Introduction

India, undoubtedly, is facing with the problem of unemployment. Unemployment is a situation

characterized by the existence of those able bodied persons who are willing to work but have to
do without a job that may yield them some regular income. In simple terms it means the state of
being out of work. So far, majority of the unemployed labor force has been illiterate or semi-
literate. Analysts in the Planning commission say that by the year 2010 over 60 per cent of the
unemployed will come from the educated class. The government needs to take effective
measures to generate employment otherwise the educated unemployed would be the single
largest causality of the new millennium. India is a developing economy. The nature of
unemployment sharply differs from the one that prevails in industrially advanced countries. In
India there is prevalence of chronic underemployment or disguised unemployment in the rural
sector. Agriculture which is the principal occupation in the countryside is by nature a seasonal
occupation. The period of seasonal unemployment varies from state to state depending upon the
methods of farming, the condition of the soil, the type of crops grown, the possibility of double
cropping and many other factors. It has been estimated that for at least five to seven months in a
year, a sizeable portion of the population engaged in agriculture remains idle. There is a sharp
increase in the working population engaged in agriculture without a corresponding increase in
the area of cultivation. This has resulted in a surplus population engaged in agriculture. All seem
to be employed but enough work is not available for all. This is disguised unemployment. The
problem of urban employment is mainly of two kinds - unemployment among industrial laborers,
and unemployment among the educated middle class.

As per the 55th Round (July 1999-June 2000) of the survey on employment conducted by
National Sample Survey Organization (NSSO), overall employment grew by about one per cent
per annum during 1993-94 to 1999-2000. Employment in absolute numbers has risen from 374
million in 1994(2.04%) to 397 million in 2000(0.98%).Unemployment is more prominent in
urban areas than in rural areas. Unemployment or underemployment levels fat" women are
higher than for men. Further, the educated individuals tend to be more unemployed or under-
employed than their uneducated counterparts. It has also been noticed that the unemployment
rates rise with every successive higher level of education. The employment situation for the
youth is truly depressing.

UNEMPLOYMENT RATE DEFINITION

The labour force is defined as the number of people employed plus the number unemployed but seeking work. The participation rate
is the number of people in the labour force divided by the size of the adult civilian noninstitutional population (or by the population of
working age that is not institutionalised). The nonlabour force includes those who are not looking for work, those who are
institutionalised such as in prisons or psychiatric wards, stay-at home spouses, kids, and those serving in the military. The
unemployment level is defined as the labour force minus the number of people currently employed. The unemployment rate is
 defined as the level of unemployment divided by the labour force. The employment rate is defined as the number of people currently
employed divided by the adult population (or by the population of working age). In these statistics, self-employed people are counted
as employed.

Variables like employment level, unemployment level, labour force, and unfilled vacancies are called stock variables because they
measure a quantity at a point in time. They can be contrasted with flow variables which measure a quantity over a duration of time.
Changes in the labour force are due to flow variables such as natural population growth, net immigration, new entrants, and
retirements from the labour force. Changes in unemployment depend on: inflows made up of non-employed people starting to look
for jobs and of employed people who lose their jobs and look for new ones; and outflows of people who find new employment and of
people who stop looking for employment.

When looking at the overall macroeconomy, several types of unemployment have been identified, including:
Frictional unemployment — This reflects the fact that it takes time for people to find and settle into new jobs. If 12 individuals each
take one month before they start a new job, the aggregate unemployment statistics will record this as a single unemployed worker.
Technological change often reduces frictional unemployment, for example: the internet made job searches cheaper and more
comprehensive.
Structural unemployment — This reflects a mismatch between the skills and other attributes of the labour force and those
demanded by employers. If 4 workers each take six months off to re-train before they start a new job, the aggregate unemployment
statistics will record this as two unemployed workers. Technological change often increases structural unemployment, for example:
technological change might require workers to re-train.
Natural rate of unemployment — This is the summation of frictional and structural unemployment. It is the lowest rate of
unemployment that a stable economy can expect to achieve, seeing as some frictional and structural unemployment is inevitable.
Economists do not agree on the natural rate, with estimates ranging from 1% to 5%, or on its meaning — some associate it with
"non-accelerating inflation". The estimated rate varies from country to country and from time to time.
Demand deficient unemployment — In Keynesian economics, any level of unemployment beyond the natural rate is most likely due
to insufficient demand in the overall economy. During a recession, aggregate expenditure is deficient causing the underutilization of
inputs (including labour). Aggregate expenditure (AE) can be increased, according to Keynes, by increasing consumption spending
(C), increasing investment spending (I), increasing government spending (G), or increasing the net of exports minus imports (X-M).
{AE = C + I + G + (X-M)}

