Unemployment Problem in India: Alarming Crisis Impacting Youth & Growth

Overview of Unemployment

Definition and Context

What is unemployment? The condition where individuals capable of working, actively seeking employment, cannot find a suitable job. It’s a key socio-economic indicator.
How is the unemployment rate calculated? Percentage of people in the labour force (able and willing to work) who do not have a job.
Unemployment in India’s context: Refers to people aged 15-59 years who are actively looking for work but are jobless. Significant due to large population, varying skill levels, and job-skill gaps.
Historical Perspectives

When skilled workers were displaced by the collapse of conventional industries during British rule, India’s unemployment problem started. Growth was the main goal of post-independence economic policies, but not enough employment were created. The expanding work force was too much for industrial and agricultural reforms to handle, and post-1991 liberalization resulted in an increase in unemployment. These historical occurrences laid the groundwork for the ongoing unemployment issue of today.

Current Unemployment Rates in India (2025)

Periodic Labour Force Survey (PLFS) (June 2025): Overall: 5.6%
Rural: 4.9%
Urban: 7.1%
Youth (15-29 years): 15.3%
Female: 5.6%
Labour Force Participation Rate (LFPR): 54.2%
CMIE (Centre for Monitoring Indian Economy) (July 2025): 6.3% (30-day moving average). Generally higher and more volatile than PLFS.

State-wise Unemployment Rates (2025)

Highest: Lakshadweep: 36.2%
Andaman & Nicobar Islands: 33.6%
Kerala: 29.9% (highest among large states)
Lowest: Madhya Pradesh: 2.6%
Gujarat: 3.1%
Jharkhand: 3.6%

Youth Unemployment Rate (2025)

National (15-29 years): 15.3%
Urban Youth: 18.8%
Male: 16.6%
Female: 25.8% (highest challenge for this demographic)
Rural Youth: 13.8%
Male: 13.8%
Female: Typically, lower than male, but with significantly lower LFPR, indicating disengagement.

Types of Unemployment in India (with Examples)

Disguised Unemployment: Explanation: More people are employed than necessary for a given output, often in traditional sectors like agriculture. Removing extra workers does not reduce output.
Indian Context: A family farm where five members work, but output could be achieved with three; the extra two are disguisedly unemployed. Prevalence in rural areas due to surplus labour, low productivity, small landholdings, and lack of alternative jobs.
Seasonal Unemployment: Explanation: Jobs are only available during specific seasons.
Indian Context: Agricultural labourers jobless outside harvesting/sowing seasons.
Structural Unemployment: Explanation: Mismatch between workers’ skills and available job requirements, often due to economic shifts, industry decline, or technological changes.
Indian Context: Arts graduates unable to find IT jobs due to skill gaps; textile workers laid off due to automation.
Technological Unemployment: Explanation: Job loss due to technological changes, innovation, or automation.
Indian Context: Factory workers displaced by machines; retail cashiers replaced by self-checkout systems.
Frictional Unemployment: Explanation: Short-term unemployment during transitions (e.g., between jobs, entering workforce for first time).
Indian Context: A recent graduate searching for their first job; someone relocating and seeking new employment.
Vulnerable/Informal Unemployment: Explanation: People working in jobs without formal contracts, security, or benefits.
Indian Context: Construction or domestic workers who may lose work any day with no job security.

Causes of Unemployment in India

Population Growth and Youth Bulge: Rapid growth adds millions of job seekers annually, overwhelming the market.
Education System and Skill Mismatch: Outdated, theoretical curricula fail to provide job-ready skills. Only ~10% of graduates are considered employable by industry.
Slow Industrial Growth and Lack of Robust Job Creation: Manufacturing sector has not grown fast enough to absorb the large workforce. “Jobless growth” where economic growth is capital-intensive rather than labour-intensive.
Technological Displacement: Automation, AI, and mechanization displace manual jobs in various sectors (IT, manufacturing, retail).
Agricultural Dependence: Over 40% of the workforce in low-productivity agriculture leads to disguised and seasonal unemployment.
Informal Sector and Job Insecurity: Large segments work in unregulated jobs with low wages and no security.
Gender Disparities: Women face additional barriers (social norms, safety, lack of flexible jobs), leading to higher unemployment, especially among educated urban women.
Seasonal and Cyclical Factors: Unemployment rises post-harvest due to temporary job losses.
Policy and Governance Issues: Inefficient programs, implementation gaps, and bureaucratic hurdles.

Impact of Unemployment on Indian Society and Economy

Economic Impact

Reduced Economic Growth: Underutilization of productive capacity, slower GDP growth.
Lower Household Income and Spending: Leads to decreased consumption and demand, slowing economic activity.
Wasted Human Capital: Investment in education yields low returns when people can’t find jobs.
Strained Public Finances: Increased government spending on welfare, reduced tax revenues.

