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Unemployment In India - Economics, UPSC, IAS. Notes | Study Indian Economy (Prelims) by Shahid Ali - UPSC

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Unemployment In India

  • Unemployment simply means a situation when able and willing people are not getting jobs as per their own capabilities.

Types of Unemployment

Structural Unemployment

  • This type of unemployment is associated with economic structure of the country, i.e., productive capacity is inadequate to create a sufficient number of jobs. Rapidly growing population causes this.
  • This type of unemployment is of long run nature. Indian unemployment is basically related to this category of unemployment.

Under Employment India

  • Those laborers are under-employed who obtain work but their efficiency and capability are not utilized at their optimum and as a result they contribute in the production up to a limited level.
  • A country having this type of unemployment fails to exploit the efficiencies of its laborers.

Open Unemployment in India

  • When the laborers live without any work and they don’t find any work to do, they come under the category of open unemployment. Educated unemployed and unskilled labor unemployment is included in open unemployment.
  • The migration from rural to urban areas in search of work is very often found in India which is an example of open unemployment.

Disguised Unemployment

  • If a person does not contribute anything in the production process or in other words, if he can be removed from the work without affecting the productivity adversely, he will be treated as disguisedly unemployed. The marginal productivity of such unemployed person is zero.
  • Agriculture sector of underdeveloped/developing economies possesses this type of unemployment at a large scale.

Frictional Unemployment India

  • The unemployment generated due to change in market conditions (change in demand and supply conditions) is called frictional unemployment.
  • Agriculture is the main occupation in India. The supply conditions still depend upon weather’s mood and similarly demand conditions depend upon availability of resources. Any change arising either of any or both creates a diversion from the equilibrium which results in frictional unemployment.

Seasonal Unemployment of India

  • It appears due to a change in demand based on seasonal variations. Laborers do not get work round the year. They get employed in the peak season of agricultural activities and become unemployed when these activities are over.
  • Indian agriculture ensures employment for only 7-8 months and laborers remain unemployed in the remaining period. This temporary type of employment gives birth to seasonal unemployment.

Causes of unemployment in India

It is obvious that the unemployment situation is grim indeed. It has, therefore, to be tackled with appropriate measures and on an urgent basis. However, before we discussed the ways and means of removing unemployment, it is necessary that we understand the causes that given rise to it. The major causes which have been responsible for the wide spread unemployment can be spelt out as under.

1) Rapid Population Growth:

It is the leading cause of unemployment in Rural India. In India, particularly in rural areas, the population is increasing rapidly. It has adversely affected the unemployment situation largely in two ways. In the first place, the growth of population directly encouraged the unemployment by making large addition to labour force. It is because the rate of job expansion could never have been as high as population growth would have required.

It is true that the increasing labour force requires the creation of new job opportunities at an increasing rate. But in actual practice employment expansion has not been sufficient to match the growth of the labor force, and to reduce the back leg of unemployment. This leads to unemployment situation secondly; the rapid population growth indirectly affected the unemployment situation by reducing the resources for capital formation. Any rise in population, over a large absolute base as in India, implies a large absolute number.

It means large additional expenditure on their rearing up, maintenance, and education. As a consequence, more resources get used up in private consumption such as food, clothing, shelter and son on in public consumption like drinking water, electricity medical and educational facilities. This has reduced the opportunities of diverting a larger proportion of incomes to saving and investment. Thus, population growth has created obstacles in the way of first growth of the economy and retarded the growth of job opportunities.

2) Limited land:

Land is the gift of nature. It is always constant and cannot expand like population growth. Since, India population increasing rapidly, therefore, the land is not sufficient for the growing population. As a result, there is heavy pressure on the land. In rural areas, most of the people depend directly on land for their livelihood. Land is very limited in comparison to population. It creates the unemployment situation for a large number of persons who depend on agriculture in rural areas.

3) Seasonal Agriculture:

In Rural Society agriculture is the only means of employment. However, most of the rural people are engaged directly as well as indirectly in agricultural operation. But, agriculture in India is basically a seasonal affair. It provides employment facilities to the rural people only in a particular season of the year. For example, during the sowing and harvesting period, people are fully employed and the period between the post harvest and before the next sowing they remain unemployed. It has adversely affected their standard of living.

4) Fragmentation of land:

In India, due to the heavy pressure on land of large population results the fragmentation of land. It creates a great obstacle in the part of agriculture. As land is fragmented and agricultural work is being hindered the people who depend on agriculture remain unemployed. This has an adverse effect on the employment situation. It also leads to the poverty of villagers.

5) Backward Method of Agriculture:

The method of agriculture in India is very backward. Till now, the rural farmers followed the old farming methods. As a result, the farmer cannot feed properly many people by the produce of his farm and he is unable to provide his children with proper education or to engage them in any profession. It leads to unemployment problem.

