Unemployment : Understanding Challenge And Exploring Solutions

Author : CA A. K. Jain

 

Preamble

Unemployment is a critical issue that continues to challenge the economic landscape of India. As one of the world's most populous nations with a diverse workforce, fluctuations in the unemployment rate have far-reaching implications for the country's growth and development.

The unemployment rate impacts the Indian economy by influencing spending, growth, and job opportunities. A high rate hinders economic progress and can lead to social unrest, while a low rate indicates a thriving job market and a growing economy. Policymakers use it to inform strategies for job creation and economic development.

Unemployment remains one of the most pressing socio-economic challenges faced by India, affecting millions across the nation. Despite sustained economic growth and various government initiatives, the issue persists, posing a significant barrier to inclusive development.

The State Of Unemployment

India's unemployment scenario is characterized by several dimensions, including urban-rural divides, gender disparities, and skill-mismatch challenges. According to the latest available data, India's unemployment rate hovers around 6-7%, with youth unemployment being particularly alarming, standing at over 20%. The COVID-19 pandemic exacerbated the situation, leading to widespread job losses across various sectors, especially in informal and low-skilled industries.

Unemployment Rate In India : Historical Data

Source: CMIE

No.	Year	Unemployment Rate (%)
1	2023	10.05
2	2022	7.33
3	2021	5.98
4	2020	8.00
5	2019	5.27
6	2018	5.33
7	2017	5.36
8	2016	5.42
9	2015	5.44
10	2014	5.44
11	2013	5.42
12	2012	5.41
13	2011	5.43
14	2010	5.55
15	2009	5.54
16	2008	5.41

Unemployment Rate
States And Union Territory
(CMIE DATA)

(As of September 2022)
No.	State or Union Territory	Unemployment Rate (%)
1	Andhra Pradesh	4.8
2	Arunachal Pradesh	18.3
3	Assam	0.4
4	Bihar	11.4
5	Chhattisgarh	0.1
6	Delhi	9.6
7	Goa	10.9
8	Gujarat	1.6
9	Haryana	22.9
10	Himachal Pradesh	9.2
11	Jammu and Kashmir	23.2
12	Jharkhand	12.2
13	Karnataka	3.8
14	Kerala	6.4
15	Madhya Pradesh	0.9
16	Maharashtra	4.0
17	Meghalaya	2.3
18	Mizoram	NA
19	Nagaland	NA
20	Odisha	5.9
21	Puducherry	7.3
22	Punjab	7.0
23	Rajasthan	23.8
24	Sikkim	NA
25	Tamil Nadu	4.1
26	Telangana	8.3
27	Tripura	17.0
28	Uttar Pradesh	4.0
29	Uttarakhand	0.5
30	West Bengal	3.3

Causes Of Unemployment

Several factors contribute to the high unemployment rate in India:

1. Population Growth : India's rapidly growing population adds pressure to create new jobs at a pace that matches or exceeds population growth.

2. Skill Mismatch : There exists a significant gap between the skills possessed by the workforce and those demanded by the industries. This mismatch leads to under employment or unemployment despite job opportunities.

3. Structural Issues : The economy's structural inefficiencies, such as rigid labour laws, bureaucratic hurdles, and inadequate infrastructure, hinder job creation and entrepreneurship.

4. Informal Sector Dominance : A significant portion of India's workforce is engaged in the informal sector, lacking job security, social benefits, and decent wages.

5. Cyclical Economic Factors : Economic slowdowns, like the recent one induced by the pandemic, often result in layoffs and hiring freezes across industries.

Potential Solutions

Addressing unemployment in India requires a comprehensive approach that encompasses policy reforms, investment in education and skill development, and fostering entrepreneurship. Here are some potential solutions:

1. Skill Development Programs : Investing in skill development initiatives tailored to the needs of industries can bridge the gap between demand and supply of skilled labour. Government-sponsored schemes like Skill India aim to train millions of youth in various trades and professions.

2. Labour Market Reforms :  Rationalizing labour laws to strike a balance between workers' rights and ease of doing business can encourage formal employment and investment. Flexible hiring and firing norms can incentivize employers to expand their workforce.

3. Promoting Entrepreneurship : Encouraging entrepreneurship through financial incentives, access to credit, and simplified regulatory procedures can stimulate job creation. Startup India and Make in India initiatives aim to foster a conducive environment for entrepreneurship and innovation.