Year Unemployment rate Percent Change

2003 8.80 %  
2004 9.50 % 7.95 %
2005 9.20 % -3.16 %
2006 8.90 % -3.26 %
2007 7.80 % -12.36 %
2008 7.20 % -7.69 %
2009 6.80 % -5.56 %

Unemployment is a sheer waste of manpower. The socio-economic consequences of

unemployment are dangerous. It leads to, poverty, slow rate of economic growth and a general
restlessness in the society. 'Empty mind is a devil's workshop'. An unemployed man gives up all
moral standards and defies all social laws. Problem of unemployment demands an immediate
solution because it threatens the peace, prosperity and stability of the country. When the young
people do not find gainful employment, they drift into money making channels that are neither
healthy for them nor helpful to the country. For instance, many unemployed youth are
increasingly resorting to many anti-social and destructive activities, like smuggling, selling
narcotics becoming hired killers and so on.
Nature of Unemployment In India
As the unemployment scenario in India has always been quite acute. With a huge population and
slow growth of job opportunities, unemployment has been widespread in India. Large scale
unemployment has led to several socio-economic problems like poverty, malnutrition, antisocial
and criminal activities, drug and substance abuse, etc. The lack of proper unemployment
insurance schemes has further aggravated this problem.

In the early 1990s, major economic reforms were undertaken in India. One of the major
objectives of these economic reforms was to boost employment in the Indian economy.
However, though the economic reforms were successful in raising productivity and attracting
FDI (Foreign Direct Investment), the growth in job opportunities was not as high as had been
expected.

There are many causes of this serious problem. With the population growing steadily each year,
the number of young, educated or uneducated, is increasing. However, the worrying aspect is
that the yearly increase in the employment opportunities is not keeping pace with this population
bulge. The Indian educational system has lost its relevance, because it has failed to conform to
the requirements in the present scenario. It still follows the pattern which was intended to
produce only clerks to serve . There is lack of emphasis on vocational education. Corruption is
prevalent in recruitment process. Nepotism and bribery favor the less competent and undeserving
jobseekers, over clouding the talent completely. The old and primitive system of agriculture is
also responsible for unemployment and underemployment. The farmers have small land
holdings. Agriculture is a seasonal activity and does not engage the farmers full time, all through
the year. There is inadequate attention towards labor intensive industries.
Why Unemployment Is Higher In India?

India has been having much higher unemployment compared to West. And West has doles for
unemployed, which drastically reduces hardships that the unemployed individuals face. The
problem of unemployment in India is very crucial. The nature of unemployment is an
underdeveloped country like India is quite different from that of advanced countries like the
USA and the U.K. The most developed countries of the world usually suffer from cyclical
unemployment due to lack of demand for industrial products. The factories just do not work due
to industrial recession during certain periods. It is of a temporary nature. But in the case of an
underdeveloped country like India, it is structural in nature. It arises primarily due to lack of
capital as a complementary factor for labour. Thus it is of a chronic nature. There is also lack of
other complementary factors of production such as land, entrepreneurship, management etc. In
all the situations, unemployment refers to a situation in which all the workers who are capable of
working, i.e., physically and medically fit for working and willing to work do not get
employment. It amounts to a waste of the country’s labour force. Frictional unemployment is a
temporary phenomenon, which occurs when people are changing jobs. The period incurred
during the process of going from one job to another is the period of frictional unemployment. It
is ignored for estimating full employment equilibrium .Cyclical unemployment, on the other
hand, is a kind of involuntary unemployment in the advanced countries which occurs during
recession or depression, caused by lack of effective demand for goods. This Problem can be
solved by appropriate monetary and fiscal policies.

But in a country like India, problem is not that of lack of demand. Hence it cannot be easily
solved through monetary and fiscal politics only.

