CAN INDIA EVER SOLVE ITS UNEMPLOYMENT CRISIS?

CAN INDIA EVER SOLVE ITS UNEMPLOYMENT CRISIS?

KAKALI DAS

Employment in India has been a persistent issue for decades, with successive governments failing to address it effectively. Despite numerous promises and policies, the question remains: why does unemployment continue to be such a significant challenge in the country?

Despite its growing global presence, India remains a country where millions struggle to find employment, and the issue goes beyond just a lack of jobs. There’s a deeper story at play. So, what does it truly mean to be unemployed in India?

India has had the peculiar experience of maintaining a very low unemployment rate for decades, yet when you speak to individuals, many would still describe themselves as employed.

India’s employment landscape is vast and diverse, spanning from high-paying corporate jobs in urban centres to the fields and farms of rural areas, where millions are engaged in agriculture. The harsh reality is that agriculture remains the largest employer in India, particularly for young people in rural communities.

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The reliance on agriculture highlights a deeper issue: the modern economy has not generated enough jobs to absorb India’s massive and growing labor force. If you have a college degree and a family farm, you may not want to work on the farm, but often return to it for a means of livelihood.

For those with only primary education or none at all, becoming a laborer and picking up whatever day work is available becomes the default. While individuals may find work, it often neither aligns with their qualifications or aspirations, nor is it sufficient to support a reasonable standard of living.

But how severe is the unemployment problem in India? According to the latest data, the country’s unemployment rate stood at 3.2% from July 2023 to June 2024, a figure that has remained relatively stable over the past few years.

However, it’s noteworthy that the labor force participation rate—the percentage of people either working or actively seeking work—has risen from 57.9% to 60.1%. Female participation has increased significantly, while male participation has experienced a modest uptick.

On the flip side, urban unemployment has climbed from 8.6% to 8.9%. While these numbers reveal part of the story, they don’t capture the full picture. The unemployment rate alone doesn’t reflect how many people are underemployed, overemployed, or whether they are securing quality jobs.

The number of salaried employees has decreased, while the number of self-employed individuals has risen. Most people in agriculture fall under the self-employed category, and currently, 46% of India’s total workforce is engaged in agriculture.

The unemployment rate for educated individuals aged 15 and older is even higher at 7.1%, while for India’s youth aged 15 to 29, it reaches a staggering 10.2%. Among urban female youth, the rate is particularly concerning, standing at 20.1%.

But here’s the real question: is it sufficient to count only those who are actively seeking work? What about the millions who have given up—the disillusioned, disheartened individuals who are no longer even trying?

In India, the growth of salaried jobs has not kept pace with the increasing number of self-employed individuals. This has led to valid criticism that while we are reducing the unemployment rate, we are not enhancing the quality of employment.

Also the rural-urban divide cmcannot be overlooked. While half of the youth are still employed in agriculture, these jobs often fail to provide a sustainable livelihood. The challenge is that the modern economy has not created enough job opportunities for urban youth either.

“Employment is a function of output, and output depends on investments. This explains the significant gap we see. Urban areas attract more investment, while rural regions see less investment in economic activities, with the exception of the agriculture sector. Consequently, this disparity creates a large gap in employment opportunities between urban and rural areas, and I believe this pressure is now manifesting in urban regions,” said NR Bhanumurthy, Director of the Madras School of Economics.

The narrative of India’s employment crisis extends beyond mere statistics; it encompasses an emotional toll as well. Young people, particularly in urban areas, often feel trapped in a cycle of depression and disappointment. The promise of a better future seems distant, almost unattainable.

Youth unemployment surged in 2020, resulting in widespread frustration. It’s not merely the absence of jobs; it’s the feeling that their dreams are slipping away. So, how did we arrive at this point?

The roots of the crisis run deep, and part of the problem can be traced back to historical policies that failed to adequately address employment. After independence, the Indian government sought to establish a self-sufficient economy, expecting agriculture and labor-intensive industries to absorb the growing workforce. However, the growth was not rapid enough to keep pace with demand.

Unemployment doubled between 1956 and 1972. By the mid-1970s, it became clear that growth alone would not resolve the issue. During this period, growth averaged only 3.5% instead of the planned 5%, causing unemployment to rise from 2.6% to 3.8%.

By the mid-1970s, it became evident that growth alone could not address unemployment, prompting the government to launch employment generation and poverty alleviation programs during the Fifth Five-Year Plan (1974 to 1979), focusing on job creation in both urban and rural areas.

“It’s easy to be too harsh on ourselves. This was also a time when our population and education levels were increasing. As a result, there were suddenly many more people seeking jobs due to both educational advancements and population growth,” said Sonalde Desai, Director of NCAER National Data.

The economic liberalization of 1991 was intended to transform the landscape, and it did to some extent. Foreign investment flowed in, and new sectors emerged; however, much of the new employment was informal, consisting of jobs without security or stability. Ultimately, this can be attributed to policy failures.

The government has prioritized economic growth over job creation. While industry modernization led to increased productivity, it did not result in a corresponding rise in employment opportunities.

Education is also part of the problem. India’s education system still relies heavily on rote learning, which leaves students without the skills that employers need. Even today, countless graduates remain unemployed simply because they lack employable skills.

India is still failing to address the issues of skilling and education. If we had a more skilled and educated workforce and focused on developing a vibrant manufacturing sector, the problems we are facing today would likely be less pronounced and less disruptive.

A report by Nasscom indicates that India could face a shortage of 1.4 million to 1.9 million tech professionals by 2026, with an expected demand for 9.3 to 9.6 million tech workers. However, only 7.5 to 7.8 million are projected to be available, highlighting a critical challenge in meeting industry demands.

Although approximately 1.5 million engineers graduate annually, only a small fraction are considered job-ready. Estimates suggest that up to 80% of Indian engineers may be unemployable in the current knowledge economy due to a lack of adequate skills.

A major reason for this issue is India’s dual economy—formal and informal. Nearly 92% of the workforce operates in the informal sector, which means that most workers lack access to job security, benefits, and government support.

Additionally, there is a strong obsession with government jobs. Even today, millions of Indians aspire to secure a government position for the stability and benefits it offers. Historically, India has experienced salary compression, with the notion that the government was meant to be the model employer, setting wage standards. Although there has been a desire to move away from this and reduce salary compression since the Fifth Pay Commission, it has never truly materialized.

For many, these jobs represent not just employment but also upward mobility in a society where they still hold significant importance. They are more than just careers; they are seen as a pathway to a better life.

So, what can be done? The solution goes beyond simply creating more jobs; it involves redefining work, enhancing education, and equipping the workforce with the skills needed to meet the demands of a rapidly changing economy.

The expectation that the government will create these jobs is not very reasonable, as government employment itself has not kept pace and has remained relatively stagnant over time. Moreover, despite the widespread desire for government jobs, there are only so many positions that can be made available.

How we skill and educate our people, and how we ensure that our manufacturing sector emphasizes not only job creation but also quality job creation, are crucial factors. Additionally, focusing on whether we can increase exports is important. It is essential to involve the private sector more actively in creating jobs.

India has the potential to become a global workforce powerhouse. However, to achieve this, we must reimagine our approach to job creation and equip our youth for the future. The solution isn’t just about finding jobs for today’s youth; it’s about building a future where work is meaningful, accessible, and sustainable for everyone.

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