4. Infrastructure Development : Investing in infrastructure projects, such as transportation networks, power plants, and digital connectivity, not only creates immediate employment opportunities but also lays the foundation for sustained economic growth.

5. Enhancing Social Safety Nets : Strengthening social safety nets, including unemployment benefits, healthcare, and education, can provide a cushion for those affected by job loss and empower them to seek re-employment or pursue skill upgrading.

6. Promoting Inclusive Growth : Ensuring equitable access to education, healthcare, and financial services, particularly for marginalized communities and rural populations, is crucial for inclusive growth and poverty reduction.

7. Harnessing Technology : Leveraging technology and digital platforms for skill training, job matching, and remote work can unlock new opportunities, especially in the post-pandemic era characterized by remote work trends.

Government Initiatives To Combat Unemployment

The Government of India, through the Ministry of Labour and Employment, has implemented various initiatives to address the employment challenges in the country. Some of the efforts include:

1. Skill Development Initiatives :
• Skill India Mission was launched in 2015 with the objective to create convergence across sectors and states in terms of skill training activities. Various schemes under Skill India include PMKVY, Jan Shikshan Sansthan, and National Skill Development Corporation .Over 1 crore youth have been skilled since inception. Mission is focussed on increasing digital skills and new-age technologies.

• Pradhan Mantri Kaushal Vikas Yojana was launched in 2015 with the objective of Indian youth to take up industry-relevant skill training that will help them secure better livelihoods. Till 2023 over 69 lakh candidates have been trained under PMKVY and the placement rate is around 54% for certified candidates.

• National Apprenticeship Promotion Scheme (NAPS) was launched in 2016 with the objective to promote apprenticeship training and increase the engagement of apprentices. Over 2.5 lakh apprentices have enrolled in the scheme.

2. National Employment Guarantee Scheme (MGNREGA):
The National Employment Guarantee Scheme, officially known as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), was launched by the Government of India in 2005. This landmark legislation aims to enhance the livelihood security of people in rural areas by guaranteeing at least 100 days of wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. The scheme is launched with Objective poverty alleviation ,employment guarantee of 100 days of wage employment per household per year and rural infrastructure development through the creation of durable assets like roads, canals, ponds, and wells.

Since its inception, MGNREGA has generated substantial employment. Wages under MGNREGA have been regularly revised.

Mgnrega Wages
S. No.	State/UTs	2023-24 (per day in Rs)	2024-25 (per day in Rs)	Increase %
1	Andhra Pradesh	272	300	10.3
2	Arunachal	224	234	4.5
3	Assam	238	249	4.6
4	Bihar	228	245	7.5
5	Chhattisgarh	221	243	10
6	Goa	322	356	10.6
7	Gujarat	256	280	9.4
8	Haryana	357	374	4.8
9	Himachal Pradesh	280	295	5.4
10	Jammu & Kashmir	244	259	6.1
11	Ladakh	244	259	6.1
12	Jharkhand	228	245	7.5
13	Karnataka	316	349	10.4
14	Kerala	333	346	3.9
15	Madhya Pradesh	221	243	10
16	Maharashtra	273	297	8.8
17	Manipur	260	272	4.6
18	Meghalaya	238	259	8.8
19	Mizoram	249	266	6.8
20	Nagaland	224	234	4.5
21	Odisha	237	254	7.2
22	Punjab	303	322	6.3
23	Rajasthan	255	266	4.3
24	Sikkim	236	249	5.5
25	Tamil Nadu	294	319	8.5
26	Telangana	272	300	10.3
27	Tripura	226	242	7.1
28	Uttar Pradesh	230	237	3
29	Uttarakhand	230	237	3
30	West Bengal	237	250	5.5
31	Andaman	328	347	5.7
32	Dadra & Nagar Haveli	297	324	9.1
33	Lakshadweep	304	315	3.6
34	Puducherry	294	319	8.5

A significant success of MGNREGA is the high participation of women. Approximately 55% of the workforce under the scheme is women, contributing to their economic empowerment and social status improvement.

Studies have shown that MGNREGA has contributed to a reduction in distress migration from rural to urban areas as it provides local employment opportunities. One of the major issues with MGNREGA has been the delay in wage payments. Reports indicate that nearly 45% of wage payments were delayed beyond the stipulated period in 2021-22 .There have been numerous instances of corruption, mismanagement, and fund diversion at various levels. For example, a 2019 audit by the Ministry of Rural Development found discrepancies in the implementation of the scheme in several states.