Following are the main reasons why India has been having higher unemployment:

1. The administration/courts in West create less obstacles to starting, running and closing a
business/industry. Easy exit policies are necessary, as unless a business is closed, the
resources like land, capital, machineries etc it owns cannot be sold or transferred to
another business and hence starting another business will become expensive and difficult.
In India, due to lack of Jury System against officers, the officers find it very easy to
create obstacles in the path of small/medium industrialists etc. This has hampered the
progress.

2. Lawlessness/corruption: In a large part of India, there is utter lawlessness and high

corruption. Due to lawlessness, perpetual violence threat of extortion and kidnapping and
rampant corruption in officers/judges, the small/middle level industrialists keep away. As
a result, even large industrialists, who need a number of small/large industrialists to
provide goods/services etc, do not go there. IOW, a portion of India is sterile for
industries due to lawlessness. Hence high unemployment in those areas.

3. High stamp duty: The transfer duty of 12% on land/building sale drastically reduces
liquidity in land/building market. The liquidity of land/building market is crucial to
starting new industries and closing existing loss-making industries. The illiquidity in
land/business market stifles industry and thus employment.

4. Lack of wealth tax: Due to lack of wealth tax, there is NO cost in hoarding land/building
in India. As a result, lot of wealthy individuals merely keeps hoarding land and buildings
in large amount. This creates an artificial scarcity of land/building in crowded cities. This
stifles industries and increases unemployment. While most Western countries have
wealth tax due to which wealth hoarding is less.

5. Regressive taxes: The regressive taxes, like taxes on movie tickets, tobacco, sugar, cloth,
liquor, edible oil, crude oil etc depletes the disposable incomes of poor. As a result, the
poor in India have less money to spend, and so they buy fewer goods. This will decrease
the sales, and thus reduce employment.
 6. The currency system in India enables RBI-directors etc to deflate the currency i.e. rupee
at the rate of 10% to 14% a year. This raises the cost of production, and puts an undue
pressure on businesses and industrialists. As a result, unemployment increases.

7. The currency system in India enables RBI-directors etc to deflate the currency i.e. rupee
at the rate of 10% to 14% a year. This raises the cost of production, and puts an undue
pressure on businesses and industrialists. As a result, unemployment increases.

8. High cost of telecommunications: Due to defunctness in telecom regulation. The cost of

phone calls (as a % of per capita GDP) is much higher in India. A low cost, and less
sophisticated, telephony is possible in India, but due to defunct TRAI, does NOT
materialize. And so the service providers have to depend to imported machineries, which
increases the cost (as % of per-capita income). So cost of telephony remains higher in
India compared to West. This reduces employment opportunities.

9. Defunct rental laws: Since rent laws are defunct, a large number of building owners
hesitate in renting the apartments. This increases the cost of starting a new business.
Hence lesser growth in employment opportunities.

10. High cost and poor quality of electricity: Given the voltage fluctuations, load shedding
etc India has poor quality of electricity compared to West. And this is due to
administrative problems, NOT lack of natural resources. The cost of fuel is same all
across the world, but due to low competitiveness in electricity generation, transmission
etc, the staff of the generation/transmission companies etc manage to get away with much
higher salaries compared to per-capita income of an average Indian. This results into
higher cost of electricity power. This in turn reduces industrial growth and increases
unemployment.

Present Scenario of Unemployment in India

The growth in labor force in India is much higher than the growth of jobs. Actual employment
figures in India have mostly fallen short of estimated figures, as per the five year plans. The
unorganized sector in India accounts for 90% of the employment. The unorganized sector
consists of agricultural workers in the rural areas and contract and sub-contract laborers in the
urban areas.

Self employment accounts for more than 60% of the employed population of India. Casual
workers, who get jobs only at times and remain unpaid when they don’t have work, constitute
30% of the workforce, while only 10% are regular employees. Merely two-fifth of this 10% is
employed in the government sector.
Around 70% of the labor force in India has education below primary level or is illiterate.
Another important factor in the unemployment scenario in India is underemployment. There
exists very high underemployment in various sectors of the labor force in India. Disguised
unemployment also exists in various sectors of the Indian economy. Regional imbalances in the
unemployment scenario in India are another important factor. While some areas have higher
employment opportunities, some areas have very low opportunities of employment. This has led
to inter-state labor migration in the Indian economy.

