Unemployment in India

Unemployment in India is a complex problem with numerous overlapping and intertwined causes; however, it is possible to identify several key causes. This article will attempt to describe and outline these causes, which vary from macro-level factors (e.g. overall slow economic growth as well as population increases) to more micro-level factors (e.g. the joint family system of business). Understanding the causes of unemployment is the first step in beginning to rectify this major problem and creating a society in which everyone is able to find a sustainable livelihood for themselves and their families.

Unemployment Rate in India

According to the Centre for Monitoring Indian Economy (CMIE), an economics and business think-tank, as of 2018, unemployment in India had risen to 31 million individuals looking for jobs. The lowest unemployment rate in India was 3.4% (July 2017) but has now risen to 7.1%.

Causes of Unemployment in India

This list captures many of the major causes of high unemployment in India but is not entirely exhaustive. There are further factors contributing to this problem as well, many of which may not yet have been identified.

The following are the main causes of unemployment:

1. The Caste System

The caste system—a structure of social stratification that can potentially pervade virtually every aspect of life in India—is a major factor in generating unemployment. In some locations, certain kinds of work are prohibited for members of particular castes. This also leads to the result that work is often given to members of a certain community rather than to those who truly deserve the job—those who have the right skills. The result is higher levels of unemployment.

2. Increased Population Growth

Increases in population have been considerable over the half-century. The country’s overall population is made up of more than 1.3 billion people, second only to that of China. Moreover, India’s population is predicted to exceed China’s by the year 2024; it will, furthermore, probably be the most populous country for the entirety of the 21st century. As the country’s economic growth cannot keep up with population growth, this leads to a larger share of the society being unemployed.

3. Slow Economic Growth

Because the Indian economy is relatively underdeveloped, economic growth is considerably slower than it might otherwise be. This means that as the population increases, the economy cannot keep up with demands for employment and an increasing share of people are unable to find work. The result is insufficient levels of employment nationwide.

4. Slow Industrial Growth

Similarly, while industrialization has been considerable, its rate of growth is nevertheless fairly slow. There is a major emphasis on industrialization nationwide, which has elevated the Indian economy; however, industrial growth continues to generate relatively few new jobs overall as compared to increases in population.

5. Seasonality of Agricultural Occupations

Agriculture offers unemployment for a large segment of the population, but only for several months out of the year. The result is that for a considerable portion of the year, many agricultural workers lack needed employment and income. More stable sources of income are essential to permit the fulfillment of basic needs.

6. Joint Family System

Large family businesses may often involve family members who depend on the family’s joint income but do not contribute substantive work. Although these individuals may appear to be working, they may not actually add anything to the business. The result is that their unemployment is “disguised.”

Thus the joint family system may contribute to low productivity. However, this system also offers numerous positive benefits as a social and economic safety net in which those who cannot find work elsewhere can derive support from their families and contribute to their business. It’s likely, then, that this system may offer more benefits than drawbacks.

7. Loss of Small-Scale/Cottage Industries

Industrial development has made cottage and small-scale industries considerably less economically attractive, as they do not offer the economies of scale generated by large-scale mass production of goods. Oftentimes the demand for cheap, mass-produced goods outweighs the desire for goods that are handcrafted by those with very specific skill and expertise. The result is that the cottage and small-scale industry have significantly declined, and artisans have become unemployed as a result.

8. Low Rates of Saving and Investment

India lacks sufficient capital across the board. Likewise, savings are low and the result is that investment—which depends on savings—is also low. Were there higher rates of investment, new jobs would be created and the economy would be kickstarted.

9. Shortage of Means of Production

Production is, quite simply, limited by the amount of materials, equipment, and energy available to fuel it. Shortages of raw materials, facilities, fuel, and electricity means decreased production of goods, which logically results in decreased availability of jobs.

10. Ineffective (or absent) Economic Planning

This is a major source of unemployment in India. Problematically, there were no nationwide plans to account for the significant gap between labor supply (which is abundant) and labor demand (which is notably lower). It is crucial that the supply and demand of labor be in balance to ensure that those who need jobs are able to get them; otherwise, many individuals will compete for one job.

11. Expansion of Universities

Thus far, this article has primarily addressed working-class unemployment, as this affects the majority of the population. However, the numbers of white-collar workers have increased as well. This is due in part to the fact that the number of universities in India has increased in recent decades—currently, there are roughly 385 universities throughout the country. The result is that more people are educated and become white-collar workers, while unfortunately, the supply of white-collar jobs does not match their numbers.

12. Inadequate Access to Irrigation

In recent years, less than half—only 39%—of India’s total cultivable land has access to irrigation. This means, then, that large areas of land can only grow one crop per year. Many farmers are unemployed for the majority of the year, during this off-season, due to lack of irrigation facilities.

13. Labor Immobility

Culturally, attachment and maintenance of proximity to family is a major priority for many Indian citizens. The result is that people avoid traveling long distances from their families in pursuit of employment. Additionally, language, religion, and climate can also contribute to low mobility of labor. As one might expect, when many of those who might otherwise be suited to jobs are unable to travel to reach them, unemployment is magnified.

  1. Prateek Agarwal
    Pooja
    September 7, 2020 at 11:48 pm

    Your mentioned reason immobility of labour is wrong, in covid-19 one must have seen huge number of migrated labourers.

    Savings are low is not correct, reason is, there is no savings at all. Most of population in India works in informal sector with salaries merely to subsistance level. This is also reason of smaller number of tax payer in India. Income level has not increased in India

    Low savings has number of reasons and major one govt policies to support single sector and often employment destroying than employment generating. Govt be it existing or other. For example recent encouragement to digitalisation. Now it will creat a few jobs but will make most of jobs to extinct. Data owners, search engines, app based softwares etc, like RILnce, microsft, Google has been immensely been profited despite of lockdown. India is huge market for them. There profit will get maximise only when govt provide necessary infrastucture to commute their products i.e data.

    Whole wealth has been accumulated in hands of few. Where with live virtual conference one can connect to other, then why there is need to go out, with work from home, why there is need to opening offices and then buildings to be created. On conference one teacher can teach millions of students then why is there need to hire or employ 10 more teachers. No schools no transportation less jobs. Physical Economic ecosystem for generating employment is getting destroyed and is being replaced with virtual ecosystem. Virtual ecosystem is technique based and varies very fast
    It is also form of labour intensive tecnique where work will be done without human interference. No interference of humans means no employment. Most of jobs will get extinct in coming years.

    In blind race with world our 2/3 population is left behind. It is good for you at least someone viewed your site and commented.

    1. Prateek Agarwal
      Vaibav M
      September 9, 2020 at 11:52 am

      Well said, very true.

    2. Prateek Agarwal
      Karishma
      September 28, 2020 at 5:27 am

      Main Reasons are automation, lack of skills(not qualification), contractualization, labor laws and failed measures to formalize the informal sector which provides jobs to millions and still unaccounted for GDP calculation.

  2. Prateek Agarwal
    Puneet
    November 1, 2020 at 12:41 pm

    only a part of the rural population move to the cities, A large crowed still stays in the rural areas. look at Punjab for example at least 40% of the youth are unemployed and addicted to all sorts of drugs.
    The next point is there is more unemployment in the Northeast.

  3. Prateek Agarwal
    Sajal patel
    November 7, 2020 at 3:15 am

    The time has gone to say slogan “Hum do hamare do”, it’s time to make a law “Any child above 2 ,then couple should be fined”.Then only people will take this seriously.

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