Social Effects

Poverty and Inequality: Direct cause of poverty, especially for vulnerable communities.
Social Unrest and Instability: Frustration, hopelessness, increased crime rates, protests, and political instability.
Mental Health Issues: Stress, depression due to persistent joblessness.
Migration and Urban Pressure: Rural job scarcity drives migration, straining urban infrastructure and creating competition.
Generational Effects: Prolonged youth unemployment can create a “lost generation.”

Structural Consequences

Expansion of Informal Sector: Pushes workers into unregulated, insecure jobs without social protection.
Slow Structural Transformation: Delays shift to higher productivity sectors.
Erosion of Social Fabric: Weakens social cohesion, increases discrimination.

Link to Social Unrest and Crime

Economic hardship and discontent increase frustration and anger.
Higher unemployment correlates with increased theft, property crimes, and sometimes violent crime.
Mass unemployment often leads to protests and demonstrations.
Regional inequality and unemployment can fuel social movements and political tensions.

Government Programs and Solutions to Reduce Unemployment

Major Programs (as of 2025)

Employment Linked Incentive (ELI) / PM Viksit Bharat Rozgar Yojana (PM-VBRY): Incentivizes employers to create new formal jobs, especially in manufacturing.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Guarantees 100 days of wage employment annually to rural households; crucial social safety net.

Effectiveness: Significant in job creation (3.83 crore households, 106 crore person-days in 2025), poverty reduction, empowerment of marginalized groups (50%+ women), rural wage benchmarking, and asset creation.
Limitations: Incomplete coverage (fewer than 100 days), funding/payment delays, limited skill building, implementation gaps.

Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 4.0 / Skill India Mission: Offers free, short-term, industry-aligned skill training for youth.

Successes: Massive outreach (13.7 million trained), inclusion of marginalized groups, certification, adaptive approach, institutional framework.
Limitations: Low placement rates (8-18%), skill-industry gap, short-term courses, dropouts, insufficient soft/digital skills focus, weak monitoring.

Prime Minister’s Employment Generation Programme (PMEGP): Credit-linked subsidies for non-farm business establishment.
Production-Linked Incentive (PLI) Scheme: Financial incentives for manufacturing to boost production and job creation.
National Career Service (NCS) Portal: Matches job seekers with employers, offers career counselling.
Deendayal Antyodaya Yojana – NRLM & NULM: Support for rural (SHGs) and urban poor (self-employment, skill training).
Pradhan Mantri Mudra Yojana (PMMY) & Start-up India: Collateral-free loans for small businesses; incentives for startups.
National Apprenticeship Promotion Scheme (NAPS): Subsidizes apprenticeship stipends.
Digital India Initiative: Expands digital infrastructure and IT-enabled jobs.

Long-Term Solutions

Education System Reform: Modernize curriculum (practical, digital, STEM, vocational, soft skills), strengthen industry-academia collaboration.
Promote Labor-Intensive Manufacturing: Expand Make-in-India, simplify regulations, invest in clusters and export zones.
Support MSME and Startup Ecosystem: Broaden credit access, provide mentorship, foster innovation.

Role of Startups: Created 1.66-2 million direct jobs, surging hiring (32% in April 2025), promotes regional growth and flexible work.
Role of MSMEs: Employ 110-120 million (60-62% of all employment), contribute significantly to GDP and exports, diverse job creation, regional inclusion.

Transform Agriculture and Rural Economy: Promote agro-processing, diversify into allied sectors, rural industrialization.
Accelerate Formalization and Quality of Work: Simplify labour laws, regulate gig economy, expand social security.
Gender and Demographic Inclusion: Increase female workforce participation (safety, childcare, flexibility), target youth counselling/placement.
Invest in Infrastructure and Green Economy: Large-scale infrastructure projects, green jobs (renewable energy, waste management).

Green Economy Potential: Significant new job creation in renewable energy, energy efficiency, sustainable agriculture, waste management; multiplier effect.

Support Innovation, Digitalization, and Emerging Sectors: Upskilling for AI, ML, data analytics; R&D investment.
Policy Reforms and Better Governance: Outcome-based program implementation, stronger monitoring, reduce regional disparities.

Key Economic Concepts

Jobless Growth

Definition: Economic growth (GDP, productivity rise) that does not translate into enough new jobs for the expanding labour force.
Concern in India: Mismatch between growth sectors (capital-intensive) and labour force skills, technology/automation, large workforce demographics, growth of informal work.

Green Economy and Gig Economy

Green Economy: Potential for sustainable, large-scale job creation (e.g., renewable energy, waste management).
Gig Economy: Offers flexible, accessible work (e.g., ride-sharing, freelancing), fosters self-employment.
Challenges: Gig jobs often lack social security, stability; both require policy support for skills, worker protections, and integration into formal ecosystems.

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