Despite the creation of numerous assets, their utilization and maintenance have been poor. Many assets remain underutilized or fall into disrepair due to lack of proper planning and follow-up . In some regions, especially in drought-prone and economically weaker states, the scheme has not been able to provide the promised 100 days of employment. The national average has often been below 50 days per household . The implementation of digital attendance systems and biometric verification, though aimed at reducing corruption, has sometimes excluded genuine beneficiaries due to technological failures or lack of infrastructure.

The National Employment Guarantee Scheme, while transformative in its ambition and scope, has had mixed results. It has undeniably succeeded in providing employment, enhancing rural infrastructure, and empowering women. However, challenges such as wage delays, corruption, and underutilization of assets persist. For MGNREGA to achieve its full potential, these issues need to be addressed through improved governance, efficient implementation, and robust monitoring mechanisms.

MGNREGA has demonstrably created jobs. In 2024-25 alone, it provided work for 12.98 crore (129.8 million) active workers . This translates to generating 47.65 crore (476.5 million) persondays of employment .A 2020 study by the National Council of Applied Economic Research found that MGNREGA led to a significant increase in household income and a reduction in rural poverty .A 2019 report by the Comptroller and Auditor General of India (CAG) highlighted issues like delayed wage payments and discrepancies in work measurement.

Since MGNREGA remains a crucial tool in India's rural development strategy, the state administration may effectively monitor the scheme and ensure timely wage payments, strengthen transparency and accountability mechanisms to curb corruption and mismanagement, enhance the capacity of local governing bodies for better planning and maintenance of assets, leverage technology effectively while ensuring inclusivity to minimize exclusion errors with periodically review emerging challenges.

3. Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) :
The Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) launched in 2016 aimed to incentivize job creation and bring informal workers into the formal sector. This scheme incentivizes employers for promoting employment generation by reimbursing the employers' contribution to EPF for new employment.

Government data shows over 1 crore (10 million) beneficiaries registered under PMRPY with the Employees' Provident Fund Organisation (EPFO) by 2019 . This indicates the scheme did create formal employment opportunities. The scheme incentivized 1.24 lakh establishments to hire new employees, potentially boosting formal job creation.

Since the deadline for new beneficiary registration closed in March 2019, the scheme lost its long-term impact. Besides, the target for PMRPY was ambitious, aiming to create millions of jobs. With only 1 crore enrolled in 3 years, it fell short of initial expectations. The scheme targeted new employees earning less than Rs. 15,000 per month, potentially missing out on job creation in higher-paying sectors.

The PMRPY achieved some success in creating formal jobs and bringing new workers into the EPFO fold. However, the closed registration window, lower-than-expected enrollment numbers, and focus on a specific wage bracket limit its overall impact.

4. Start-up India:
The Government of India's Startup India initiative, launched in 2016, aims to foster a vibrant startup ecosystem and boost economic growth. A key objective is employment generation. Scheme Design: Startup India offers benefits like simplified regulations, easier access to capital, and tax breaks. This fosters an environment conducive to starting and scaling businesses, which inherently creates jobs.

As of February 2024, according to the Department for Promotion of Industry and Internal Trade (DPIIT), the Startup India initiative has recognized over 84,000 start-ups, which have collectively generated more than 800,000 direct jobs. Indirect employment generated by these start-ups is estimated to be much higher.

Case Studies :
• Ola Cabs: Founded in 2010 and recognized under the Startup India scheme, Ola Cabs has created over 2 million driver-partner jobs, significantly impacting urban employment.
• Byju's: An ed-tech startup, Byju's has not only revolutionized education in India but has also created thousands of jobs for educators, content creators, and support staff.
• Swiggy: This food delivery platform has generated employment for over 200,000 delivery partners, providing flexible job opportunities across India.

The Startup India scheme has had a substantial positive impact on employment in India. By providing an enabling environment and robust support system, the government has encouraged the growth of start-ups, which in turn has led to significant job creation. The initiative not only supports the economic development of the country but also empowers the youth by providing numerous employment opportunities. As the start-up ecosystem continues to grow, it is expected to play an even more crucial role in shaping India’s employment landscape in the coming years.

