Highlight the fundamental reasons behind the employment problem that India is facing currently. Also, suggest a way forward.

Unemployment is defined as a situation when a person actively searching for employment is unable to find work. It is often used as a measure of the health of the economy. According to recent data from the Center for Monitoring Indian Economy (CMIE), India’s unemployment rate rose to 7.83% in April 2022.

India employment problem:

  • Large unemployed youth in the country.
  • Skewed against gender justice ideals – labour force participation ratio of males is higher than females.
  • Informal nature of employment. Approximately 90% of India’s workforce is employed in informal sector.
  • Temporary and contractual nature of employment.
  • Lack of social security measures for major portion of India’s workers.
  • Skewed in favour of non-manufacturing sectors, e.g. ~45% of India’s workforce is employed in agriculture sector.

Reasons behind India’s unemployment problem:

  1. Structural:
    • Service sector led growth since LPG reforms.
    • Employment intensive manufacturing sector lags in growth.
    • Agriculture still dominates India Employment share while contributing little to output (~10%).
  2. Supply side issues:
    • Less than 2% of India’s workforce is formally skilled.
    • According to skill India report of 2020, only ~40 % of India’s youth is employable.
    • Lack of Vocational skills certification.
  3. Demand side challenges:
    • Labour market rigidities.
    • Rise of disruptive Technologies, like artificial intelligence, big data, is causing job losses.
    • Impact of global slowdown in wake of Covid-19 pandemic.

Way forward:

  • Promotion of labour intensive industries.
  • Giving boost to entrepreneurship.
  • Emphasize on vocational training.
  • Enhancing human capital with the help of skill development.

PM-Daksh, Pradhanmantri Kaushal Vikas Yojana, Stand Up India, Start up India, Skill India and new education policy focusing on vocational training, are the steps in right direction.


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