6) Decline of Cottage Industries:

In Rural India, village or cottage industries are the only mans of employment particularly of the landless people. They depend directly on various cottage industries for their livelihood. But, now-a-days, these are adversely affected by the industrialisation process. Actually, it is found that they cannot compete with modern factories in matter or production. As a result of which the village industries suffer a serious loss and gradually closing down. Owing to this, the people who work in there remain unemployed and unable to maintain their livelihood.

7) Defective education:

The day-to-day education is very defective and is confirmed within the class room only. Its main aim is to acquire certificated only. The present educational system is not job oriented, it is degree oriented. It is defective on the ground that is more general then the vocational. Thus, the people who have getting general education are unable to do any work. They are to be called as good for nothing in the ground that they cannot have any job here, they can find the ways of self employment. It leads to unemployment as well as underemployment.

8) Lack of transport and communication:

In India particularly in rural areas, there are no adequate facilities of transport and communication. Owing to this, the village people who are not engaged in agricultural work are remained unemployed. It is because they are unable to start any business for their livelihood and they are confined only within the limited boundary of the village. It is noted that the modern means of transport and communication are the only way to trade and commerce. Since there is lack of transport and communication in rural areas, therefore, it leads to unemployment problem among the villagers.

9) Inadequate Employment Planning:

The employment planning of the government is not adequate in comparison to population growth. In India near about two lakh people are added yearly to our existing population. But the employment opportunities did not increase according to the proportionate rate of population growth. As a consequence, a great difference is visible between the job opportunities and population growth.

On the other hand it is a very difficult task on the part of the Government to provide adequate job facilities to all the people. Besides this, the government also does not take adequate step in this direction. The faulty employment planning of the Government expedites this problem to a great extent. As a result the problem of unemployment is increasing day by day.

How to solve Unemployment Problem in India

We now discuss the following measures that can help us in eradicating the unemployment problem from rural India:

1) Development of Agricultural method:

In rural society, agriculture is the only source of employment of the people. If the method of agriculture has to be modernised and improved, the unemployment problem has to be eradicated. For this several steps should be taken into consideration.

Firstly, holding should be consolidated and made economic. Secondly, methods of agriculture should be improved and as far as possible the farms should be freed from dependence on Nature. Thirdly, system of crops should be planned scientifically and developed sufficiently. If more crops earned it would provide more employment facilities to the rural people. Finally, modern agricultural equipments, good seeds, fertilisers, proper agricultural suggestion and so on should be provided to the rural farmers.

Thus if the agricultural system has to be improved in the above direction, it can afford sufficient employment facilities to the rural people throughout the year.

2) Proper arrangement of irrigation:

A major cause of agricultural unemployment in Rural India is the dependence of cultivation on the rains. Since agriculture is seasonal and depends very much on the rains, therefore, only in a particular season of the year the village people are engaged in agricultural work and in the rest of the year they remain unemployed. Besides, if rains fail, the agricultural work is hindered and it brings about a good deal of unemployment problem among the rural farmers.

Thus, for the eradication of unemployment the methods of irrigation should be made more modern. In rural areas proper arrangements of irrigation should be made through minor and major projects. As a consequence, the rural people are able to do agricultural work throughout the year by using water in their lands.

3) Increasing the Cultivable land:

Now-a-days, due to the rapid population growth, there is heavy pressure on land in rural areas. The cultivable land is not sufficient to provide food as well as employment facilities to all the people. Therefore, it is essential to increase cultivable land in the rural areas.

In this context, barren land should be made fertile by scientific methods. Much sandy, rocky and grass lands can be converted into cultivable lands by applying modern scientific techniques. As a result rural people are much engaged in agricultural work and this would remove unemployment problem in rural areas.

4) Reconstruction of Cottage Industries:

For the removing of unemployment problem in Rural Society, the various new cottage industries should be established and the old are also reconstructed. In order to provide employment opportunities to the landless people in the village, it is essential that various cottage industries should also develop.

The cottage industries like dairy farming, poultry farming, furniture making, basket making, bee keeping, weaving, tailoring, match stick making and so on afford large employment facilities to the rural people and help in eradication unemployment problem from Rural India to a considerable extent.

5) Development of transport and Communication:

In order to create the employment atmosphere in rural areas, it is essential on the part of the Govt. To develop the means of transport and communication to a large extent. It is true that unemployment problem can minimise only when the transport and communication systems are developed properly in rural areas. Because, the educated rural people who are not interested in agricultural work have to engage themselves in different occupations relating to business through transport.

Besides, the development of communication helps the surplus population of Rural Society to move different places in search of employment.





Year of


























To assist the economically weaker sections of the rural society.





Scheme of Maharashtra

























For rural employment









Program  for  Trainingrural  youth  for  self employment.





Self-Employment (TRYSEM)










All-round development of the rural poor through









a  program  of  asset  endowment  for  self



Programme (IRDP)















To provide profitable employment opportunities









to the rural poor.






















For providing employment to landless farmers



Employment Guarantee





and laborers.






Program (RLEGP)








Self-employment to the



To provide financial and technical assistance for






Youth (SEEUY)















provide self

employment to





programme  for

Urban Poor (SEPUP)





through provision of subsidy and bank credit.