5. Atal Pension Yojana (APY) :
Atal Pension Yojana (APY) is a government-backed pension scheme launched by the Government of India in May 2015. Named after the former Prime Minister Atal Bihari Vajpayee, the scheme is aimed at providing a universal social security system for the unorganized sector, which constitutes over 85% of India's workforce. The objective of APY is to ensure a steady income for the elderly, thereby reducing the dependence on family members and providing financial security during old age. The government co-contributes 50% of the subscriber's contribution or Rs.1,000 per annum, whichever is lower, for a period of 5 years (2015-2020) for eligible subscribers.

Over 60 million subscribers have enrolled as of FY 2023-24, reflecting a steady rise. This indicates increasing awareness and participation. APY's government guarantee assures a minimum pension, offering a safety net compared to purely market-driven schemes. The scheme has generated an investment return of around 8.92% since inception.

A study by the Indian Council of Social Science Research (ICSSR) suggests that a significant portion (around 70%) of subscribers discontinue contributions due to various reasons like financial constraints or lack of awareness. It’s a matter of concern. Critics also argue that the maximum pension amount offered (around Rs. 5,000 per month) might not be sufficient considering inflation over an extended period.

The APY shows potential for success. The growing subscriber base and government backing are positive signs. However, addressing dropout rates and ensuring adequate pension amounts in the long run are crucial for its continued effectiveness. The maximum pension amount of Rs. 5,000 per month may be insufficient to cover the rising cost of living, especially in urban areas.

6. National Career Service (NCS) :
The National Career Service (NCS) is a flagship initiative by the Ministry of Labour and Employment, Government of India. Launched in July 2015, NCS aims to provide a comprehensive and inclusive platform for job seekers, employers, and other stakeholders in the employment ecosystem. The primary objectives of NCS are to facilitate job opportunities, provide career counselling, offer vocational guidance, and ensure a streamlined job matching process.

NCS uses a robust database and advanced algorithms to match job seekers with suitable job opportunities based on their skills, qualifications, and preferences. The platform offers career counselling services to help individuals make informed career choices. NCS collaborates with various training providers to enhance the employability of job seekers through skill development programs. It provides up-to-date information about the job market, helping job seekers and employers stay informed about trends and opportunities. NCS ensures that its services are accessible to all, including marginalized groups such as women, differently-abled individuals, and rural job seekers.

As of 2023, NCS has over 95 million job seekers registered on its platform. Approximately 1.6 million employers are also registered, contributing to a substantial database of job opportunities. NCS has successfully facilitated around 10 million job placements since its inception. NCS has partnered with over 2000 private sector employers, bridging the gap between job seekers and private sector job opportunities. Collaboration with various educational institutions and training providers has enabled NCS to offer skill enhancement programs to a large number of job seekers.

The NCS mobile app and its outreach programs in rural areas have significantly increased the accessibility of employment services. Special initiatives like job fairs in rural regions have helped thousands of rural job seekers secure employment.

While NCS has been successful in placing many job seekers, the quality of jobs and the match between job seekers’ qualifications and job requirements need further enhancement. There is a need to focus more on permanent and skilled employment opportunities rather than temporary or low-skilled jobs. In collaboration with NGOs, NCS has conducted special job fairs and skill development programs targeted at women, leading to a significant increase in women’s participation in the workforce. For example, in 2021, a job fair in Delhi specifically for women saw over 3000 participants, with around 1200 securing jobs on the spot.

An NCS initiative in Maharashtra focused on vocational training for young graduates resulted in over 5000 participants gaining employment in the manufacturing sector within six months of completing their training.

The National Career Service has made notable strides in bridging the employment gap in India. With millions of registrations and job placements, it has positively impacted the employment landscape. However, there is room for improvement, particularly in addressing the digital divide and enhancing the quality of job matches. Continued efforts to promote the platform and improve its services will be crucial for its sustained success in generating employment and fostering economic growth in India.

A 2020 report by the Parliamentary Standing Committee on Labour in India highlighted concerns about underutilization of funds allocated to NCS. This raises questions about the program's efficiency in achieving its goals.

7. Labour Code Reforms :
The Government of India has undertaken significant labour reforms with the aim of simplifying and modernizing the existing complex framework of labour laws. In 2020, Parliament passed four Labour Codes, consolidating 29 central labour laws into four comprehensive codes:

• The Code on Wages, 2019
• The Industrial Relations Code, 2020
• The Code on Social Security, 2020
• The Occupational Safety, Health, and Working Conditions Code, 2020

These reforms aim to improve the ease of doing business, ensure the welfare of workers, and stimulate economic growth by creating a more conducive environment for employment generation. The reforms have contributed to the formalization of the workforce by bringing more workers under the ambit of social security and formal employment contracts. According to the Ministry of Labour and Employment, there has been a notable increase in the registration of establishments under the Employees’ Provident Fund Organisation (EPFO) and the Employees' State Insurance Corporation (ESIC).

