Intricacies of Unemployment: A Closer Look at India's Multifaceted Challenges

By Bhawna Ahuja

Cover Image Attribute: Indian workers submitting registration forms for jobs in Israel at the Industrial Training Institute in Lucknow on January 25, 2024 | Source: NAEEM ANSARI/AFP

Unemployment remains a pressing issue in India's economic landscape, given its status as one of the world's most populous nations with a diverse workforce. Fluctuations in the unemployment rate carry significant implications for the country's growth and development, particularly in light of the dominance of the services sector in the Gross Domestic Product (GDP). As per recent data from the National Sample Survey Survey (NSSO), there's a glimmer of hope with a decline in India's unemployment rate, signaling a potential turnaround in the job market amidst economic complexities. However, sustained vigilance and effective policy measures are essential to ensure sustainable job growth and secure the nation's future prosperity.
The latest Gross Domestic Product (GDP) estimates by the National Statistical Office (NSO) underscore the importance of services in India's economic output. With the services sector playing a pivotal role in driving economic growth, it's imperative to have a well-developed job market that facilitates the free movement of workers and fair wage determination. Failure to establish such mechanisms could result in rigidity within the services sector, hindering growth and imposing economic penalties on the workforce. Against this backdrop, this essay explores critical aspects of the Indian job market, including the influence of technology on the services sector, skill mismatches in the labor market, and the role of services in promoting a gender-neutral work environment.

Unemployment in India: The Current Scenario

In January 2024, India experienced a significant decline in its unemployment rate, dropping to 6.8 percent according to the latest data from the Centre for Monitoring Indian Economy (CMIE), an independent research organization. This marks a notable decrease of 1.9 percent from the previous month when the unemployment rate stood at 8.7 percent in December of the preceding year.
Despite this overall decrease, unemployment among individuals aged 20 to 30, particularly those between 20 and 24, saw an increase during the October-December quarter of 2023. Among this demographic, unemployment rose to 44.49 percent from 43.65 percent in the preceding July-September quarter. Similarly, for those aged between 25 and 29, unemployment increased to 14.33 percent from 13.35 percent in the previous quarter. 
The recent weather patterns across India, which have positively impacted agricultural land by covering a large portion with rains, have raised expectations of higher farm production. This development has the potential to contribute to overall economic growth and stimulate labor demand within the agriculture sector. Additionally, there has been a noticeable uptick in Mudra loan disbursements, startup registrations, and an increased number of tax returns, indicating a growing trend of individuals opting for entrepreneurship and micro-entrepreneurship. The percentage of people engaged in self-employment, including unpaid household work or small business operations, has risen to 57.3 percent from 55.8 percent a year ago.
These shifts in labor demand and employment patterns underscore the need for thoughtful policy measures to address ongoing economic challenges and ensure sustainable growth in both rural and urban areas. It emphasizes the importance of diversifying economic activities to generate more employment opportunities and enhance the country's financial resilience.

