Unemployment in India

Unemployment refers to the condition in which individuals who are willing and able to work are unable to find suitable employment opportunities. It is an economic phenomenon that indicates a gap between the supply of labor and the demand for labor in a given job market. Unemployment is often used as an indicator of economic health, as it reflects the efficiency of labor allocation within an economy.

Unemployment Patterns in India 

As per the recent report by CMIE, the urban unemployment rate saw a decline to 7.93% in February, down from 8.55% the previous month, while the rural unemployment rate experienced an increase to 7.23% from 6.48%. India’s overall unemployment rate also edged up to 7.45% in February, compared to 7.14% in January.

Quarterly statistics from the National Statistical Office (NSO), released in November 2022, showed a decrease in the unemployment rate from 7.6% in the previous quarter to 7.2% in the July-September period.

Despite historical trends of elevated unemployment, projections suggest that India’s unemployment rate is anticipated to rise in the coming years. Even if the nation’s economy continues its robust growth, the Organization for Economic Cooperation and Development (OECD) forecasts a quadrupling of India’s jobless rate, from 4% to 8% by 2022.

Starting from a 6% unemployment rate in 2017, India’s unemployment rate is predicted to reach 8.3% by 2022. This estimation indicates that within the next four years, an additional 10 million individuals will join the ranks of the unemployed, resulting in a total of 220 million by 2022. The government foresees around 1 million new job opportunities during this period, but it acknowledges that these might not suffice to counterbalance the general population growth.

Unemployment Rate Data by CMIE in India

The Centre for Monitoring Indian Economy (CMIE), a private organization, currently estimates India’s unemployment rate at approximately 7.45%. This figure breaks down to 7.93% for urban areas and 7.44% for rural areas. CMIE publicly releases India’s daily and monthly unemployment rates on March 1, 2023.

Unemployment data for previous 6 months

State-wise unemployment rates

The unemployment rate in India 2023 Male & Female

According to the NSO survey, The unemployment rate was 6.6% for men and 9.4% for women. In July-September 2021, the unemployment rates were 9.3% for men and 11.6% for women.

The formula for calculating the unemployment rate

The unemployment rate is calculated using the following formula:

Unemployment Rate = [Number of Unemployed Individuals/Labor Force]×100 

Where:

• Number of Unemployed Individuals: This refers to the total number of people who are actively seeking employment but are currently without a job.
• Labor Force: The labor force includes both employed individuals and those who are actively seeking employment (unemployed individuals).

The unemployment rate is expressed as a percentage, and it provides a measure of the proportion of the labor force that is unemployed.

Reasons for high unemployment in India

High unemployment in India can be attributed to a combination of structural, cyclical, and demographic factors. Reasons for high unemployment in India, along with data and examples:

1. Population Growth: India has a rapidly growing population, leading to an increase in the labor force. However, the pace of job creation has not kept up with the population growth, resulting in higher unemployment rates.
2. Skill Mismatch: There is often a mismatch between the skills possessed by job seekers and the skills required by available job opportunities. This leads to underemployment or unemployment due to the inability to find suitable positions.
3. Low Industrialization: India’s economy has a significant share of informal and unorganized sectors, where jobs might be irregular and low-paying. The lack of industrialization and modernization in certain sectors limits the creation of stable and well-paying jobs.
4. Educational Disparities: While India has a large number of educated youth, the quality and relevance of education might not always align with market demands. This results in a scenario where there are educated individuals who lack the necessary skills for available jobs.
5. Slow Economic Growth: Periods of slow economic growth or economic downturns can lead to decreased job creation and higher unemployment rates. The economic impact of events like the COVID-19 pandemic has highlighted this challenge.
6. Labor Market Rigidities: Certain labor market regulations and rigidities can discourage companies from hiring new employees. Complex labor laws and regulations might make it difficult for businesses to adjust their workforce according to market conditions.
7. Regional Disparities: Unemployment rates can vary significantly across different states and regions within India. Some states might have better industrialization and employment opportunities compared to others.
8. Underemployment: Many individuals are employed in jobs that do not fully utilize their skills and qualifications. This type of underemployment can lead to lower job satisfaction and economic productivity.
9. Lack of Infrastructure: Insufficient infrastructure, particularly in rural areas, can limit job opportunities. Lack of access to transportation and basic services might restrict individuals from accessing employment opportunities.
10. Youth Unemployment: India has a substantial youth population, and the transition from education to employment can be challenging. Limited job opportunities for young people can result in higher youth unemployment rates.

Impact of High Unemployment in India

1. Economic Slowdown: High unemployment can lead to reduced consumer spending and lower demand for goods and services. This can contribute to an economic slowdown, as businesses may scale back production and investment due to weaker demand.
2. Loss of Human Capital: Unemployment can lead to a waste of human capital and skills. When educated and skilled individuals are unable to find suitable employment, their talents go underutilized, and the potential for innovation and economic growth diminishes.
3. Poverty and Inequality: Unemployment can push individuals and families into poverty, particularly in cases of long-term or chronic unemployment. It can also exacerbate income inequality as those without jobs struggle to make ends meet while a small portion of the population enjoys high incomes.
4. Social Unrest: High levels of unemployment can lead to social tensions and unrest. When a significant portion of the population is unable to find employment and improve their quality of life, it can result in dissatisfaction and social discontent.
5. Brain Drain: In situations of persistently high unemployment, skilled and educated individuals might choose to migrate to other countries in search of better job opportunities. This “brain drain” can result in a loss of talent and expertise that could otherwise contribute to the country’s development.
6. Health and Well-being: Unemployment can lead to stress, mental health issues, and lower overall well-being. The financial strain and uncertainty associated with unemployment can take a toll on individuals’ physical and mental health.
7. Social Stigma: Being unemployed can carry a social stigma, leading to feelings of shame and inadequacy for those who are affected. This can further impact individuals’ self-esteem and psychological well-being.
8. Crime and Instability: High unemployment rates can be associated with an increase in crime rates, as individuals facing financial hardship might resort to illegal activities to survive. This can contribute to social instability and public safety concerns.
9. Dependency on Government: When a significant portion of the population is unemployed, it can lead to increased dependency on government welfare programs and social support systems. This places a strain on public finances and limits resources for other important sectors.
10. Reduced Productivity: A lack of employment opportunities can result in lower productivity for the economy as a whole. With a large portion of the population either unemployed or underemployed, the overall economic output can be lower than its potential.

FAQ

Q. Which state is top in unemployment in India?

Haryana is the top unemployment state in India.

Q. Which Indian states have the highest and least unemployment rates?

Meghalaya has the least unemployment rate among the Indian states, while Haryana has the highest unemployment rate.