For example, the Quarterly Employment Survey (QES) by the Labour Bureau indicated a rise in employment in nine major sectors, including manufacturing, construction, and IT/BPO, reflecting a positive trend post-reforms.

In the manufacturing sector, the flexibility in labour laws has reportedly led to an increase in hiring. For instance, the automotive and electronics manufacturing sectors have seen a surge in job creation as companies expand their operations.The QES data for 2022 showed an increase in employment in the manufacturing sector by over 3%, indicating positive momentum post-reform.

The IT and BPO sectors have benefited from the simplified compliance process, leading to a smoother expansion of operations and workforce. A report by NASSCOM highlighted that the IT/BPO sector added over 1.5 lakh jobs in 2021-22, partly attributed to the more flexible regulatory environment.

The Labour Code Reforms represent a significant step towards modernizing India’s labour laws, with the potential to enhance employment generation and improve the ease of doing business.

8. Promotion of MSMEs :
The Government of India has undertaken numerous initiatives to promote Micro, Small, and Medium Enterprises (MSMEs) with the objective of increasing employment opportunities and fostering economic growth. These efforts encompass a range of policies, schemes, and reforms aimed at supporting MSMEs through financial assistance, skill development, infrastructure improvements, and market access. Below are some key initiatives.

• Prime Minister's Employment Generation Programme (PMEGP): To generate self-employment opportunities through the establishment of micro-enterprises in rural and urban areas. Over 7 lakh (700,000) projects have been financed since its inception in 2008, creating around 54 lakh (5.4 million) jobs.

• Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE): To provide collateral-free credit to the micro and small enterprise sector. Facilitates credit flow by guaranteeing loans up to INR 2 crore. As of 2021, over 50 lakh guarantees have been approved, covering loans worth more than INR 2.5 lakh crore.

MUDRA (Micro Units Development and Refinance Agency) Yojana: To provide loans up to Rs.10 lakh to non-corporate, non-farm small / micro enterprises. Loans are classified into Shishu, Kishore, and Tarun categories, reflecting the growth stages of the enterprises. Since its launch in 2015, MUDRA has disbursed loans worth INR 15.75 lakh crore to more than 28 crore (280 million) beneficiaries.

• Atmanirbhar Bharat Abhiyan: To strengthen MSMEs through a comprehensive economic package that includes financial support, credit guarantees, and market linkages. Launched schemes such as the Emergency Credit Line Guarantee Scheme (ECLGS) to provide collateral-free loans. ECLGS has extended collateral-free credit to MSMEs, leading to improved liquidity and sustained operations during the COVID-19 pandemic.

While specific figures on job creation solely due to MSME schemes are hard to find, MSMEs are significant job generators in India. They contribute about 45% of manufacturing output and employ a large portion of the workforce. Programs like PMEGP, MUDRA Yojana, and CGTMSE have provided significant financial support and job opportunities. However, challenges such as implementation inefficiencies, credit constraints, and limited market access need to be addressed to fully realize the potential of MSMEs in employment generation. Continued focus on these areas, along with enhanced policy measures, can further bolster the MSME sector's contribution to India's economy. Overall, MSME schemes hold promise for employment generation.

9. Foreign Direct Investment (FDI) :
Policies have been formulated to attract FDI, which is expected to create job opportunities through investment in various sectors. FDI has led to job creation in various sectors. For example, the services sector (finance, IT, and business services) attracted significant FDI and created numerous jobs. The "Make in India" initiative, launched in 2015 to attract FDI in manufacturing, has also generated employment opportunities.

According to Invest India, the total FDI inflow into India reached $971.52 billion between April 2000 and December 2023. This significant investment has translated into jobs. While FDI creates jobs, some may not be permanent or high-skilled. There's a possibility of job displacement due to automation or outsourcing within the invested sectors. Uneven Distribution: FDI benefits may not be evenly distributed across regions. Tier 1 and Tier 2 cities tend to attract more FDI, leading to concentrated job growth.

The Indian IT industry, a major FDI recipient, has created millions of jobs. The National Association of Software and Service Companies (NASSCOM) estimate the industry directly employed over 4.5 million people in 2023.