The Great Skill Divide Across Multiple Demography

In India, the skill level disparity in the workforce presents a significant obstacle, as half of the young individuals within the population are considered employable due to a deficiency in essential skills. This challenge is exacerbated by the country's diverse socio-economic circumstances, particularly impacting those in rural regions and from economically disadvantaged backgrounds who lack access to quality education and training. Consequently, this perpetuates cycles of poverty and exacerbates wage disparities. 
As per the latest India Employment Report 2024, compiled jointly by the Institute for Human Development (IHD New Delhi) and the International Labour Organization (ILO), the proportion of educated young individuals among the total unemployed population has risen to 65.7% in 2022 from 54.2% in 2000. Furthermore, among the educated (at least secondary level) unemployed youth, a larger proportion is accounted for by women (76.7%) compared to men (62.2%). These findings suggest a growing concentration of unemployment issues among India's youth, particularly educated youth and women in urban areas.
Using data from the annual Periodic Labour Force Survey conducted by the NSSO, the report observed a correlation between youth unemployment rates and educational attainment, particularly noting higher rates among graduates and a disparity favoring men over women. Over the past 22 years, there has been a steady increase in the unemployment rate among educated individuals, albeit with a notable decline between 2019 and 2022. The unemployment rate among educated youth rose from 23.9% in 2000 to 30.8% in 2019 before sharply dropping to 18.4% in 2022. Nevertheless, in 2022, the unemployment rate among youth was significantly higher for those with secondary education or higher (18.4%) and even more pronounced for graduates (29.1%) compared to those with no literacy skills (3.4%).
Moreover, the dire need for more emphasis on cultivating increasingly sought-after non-technical skills like communication, critical thinking, and leadership compounds the issue. The absence of these competencies in the curricula of most educational institutions results in employers favoring candidates from a select few prestigious institutes (Tier-1 and Tier 2). Additionally, a notable discrepancy exists between the skills taught and those demanded by employers, leading to unemployment even among formally educated individuals.
To address this gap, efforts should incorporate public-private partnerships (PPPs), including initiatives like the enhancement of Industrial Training Institutes (ITIs) and the establishment of the National Skill Development Corporation (NSDC) in 2009, with the aim of training 150 million people by 2022. These endeavors mark strides towards aligning educational outcomes with market requisites, underscoring the significance of both technical and non-technical skill development to bolster employability and mitigate inequality within India's labor market.

The Gender Gap in Unemployment, A Sad Truth

According to Statista, the proportion of employable individuals in India saw a decline in 2024 compared to the previous year, with women comprising nearly 51 percent of the employable population. While there's a positive trend in the rising participation of women in the labor force over the years, the bias still persists and requires further improvement. Also, the IHD/ILO report highlights that India boasts one of the lowest rates of female labor force participation globally, standing at approximately 25%.
Senior economist Lekha Chakraborty from the National Institute of Public Finance and Policy (NIPFP New Delhi) points out that unemployment among the educated, particularly among women, remains a significant issue in India. She attributes this to three main factors: the absence of comprehensive 'care economy' infrastructure policies, entrenched social norms, and insufficient skills development. She advocates for integrating care economy considerations into macroeconomic policies, which she believes will enhance the overall economic well-being of the nation. Concrete measures are necessary to combat labor market discrimination against women and marginalized social groups.
To counter this, the Indian government has initiated various measures to promote gender-inclusive employment, aiming to narrow the gender gap in the workforce and make hiring female workers more appealing while also ensuring equitable pay practices. Notably, the Equal Remuneration Act of 1976 aims to eradicate wage disparities by mandating equal pay for equal work. However, challenges such as the narrow interpretation of job similarity and the burden of proof on employees hinder its effectiveness.
The Maternity Benefit (Amendment) Act of 2017 represents another progressive step, extending paid maternity leave and introducing provisions for flexible work arrangements and childcare facilities. This legislation hints at the potential introduction of paternity leave in the private sector to encourage shared childcare responsibilities and support women's career progression.
Furthermore, government schemes like Mission Shakti and the DAY-NRLM scheme focus on women's skill enhancement and employability, offering specialized training institutes, industry-aligned courses, and partnerships with private sector entities and NGOs. To promote female participation in skill development, a quota of 30 percent of seats in technical training institutions is reserved for women.  However, the anticipated results of these efforts will take time to materialize; it will require years to observe any favorable transformations.

Conclusion

In conclusion, unemployment in India demands sustained attention and proactive policy measures. The challenges persist, especially in addressing the skill gap and gender disparities. The dominance of the services sector in India's economy underscores the importance of fostering a well-developed job market that promotes fair wage determination and facilitates the free movement of workers. Initiatives aimed at bridging the gender gap, such as legislative reforms and skill development programs targeting women, are steps in the right direction but require ongoing commitment to yield tangible results. Ultimately, concerted efforts are needed to ensure inclusive growth and secure the nation's future prosperity, with a focus on diversifying economic activities, enhancing employability, and promoting gender equality in the workforce.


About the Author:
Bhawna Ahuja is the Head of Content and Communications at IndraStra Global. She is a digital entrepreneur driven by "Human Psychology" with over nine years of experience in Public Relations and Insights Management. She can be reached on  Youtube Channel, Instagram, Twitter, and Linkedin.  

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