Rozgar Yojana



For providing employment to rural unemployed.



Nehru Rozgar Yojana






















To provide wages employment after arranging







the basic facilities for poor people in the urban









areas where population is less than one lakh.








To provide employment of at least 100 days in a




Scheme (EAS)





year in village.










To  provide  gainful  employment  to  urban





unemployed and under employed poor through



Rozgar Yojana (SJSRY)



self employment or wage employment.









For eliminating rural poverty and unemployment





Yojana (SYGSY)






and promoting self employment.





Jai  Prakash














Employment guarantee in most poor distt.







Yojana (JPNRGY)
















To provide atleast 100 days wage employment



Employment Guarantee Scheme





in rural areas.










To provide wage employment and food security






rural areas

and also to create durable



Rozgar Yojana





economic ans social assets.











To give food thrugh wage employment in the









drought affected areas in eight states. Wages








are paid by the state governments partly in cash









and partly in foodgrains.










To create a right based framework for wage







employment  programmes  and  makes  the



Employment Guarantee

government   legally

bound   to   provide






employment to those who seek it.







To generate employment opportunities in rural





as well as urban areas through setting up of




Employment Generation




new  self-employment





Programme (PMEGP)











  • The share of agriculture in total employment has come down from 61.67 per cent in 1993-94 to 58.54 per cent in 1999-2000, and further to 54.19 percent in 2004-05. With the declining share of agriculture in GDP, the scope for absorbing substantial additional labour force in agriculture appears limited. While construction and services particularly transport, storage and communication, contributed in maintaining employment growth in the economy, employment growth in manufacturing fell short of its potential.
  • As per the survey carried out by the National Sample Survey Organization in the year 1999-2000, the total employment in both organized and unorganized sectors in the country was of the order of 39.7 crore, i.e., around 2.8 crore in the organized sector and the balance 36.9 crore in the unorganized sector.
  • Out of 36.9 crore workers in the unorganized sector, there are 23.7 crore workers employed in agricultural sector, about 1.7 crore in construction work, 4.1 crore in manufacturing, 3.7 crore in trade and 3.7 crore in transport, communication and services. The Census 2001 has estimated the number of workers in the country as 40.2 crore, out of which 31.3 crore are main workers and 8.9 crore are marginal workers.

Employment Generation: 11th Plan Viewpoint

  • The Approach paper to the Eleventh Plan targets generation of additional employment opportunities in services and manufacturing, in particular, labor intensive manufacturing sectors such as food processing, leather products, footwear and textiles, and in service sectors such as tourism and construction.

It calls for elimination of distorting fiscal incentives which foster capital intensity; infrastructure investment; removal of distortions that hinder competition, prevent entry and discourage graduation from unorganized to organized status; and greater emphasis on vocational training and skill development to improve employability of youth.

As Village and Small Scale Enterprises (VSE) will have to provide most of the new employment during the Eleventh Plan, the Approach Paper also calls for redressing the problems faced by VSE units and home based workers, particularly women, such as non-availability of timely and adequate credit, unreliable or absence of power supply, requirement of permission from a number of government agencies and burden of multiple inspections.

India Women Labour

  • Women constitute a significant part of the workforce of India but they lag behind men in terms of level and quality of employment. The Census of India (2001) has registered 25.60 percent of female population as workers numbering 127.22 million in absolute terms out of a total female population of 496 million. The majority of women workers are employed in the rural areas.
  • Amongst rural women workers, 87 percent are employed in agriculture as laborers and cultivators. Amongst the women workers in the urban areas, 80 percent are employed in unorganized sectors like household industries, petty trades and services building and construction, etc. The employment of women in the organized sector (both public and private sectors) as on Mar 31, 2002, was about 4.935 million.
  • This constitutes of 17.8 percent of the total organized sector employment in the country. The distribution of women employees in major industries reveals that community, social and personal services sectors continued to absorb the majority of women employees.

Child Labour in India

  • The problem of child labor is a major social concern. The number of working children in the country declined from 2 percent of the total population and 6 percent of the total workforce in 1981 to 1.34 percent of the population and 3.59 total workforces in 1991.
  • According to the census 2001 figures, there are 1.25 crore working children in the age group of 5-14 as compared to the total child population of 25.2 crore, of which 1.07 crore working children are in the age group of 10-14.
  • Children continue to be employed in the unorganized and home-based industries and domestic services. The state with the highest child labor population in the country is Andhra Pradesh. Other states having a child labor population of more than a million are Madhya Pradesh, Maharashtra and Uttar Pradesh.
  • Government has adopted two schemes namely National Child labor Project Scheme (NCLP) arid Grant-in-aid to voluntary organizations for taking up action oriented programs in the field of rehabilitation of child labor.
The document Unemployment In India - Economics, UPSC, IAS. Notes | Study Indian Economy (Prelims) by Shahid Ali - UPSC is a part of the UPSC Course Indian Economy (Prelims) by Shahid Ali.
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