In the automotive sector, FDI has played a pivotal role in creating employment opportunities. For instance, companies like Hyundai, Honda, and Suzuki have established manufacturing plants in India, generating thousands of direct and indirect jobs. According to data from the Ministry of Commerce and Industry, FDI inflows into the automobile industry have surged consistently over the past decade, with a direct correlation to job creation. For example, FDI in the automotive sector increased by 27% in the fiscal year 2023-24, leading to a 15% rise in employment within the industry.

Referring to retail sector , despite efforts to liberalize FDI policies in the retail sector, the anticipated job creation has not materialized as expected. Large multinational retail chains like Walmart and Carrefour have faced challenges in penetrating the Indian market due to regulatory constraints and local resistance. According to a study for Retail Research, FDI in the retail sector has not resulted in a significant increase in employment levels. Instead, it has led to concerns about the displacement of small traders and traditional retailers, thereby exacerbating unemployment in certain segments of the economy.

According to the World Bank, countries with higher FDI inflows typically experience faster job growth rates compared to those with lower FDI levels. However, the quality of jobs created by FDI remains a critical factor. Studies suggest that FDI-driven employment often entails a higher skill requirement, potentially exacerbating income inequality and unemployment among low-skilled workers.

In conclusion, while FDI can be a potent driver of employment, its success or failure depends on a myriad of factors, including sectoral dynamics, regulatory environment, and skill development initiatives. The government must adopt a nuanced approach, tailored to each industry's specific needs, to maximize the employment generation potential of FDI.

10. Government-Run Employment Exchanges in India :
Government-run employment exchanges in India have a rich history dating back to the early 20th century. The first employment exchange was established in Chennai in 1910, under the Indian Labour Department. During the pre-independence era, these exchanges primarily focused on meeting the manpower needs of colonial industries. Post-independence, the focus shifted towards addressing unemployment and ensuring equitable access to job opportunities for all sections of society.

After world war-2 , exchange helped resettling demobilized soldiers and wartime workers into civilian jobs. In 1947,exchange supported employment for displaced persons arriving from Pakistan after partition. In early 1948 expanded its scope to serve all job seekers in India. In 1956, day-to-day administration of the Employment Exchanges was transferred to state governments. Over the years, the network of employment exchanges expanded across the country, with the primary aim of facilitating job matching between employers and job seekers.

The performance of government-run employment exchanges in India has been a subject of debate and scrutiny over the years. While they have served as vital institutions in the Indian job market, several challenges have hindered their effectiveness. In recent years, the Government of India has initiated several reforms and digitalization efforts to improve the functioning of employment exchanges. The NCS portal, launched in 2015, aims to provide a wide range of career-related services, including job matching, skill assessment, and counselling, through a centralized online platform.

Despite these efforts, the performance of government-run employment exchanges in India continues to face challenges. Addressing these challenges requires sustained investment, policy reforms, and collaboration between the government, private sector, and civil society to create a more inclusive and efficient labour market ecosystem.

Policy Implementation Obstructions

The Government of India's employment policy has several weaknesses that affect its effectiveness and inclusiveness. Here are some key points with details, examples, and statistics:

1. High Informal Sector Employment :
A large proportion of India's workforce is employed in the informal sector, which lacks job security, benefits, and adequate working conditions. According to the International Labour Organization (ILO), over 80% of Indian workers are in informal employment. In 2021, only about 10% of the workforce was employed in the formal sector, indicating limited progress in formalizing jobs.

2. Underemployment and Skill Mismatch :
There is a significant mismatch between the skills provided by educational institutions and the requirements of the job market. Many individuals are underemployed, working in positions that do not match their qualifications or skills. Engineering graduates often end up in jobs that do not utilize their technical skills due to a lack of appropriate opportunities. A report by the Centre for Monitoring Indian Economy (CMIE) highlighted that 33% of graduates were unemployed in early 2022, indicating disconnect between education and employment.

3. Slow Growth of Manufacturing Sector :
The "Make in India" initiative aimed to boost manufacturing and create jobs, but progress has been slower than anticipated. Despite ambitious targets, manufacturing's contribution to GDP remains around 15%, which is below the desired 25%. Between 2014 and 2020, the manufacturing sector grew at an average annual rate of 5.6%, which is insufficient to meet the employment needs of a growing population.

4. Gender Disparities in Employment :
Women face significant barriers in accessing employment opportunities, resulting in low female labour force participation rates. Cultural norms, safety concerns, and inadequate maternity benefits limit women's participation in the workforce. Female labour force participation in India was around 21% in 2021, one of the lowest globally.

