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Satyajit Ray’s famous Bengali film, Seemabaddha (1971), opens with the dialogue that translates to, “One of the major problems in Bengal is unemployment.” The same is true for India now. According to a report published by the think-tank, the Centre for Monitoring Indian Economy (CMIE) that tracks business and economic data, currently, around 31 million unemployed Indians are seeking jobs. 

Where are the jobs?

According to a report published in The Hindu in 2017, the Chief Economic Adviser, Arvind Subramanium had pointed to the need to achieve an economic growth of 8% to 10% to solve the problem of jobless growth in India. He had raised concern over the underperformance of the information technology (IT), construction, and agriculture sectors, which had traditionally served as prominent job generating sectors for the Indian economy. According to Labour Bureau figures, India added around 1.35 lakh jobs in eight labour-intensive sectors in 2015 as compared to the 9.3 lakh jobs that were created in 2011.

Higher economic growth alone will not solve this problem. Jobs can be created when growth comes from the transition of labour from informal sectors like agriculture to formal sectors like manufacturing and service. Such extensive growth may run the risk of stagnation once supply from the informal labour market gets exhausted. On the other hand, growth can come about without any substantial job creation in the formal sectors of the economy but through improvements in productivity. The growth record of several developed economies even after modernisation of their labour force explains such intensive growth.

India’s unemployment problem

Prime Minister Narendra Modi has pitched for the greater use of technology. Yet, there’s stagnation in India’s IT sector. The country’s unemployment saga lies beyond the formal job market. Around 77% families have no regular wage earner and more than 67% have income less than Rs. 10,000 a month.

Bandaru Dattatreya, the Union Minister of State (Independent Charge) for Labour and Employment had said in the Lok Sabha in 2017 that the unemployment rate rose marginally from 3.4% in 2013-14 to 3.7% in 2015-16. However, the data are based on the Usual Principal Subsidiary Status (UPSS) approach that requires only 30 days of work in a year to call the person employed. Many persons who are reported as ‘employed’ or as ‘workers’ in official publications, only work for a small period of time. According to the Fifth Annual Employment Unemployment Survey 2015-16 conducted by the Labour Bureau, if the Usual Principal Status (UPS) approach is taken (which involves 183 days of work), the unemployment rate rises to 5%. The same survey also said that only 60.6% workers were able to get work throughout the year. Of the total employed, 46.6% were self-employed, 32.8% were casual labourers and the rest 3.7% were contract workers. That means around 71.2% of workers were not eligible for social security benefits. Only 17% were regular salaried persons.

According to the survey, around 66.4% of the contract workers and 84.3% of casual workers had monthly earnings up to Rs. 7,500. Most (67.5%) of the self-employed workers also had average monthly earnings up to ~ Rs. 7,500. Around 5.1% of the households did not have even a single earner while 48.4% had one employed person followed by 30.6% house-holds with two earners.

Of the total families, more than 67% had average monthly income less than Rs. 10,000. Rural sector had greater proportion of such households at 77% as compared to 45% urban households. Madhya Pradesh recorded the highest proportion (35.8%) of households with average monthly earnings not exceeding Rs. 5000 followed by West Bengal (34.5%), Uttar Pradesh (30.1%), and Odisha (29.8%).

Apart from this, many Indians working on jobs, which do not allow them to fully utilise their abilities. The concept is known as under-employment and it remains a worrying aspect of the Indian job market. 

Employment and demonetisation

It has been pointed out that demonetisation has resulted in the contraction of jobs, especially in the informal sector. The Centre for Monitoring Indian Economy has estimated that 1.5 million jobs were lost during the January-April period of 2017. Alongside this loss of jobs, there has been a decline in the labour force participation rate (LPR). The reported job losses are not reflected in the unemployment rate but the declining LPR reflected the contraction of the labour force in that period. It has often been stated that India has a young population and approximately half the population is under the age of 26. It seems inconceivable that LPR can show a declining trend unless something dramatically unusual is happening in the Indian economy.

Underemployment more serious problem than unemployment

The government’s policy think-tank, Niti Aayog, has recognised the extent of under-employment in India. In its draft three-year agenda report for 2017-18 to 2019-20, the Niti Aayog stressed the need for the creation of high-wage jobs. According to its report, “Indeed, unemployment is the lesser of India’s problems. The more serious problem is severe underemployment.”

Contrary to some assertions that India’s growth has been job-less, the Employment Unemployment Surveys of the National Sample Survey Office (NSSO), which till date remains the most reliable source of information on the country’s employment situation, has consistently reported low and stable rates of unemployment over the last three decades. Citing examples, the Niti Aayog said as per the NSSO survey, in 2011-12, 49% of the work force was employed in agriculture but the sector contributed only 17% of India’s GDP at current prices.

Government initiatives to solve unemployment problem

The government, in the past, has taken initiatives to create employment by connecting job-seekers to potential employers through the Ministry of Labour and Even, which launched the National Career Service portal. It is a common platform connecting job-seekers, employers, skill providers, placement organisations, and counsellors. The government also initiated the Pradhan Mantri Kaushal Vikas Yojana (PKMVY) – a skill development scheme for which the Ministry of Skill Development and Entrepreneurship has been made the nodal point to help young people learn industry relevant skills.

The Prime Minister Rozgar Yojana is an initiative of the Government of India for the educated unemployed youth of the country. Self-employment in rural and small towns in India is considered the best means to solve the growing unemployment problem. The main objective of the scheme is to provide easy subsidised financial assistance to the educated unemployed for starting their own enterprises in manufacturing, business and service. The scheme has been designed to provide employment to more than a million people by helping to set up of seven lakh micro enterprises. Such schemes may create employability through skill upgrading but the worrying part is that India’s IT industry has been laying off its employees.

Companies like Wipro, Cognizant, and Infosys have announced their intent to downsize. While there was 8.6% growth in the IT sector in the 2016-17 fiscal, jobs grew only by 5% as compared to 6% in 2015-16. With growing automation, this downward trend is expected to continue, with a 20-25% reduction in employment growth in the sector over the next three years. New skill sets for new jobs demands and creating such job opportunities should be policy priorities.