is affected by how much output businesses can sell. Businesses are less inclined to recruit more staff if there is less demand for their products.
The advent of labor-saving technologies enables businesses to generate the same amount of product with fewer workers, increasing efficiency but potentially reducing the number of jobs available in the formal sector. For this reason, the second factor is the degree of technology.
Policy Emphasis on Output Growth: Traditionally, Indian economic policies have been defined in terms of output growth (GDP or value-added), which may not always solve the problem of creating jobs.
Policies that just concentrate on increasing production could not lead to a gain in job possibilities, particularly if the pace of labour productivity growth increases.
Despite a notable increase in both the GDP growth rate and the value-added growth rate over the past two decades, the employment growth rate in India’s formal and nonagricultural sectors has not responded.
What is the jobless growth in India’s case?
It is commonly observed that an economy gets more productive as it expands. To put it another way, businesses are able to produce more per worker as they increase their overall production.
What economists refer to as “economies of scale” are the reason for this.
Businesses find it simpler to use labor-saving technology as their output increases. However, the level of labour negotiating strength determines how much labor-saving technology is used.
▪ Depending on how closely production growth and labour productivity growth are related, there are two kinds of jobless growth regimes.
Weak responsiveness of employment to GDP growth: In this instance, automation and the adoption of labor-saving technologies are the only factors that raise the probability of jobless growth.
- However, if the output growth rate were to rise, the employment growth rate in these nations would inevitably rise as well.
- When labour productivity is not responsive, the GDP growth rate’s beneficial impact on employment would outweigh the negative impact of labor-saving technology. In this case, faster economic development is the answer to the employment dilemma.
High Employment Responsiveness to GDP Growth: The labour productivity growth rate in India is highly responsive to the output growth rate.
- In this case, the negative impact of labor-saving technology is not offset by the favourable effect of production growth rate on employment.
- In these nations, raising the GDP growth rate alone will not boost the employment growth rate.
The degree to which labour productivity growth reacts to output growth is measured by the Kaldor-Verdoorn coefficient.
What should be Done to Address Unemployment in
India?
▪ Put in place a National Employment Policy (NEP): Research indicates that faster GDP development is no longer the sole way to address the employment issue. Instead, in addition to the concentration on GDP growth, a distinct policy focus on employment is required.
Both supplyside and demandside elements will be required for such employment programs.
For instance, the absence of public health and education services for sufficient trained workers makes it simpler for Indian businesses to automate. Therefore, improving worker quality through improved care and closing the skills gap are crucial.
Direct public employment creation will be required on the demand side.
Presenting an Urban Version of MGNREGA: It can give the urban poor a safety net and a source of income. For the urban poor, who frequently work in informal and unstable occupations, the program can be put into place. In addition to creating public assets and services in metropolitan areas, this may give people a bare minimum of financial stability.
The MGNREGA recently saw the introduction of an urban version in Rajasthan.
Expand Agriculture Investment and Industrialisation: It can increase production and provide additional employment. Rapid industrialisation is one of the most reliable solutions to India’s unemployment problem.
There are more industries, which practically means there are more job options.
Additionally, capital formation or investment in agriculture.
▪ Diversifying agriculture and fostering agro-processing industries can increase employment and income in rural areas. Crop cultivation must give way immediately to more labour-intensive and higher-yielding industries like horticulture, vegetable production, floriculture, animal husbandry, fisheries, etc.
Furthermore, there is significant job potential in promoting agro-processing enterprises for export.
These sectors can also boost value addition and decrease agricultural produce waste.
Increasing access to healthcare and education may boost human capital and create jobs in the social sector. In addition to encouraging the development of human capital, which boosts productivity, the expansion of health care and education will also provide a significant number of job possibilities.
The workforce’s employability and skill set will be improved by vocational and technical training as well as educational reform.
By helping students gain the skills and information needed for certain industries and occupations, vocational and technical training can lessen the gap between the supply and demand for skilled labour and raise economic productivity and competitiveness.
Decentralising development and fostering rural development can lessen the strain of migration on cities and promote more balanced growth.
Developing rural regions can lessen the burden on jobs in metropolitan areas by reducing the number of rural residents moving to cities.
Decentralized development can also guarantee that various sectors and areas receive a more equitable share of the advantages of growth.
This can also encourage local involvement and citizen empowerment.