5. Rural-Urban Divide :
Employment opportunities are concentrated in urban areas, leaving rural populations with limited job prospects. Many rural residents migrate to cities in search of better employment, often ending up in low-paying, insecure jobs. According to the Periodic Labour Force Survey 2019-20, the rural unemployment rate was 6.1%, while the urban rate was 8.9%, indicating a disparity in job opportunities.

6. Inefficient Execution of Employment Schemes :
Various employment schemes suffer from issues such as corruption, mismanagement, and delays in implementation. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) aims to provide rural employment but faces challenges in timely wage payments and proper job allocation. A study by Azim Premji University in 2020 found that 71% of MGNREGA workers experienced delays in wage payments, undermining the scheme's effectiveness.

7. Youth Unemployment :
Youth unemployment remains high, reflecting inadequate job creation and vocational training. Many young people, particularly graduates, struggle to find suitable employment opportunities. The unemployment rate among youth aged 15-29 was 20.9% in 2021, as per the Periodic Labour Force Survey (PLFS) Annual Report 2022- 23.

8. Gig Economy and Lack of Social Security :
A gig economy is a labour market that relies heavily on temporary and part-time positions filled by independent contractors and freelancers rather than full-time permanent employees. Gig workers gain flexibility and independence but little or no job security. The rise of the gig economy has led to an increase in precarious employment without adequate social security protections. Gig workers in sectors like food delivery and ride-hailing services often lack benefits like health insurance and pension. An NITI Aayog report estimated that around 23.5 million workers were engaged in the gig economy in 2021, with limited social security coverage.

9. Overemphasis on Government Jobs :
The employment policy tends to prioritize filling government positions, which are limited, compared to the vast Indian workforce. A larger focus on enabling job creation in the private sector is needed .There's a high number of vacant government positions, which could potentially create jobs but remain unfilled due to various reasons. As of 2019, around 22.69% of sanctioned central government positions were vacant. A study by Associated Chambers of Commerce and Industry of India found a skill gap of around 22% in the Indian workforce.

Role of International Organisations

The United Nations (UN) and the International Labour Organization (ILO), a specialized agency of the UN, work together to address unemployment, particularly in developing countries. Here's a summary of their efforts:

United Nations :
Addressing unemployment, especially in developing and underdeveloped economies, remains a complex challenge for the United Nations (UN). Several factors contribute to the UN's perceived failures in handling unemployment.

• The UN system involves numerous specialized agencies, programs, and funds, each with its own mandates and priorities. This fragmentation can lead to a lack of coordination and coherent action on employment issues, hindering the effectiveness of UN efforts.

• Despite the UN's mandate to promote full employment and decent work for all, resource constraints often limit the scale and impact of its employment-related initiatives.

• Many developing and underdeveloped economies face deep-rooted structural challenges that contribute to persistent unemployment. These challenges include inadequate infrastructure, limited access to education and skills development, and an overreliance on low-productivity sectors such as agriculture and informal employment.

• The UN's efforts may sometimes fail to take into account local socio-economic conditions, cultural factors, and governance challenges that influence employment dynamics.

• Political instability, conflict, and insecurity in many developing countries can exacerbate unemployment by disrupting economic activity, displacing workers, and undermining investment and development efforts. The UN's capacity to address unemployment in such contexts may be constrained by broader peace building and humanitarian priorities.

• Limited data availability and monitoring capacity in many developing and underdeveloped economies can hamper the UN's ability to accurately assess the extent of unemployment and design evidence-based interventions. Without reliable data, it is challenging to target resources effectively and measure progress over time. In some cases, there may be inconsistencies or contradictions between national policies pursued by UN member states and the employment-related goals espoused by the UN.

• Despite these challenges, the UN continues to play a vital role in advocating for employment-focused policies, providing technical assistance, and fostering international cooperation to address unemployment in developing and underdeveloped economies. However, overcoming these barriers requires sustained political commitment, resource mobilization, and innovative approaches tailored to local contexts.

International Labour Organization :
The International Labour Organization (ILO) is a specialized agency of the United Nations dedicated to improving labour and working conditions worldwide. While it has made significant strides in many areas, there have been challenges and failures too in fulfilling its duties. The reasons may be the following.

