Cause 1# Lack of the Stock of Physical Capital:

The major cause of unemployment and underemployment in underdeveloped countries like India is the deficiency of the stock of capital in relation to the needs of the growing labour force.

In the modern world, man by himself can hardly produce anything. Even the primitive man needed some elementary tools like the bow and arrow to engage in hunting for the earning of his livelihood.

With the growth of technology and specialization, he needs much more capital with which to engage in the productive activity. If he is an agriculturist, he needs a piece of land and also a plough, a pair of oxen, seeds and some food grains and other necessities of life to sustain himself during the period of sowing to the reaping of the harvest.

In the industrial sector, he needs factories to work in and machines to work with. All these aids to production belong to the community’s stock of capital. Now, if the working force grows faster than the stock of capital of a country, the entire addition of labour force cannot be absorbed in productive employment because not enough instruments of production would be there to employ them. The resulting unemployment is known as the long-term or chronic unemployment.

A nation’s stock of capital can be enlarged by increased investment which, in the absence of any unutilized resources, requires additional saving on the part of the community. The concern of the classical economists was to ensure that the rate of capital formation was kept sufficiently high so that employment opportunities were successively enlarged to absorb the additions to the working force of a country as a result of population growth.

This is also the problem that the developing countries like India are facing today. In recent times, the labour force in India has been growing at more than 2 per cent per year, yet our rate of investment expressed as a percentage of our stock of capital has not been growing at a fast enough rate so as to keep pace with the growth of population.

As a result, the country’s ability to offer productive employment to the new entrants in the labour market has been severely limited. This manifests itself in two things: first, the prevalence of large- scale open unemployment in the urban areas as evidenced by the statistics of employment exchanges; second, it manifests itself in the form of open unemployment in the rural areas as well as disguised unemployment in agriculture.

Cause 2# Use of Capital-Intensive Techniques:

An important factor responsible for slow growth of employment has been the use of capital-intensive techniques of production, even in consumer goods industries where alternative labour-intensive techniques are available. Even before 1991, under the Industrial Policy Resolution 1956, the development of consumer goods industries was left open for the private sector.

However, private sector prefers to invest in highly capital-intensive plants and equipment on the basis of technology developed in labour-scarce western countries. It is argued by them that the alternative labour-intensive techniques have low productivity and low surplus-generating capacity.

However, the important reason for the use of capital-intensive techniques has been the availability of cheap capital. Even firms in modern small industry sector which were expected to generate large employment opportunities have also tended to use capital-intensive techniques of production

(a) Lower rate of interest,

(b) Liberal depreciation allowance on capital investment permitted in the taxation system of the country,

(c) Relatively cheap capital equipment imported from abroad.

Second, higher wages of labour in the organised sector relative to their productivity under pressure from trade unions. Thirdly, rigid labour laws also discourage the employment of labour. It is difficult to retrench labour even when it is not required in case an industrial unit becomes sick and proposes to close down or exit.

Fourthly, Research and Development (R & D) activity has not been adequately directed to discover and identify labour- intensive appropriate techniques to be used in industries which, though labour-intensive, have also reasonably good productivity.

Introduction: Unemployment in India

Unemployment remains a critical issue in India, affecting millions of individuals across the country. The reasons behind the high unemployment rate in India can be attributed to various factors, ranging from economic to social and educational. Let's delve into the details to understand the causes of unemployment in India.

Economic Factors:
- Slow Economic Growth: India's economic growth has been sluggish in recent years, leading to a limited number of job opportunities. The pace of job creation has not kept up with the growing population, resulting in a high unemployment rate.
- Lack of Industrialization: The lack of industrialization in many parts of India hampers the creation of employment opportunities. The majority of the population still depends on agriculture, which is highly seasonal and unable to provide stable jobs throughout the year.
- Skill Mismatch: There is often a mismatch between the skills possessed by job seekers and the skills demanded by employers. The education system fails to equip individuals with the necessary skills required by the job market, resulting in a surplus of unskilled labor.

Social Factors:
- Rapid Population Growth: India's population is growing at an alarming rate, which puts immense pressure on the job market. The number of people entering the workforce exceeds the number of available jobs, leading to unemployment.
- Gender Inequality: Gender inequality persists in India, with women facing limited access to education and employment opportunities. This disparity contributes to a higher unemployment rate among women.
- Caste System: The caste system prevalent in India also plays a role in unemployment. People from lower castes often face discrimination, limiting their access to education and employment opportunities.

Educational Factors:
- Lack of Quality Education: Many educational institutions in India fail to provide quality education, resulting in a lack of skilled graduates. This gap between education and industry requirements further exacerbates unemployment.
- Outdated Curriculum: The curriculum in many schools and colleges does not align with the changing demands of the job market. As a result, graduates often lack the necessary skills and knowledge required by employers.
- Limited Vocational Training: Vocational training programs are essential for equipping individuals with specific skills relevant to the job market. However, such programs are limited in India, leading to a shortage of skilled workers.

Conclusion:
Unemployment in India is a complex issue influenced by economic, social, and educational factors. Addressing this problem requires a multi-faceted approach, including promoting economic growth, industrialization, and skill development. Efforts should also be made to reduce gender inequality and provide quality education to bridge the gap between education and employment. By addressing these factors, India can work towards reducing unemployment and improving the overall socio-economic well-being of its population.