Issue

Context-

• Unemployment has been at the centre of public debates in India recently.
• The government’s Periodic Labour Force Survey carried out in 2017-18 revealed that unemployment in the country reached an all-time high rate of 6.1%.
• What explains this sudden jump in unemployment in India, which had remained at a rather low rate of around 2% for several decades?

About-

• Unemployment Rate (UR) is the ratio of number of unemployed persons/person-days to the number of persons/person-days in labour force.
• In 2018, there were 471.5 million persons employed and 30.9 million unemployed in India.
• For the rural areas, the unemployment rate was 5.3 per cent, while in the urban areas it was 7.8 per cent.
• According to the NSSO, in the rural male youth between age group of 15 to 28, the jobless rate was 17.4 percent and for females, it was 13.6 percent.
• For urban males, it was 18.7 per cent and for females, it was much higher at 27.2 per cent.
• Unemployment for young educated rural males was 10.5 percent and for females, 17.3 per cent.
• Estimates shows that the potential non-agricultural workforce in India grew at the rate of 14.2 million a year between 2005 and 2012, which rose further to 17.5 million a year between 2012 and 2018. 

Reasons for rising number of job seekers-

• Expansion of working-age population- The population of 15-59-year-olds increased at the rate of 14 million a year in the 2000s, which in turn has increased the labour supply.
• Nature of Labour supply- There has been an increasing enrolment of young adults for education and this has led to rising job aspiration. For example- 31% of 15-29-year-old females had been attending schools or colleges in 2018, up from 16.3% in 2005.
• Workforce in Agriculture and Allied sectors- The size of the workforce engaged in agriculture (and allied activities) has been declining in India: from 258.8 million in 2005 to 197.3 million in 2018 (which still accounted for 41.9% of the total workforce in the country). The decline has been partly due to the ‘push’ from low-productivity agriculture, which has suffered due to stagnant public investment from the 1990s onwards. The decline has also been driven by the ‘pull’ of new opportunities that emerge in the towns and cities. 
• Increase in the supply of potential workers for the non-agricultural sectors- The potential non-agricultural workforce in India grew at the rate of 14.2 million a year between 2005 and 2012, which rose further to 17.5 million a year between 2012 and 2018.
• Fall in construction sector: New employment opportunities in construction created in rural India amounted to 18.9 million between 2005 and 2012, which fell sharply to 1.6 million between 2012 and 2018.
• Manufacturing sector- The size of the manufacturing workforce in India declined by one million between 2012 and 2018, with micro and small firms in the informal sector suffering severe setbacks. 
• Demand-supply mismatch- From 2005 to 2012, job creation in industry, construction and services in India (at the rate of 6.3 million a year) was inadequate to absorb the increase in potential job seekers into these sectors (at the rate of 14.2 million a year). Between 2012 and 2018, while the supply of potential workers into the non-agricultural sectors accelerated (to 17.5 million a year), actual labour absorption into these sectors decelerated (to 4.5 million a year). 
• Public sector- The public sector is a big employer of youth, but its share as a job provider has been shrinking despite the fact that government jobs are the preferred option for 80 per cent of the rural and urban youth.
• Women workforce- Faced with the inadequate number of new jobs generated in the economy, women withdrew altogether from the labour market. Of all 15-59-year-old women in India, only 23% were employed in 2018, down from 42.8% in 2005.
• Young men- Among 15-29-year-old men, there was an unprecedented increase in the number of the unemployed, from 6.7 million in 2012 to 21.1 million in 2018. This was indeed the main contributor to the sudden increase in overall unemployment in India.

 Suggestions to solve unemployment problem:

• Action will be needed on multiple fronts including investments in human capital, revival of the productive sectors, and programmes to stimulate small entrepreneurship. 
• Production technique should suit the needs and means of the country. It is essential that labour intensive technology should be encouraged in place of capital intensive technology and emphasis should be given to mass consumer goods industries.
• Greater investment should be encouraged towards small enterprises. Also, during the period of rapid growth in the labour force, it would be advisable to adjust the choice of techniques consistent with the employment objective. Intermediate technology would be more suited to Indian conditions.
• Rate of capital formation in the country should be accelerated. Capital formation should be particularly encouraged in such activities which generate greater employment opportunities. Capital output ratio should be kept low.
• The pattern of subsides should be altered. Creation of more employment should be treated as the basis for the grant of subsides and incentives. This will shift the entire structure of government support from the large-scale producer to the small-scale producer as this is more consistent with the objective of employment generation and achieving equality and social justice.
• Creating more employment opportunities in the rural areas through intensive farming, greater irrigation facilities, extension of community projects, organiza­tion of co-operative farming, development of village industry and settlement of agricultural labourers on the reclaimed land. 

Way Ahead-

India faces a tough challenge in creating decent jobs for its growing young population.  If the country is unable to make effective use of the strengths of its young women and men now, it can perhaps never do so. The Government has to come out with a National Employment Policy to tackle all the problems concerning jobs for youth.