• The ILO lacks direct enforcement power over member states, relying instead on persuasion and cooperation. Despite the ILO's efforts to establish international labour standards through conventions, not all member states ratify or implement them. For example, as of 2021, only 188 out of 195 member states had ratified the fundamental Convention 87 on Freedom of Association and Protection of the Right to Organise.

• Political considerations sometimes undermine the ILO's efforts to address labour rights violations. Member states may have conflicting national priorities that hinder cooperation within the ILO. For example, countries with strong labour protections may be reluctant to support measures that could disadvantage their own industries or economies.

• Like any large organization, the ILO also faces bureaucratic inertia and resistance to change, which can impede its ability to adapt to evolving labour challenges and opportunities.

It's important to note that addressing unemployment in developing countries is a complex challenge with no easy solutions. However, the UN and the ILO play a vital role in supporting these countries in their efforts to create more and better jobs for their citizens. The ILO and the World Bank jointly launched the Jobs and Skills Programme to support developing countries in creating jobs and developing skills for their workforces.

International Mobility of Labour

The international mobility of labour, while beneficial in many ways, is not a complete solution to resolving unemployment across the world. It has both positive and negative effects, and its efficacy depends on a range of factors including economic conditions, political policies, social implications, and the scale of labour movement. Here are some key points to consider:

• Redistribution of Skills : Labour mobility can help match skilled workers from countries with high unemployment to countries with skill shortages, improving overall employment rates and productivity.

• Enhanced Innovation and Knowledge Transfer : Migrant workers can bring new ideas and innovations, fostering economic growth and creating new job opportunities in host countries.

• Increased Labour Market Efficiency : By moving to areas where their skills are in demand, workers can contribute to more efficient and dynamic economies.

• Remittances : Migrants often send money back to their home countries, which can support economic development and reduce poverty in those regions.

• Addressing Aging Populations : In countries with aging populations, an influx of younger workers can help balance the workforce and support social welfare systems.

• Mismatch of Skills :

• Even with mobility, there may be structural mismatches where the skills of migrants do not align perfectly with the needs of the host country’s labour market.

• Long-term Training and Education Needs : Some unemployment issues require long-term investment in education and training, which labour mobility alone cannot solve.

• Immigration Policies : Strict immigration policies and political resistance can limit the extent to which labour mobility can occur.

• Economic Barriers : Costs associated with moving and settling in a new country can be prohibitive for many potential migrants.

• Integration Challenges : Migrants often face difficulties integrating into new cultures, which can lead to social tensions and discrimination, impacting their employment prospects.

• Labour Market Segmentation : Migrants may end up in low-paid, precarious jobs that do not fully utilize their skills, leading to underemployment rather than a resolution of unemployment.

• Brain Drain : Countries losing skilled workers may suffer from a "brain drain," negatively impacting their own economic development and exacerbating unemployment issues domestically.

• The European Union's free movement of labour allows citizens to work freely within member states. Similar initiatives exist in other regions like Pacific Island Countries. Many countries offer visas specifically for attracting skilled professionals in needed sectors e.g., Australia's PALM scheme. In inference, while international mobility of labour can play a significant role in addressing global unemployment, it needs to be part of a broader, multifaceted approach. It's not a silver bullet.

Conclusion

India's employment policy faces several challenges, including the dominance of the informal sector, skill mismatches, slow manufacturing growth, gender disparities, rural-urban employment gaps, and inefficiencies in employment schemes, high youth unemployment, and the precarious nature of gig economy jobs. Addressing these issues requires comprehensive policy interventions, effective implementation, and continuous monitoring to ensure inclusive and sustainable employment growth.

The Government of India has already introduced several schemes to address the problem of unemployment. What is now required is , consolidation of various programs and schemes and making the executives accountable for the successful implementation of these schemes. Addressing unemployment in India requires concerted efforts from the government, private sector, civil society, and other stakeholders. By implementing targeted policies to enhance skill development, promote entrepreneurship, and invest in infrastructure, India can unleash its vast human potential and pave the way for inclusive and sustainable growth. However, sustainable solutions will require long-term commitment, collaboration, and innovation to tackle the complex challenges underlying unemployment effectively.

 

 

**********Disclaimer: The information and statistics presented in this article have been compiled from various sources deemed reliable. However, readers are advised to independently verify the accuracy and relevance of the data before making any decisions or taking action based on the information provided herein. The author and publisher do not assume any responsibility or liability or any consequences resulting from reliance on the information presented in this article.

2024/05/27