Recent studies have revealed the fact that growth of unemployment in India at current rates can
lead to devastating results. At this rate, India is expected to have a 30% unemployment rate by
2020. This would mean that there would be 21 crore jobless people in India. The decline in job
creation in agriculture has been identified as one of the important reasons behind the increasing
unemployment in India.

Various government schemes have been undertaken in India to tackle the problem of
unemployment. Swarozgar Yojnas (self-employment schemes) have been launched by the
government to help young educated Indians earn a living. Specific programs have been adopted
for rural areas. Many people have migrated from rural areas to urban areas in search of
employment in the last few decades. Schemes have been undertaken to provide proper training,
guidance and financial assistance to needy people under self employment schemes. Focus on
education and training has also been increased to increase employability of the people.

The present scenario for job seekers is very grim. The job opportunities for the youth are
shrinking in the public sector. No new recruitment is taking place in the government sector in as
big a way as it used to be earlier. Fewer replacements for those who retire from government
service are taking place. The job opportunities in government are literally few. The problem has
been worsened by the introduction of Voluntary Retirement Scheme (VRS) in the Public Sector
Banks, Privatization of Public Sector Undertakings, non-recruitment of staff by Central or State
Governments, and the introduction of retrenchment provisions. Downsizing and cutting of costs
by the large public sector firms to face the competition emerging in the light of the entry of
Multi-National Corporations (MNCs) has added to the woes4 of the unemployed.
Sector Wise Analysis
The nature of unemployment in India is changing. Today, unemployment rates are much higher
among educated individuals. Within this category, the largest chunk comes from urban India. As
far as the proportion of self-employment goes, it’s in the range of 30-70%, depending on states.
Importantly, self-employment is high in less-developed states. Now we look at the composition
of the Indian labour market across different segments and sectors.

According to the report, the retail sector, among emerging sectors, is the largest employer,
followed by construction. Recruitments on a temporary basis have been witnessed in segments
such as hospitality, transport, communication and finally wholesale and retail trade. The case of
temporary recruits is far less pronounced in segments such as financial intermediation, mining
and quarrying and real estate. The report is based on the survey conducted by the National
Sample Survey Organisation (NSSO).
A state-wise analysis of the trend reveals states such as Goa have the highest unemployment
rates of 11.4%, followed by Kerala at 9.1%. States, which enjoy the lowest unemployment rates,
are Uttaranchal and Chattisgarh — 0.5% and 0.8%, respectively.
While this is the story across genders, the section on women presents interesting findings. At
9.92%, urban women have the highest unemployment rates while the lowest is accounted for by
rural women at 7.31%.

The percentage of urban women, who are not part of the labour force, is higher than that of their
rural counterparts. While in most states, the percentage of rural women, not part of the labour
force, is nearly 60-70%, the corresponding figure for their urban counterparts is close to 80%.

Disguised Unemployment in Rural Sector

Disguised unemployment stems from the observation that, in the developing and the over
populated countries; agriculture engages many more persons, than are strictly required for efficient
production . Disguised unemployment is said to exist in the form of the surplus labour engaged in
agriculture, especially in the developing countries, this surplus labour represented a savings
potential, that could be realized by shifting this surplus labour, from agriculture to the modern,
non–agricultural sector; while maintaining at constant levels, the output in the traditional,
agricultural sector and the consumption pattern of labour. Also the industrial sector could grow, by
tapping into this “unlimited supply of labour‟ from the agricultural sector.

It can be inferred from above that, the “surplus labour‟ employed in agriculture, is in fact
underemployed. While they appear to be employed, in terms of productivity or the labour time
spent engaged in agricultural work, they are underemployed.
Extent of Disguised unemployment in India
In the absence of any kind of social security or state sponsored assistance, the poor have no other
choice, but to accept any work that is available, and hence a large number of them may be
underemployed. The NSS estimates that about 7.3% of India‟s labour force was either chronically
unemployed or underemployed in 1999/ 2000. This figure increased to 8.02%, according to the 62 nd
NSS round. The majority of the labour force is employed in the self–employed and the casual labour
category. For many, self–employment is merely a nominal status, while casual labour is
characterized by volatility, in income levels and job security.
There are several dimensions in which the employment opportunities available may not be ideal.
Apart from the working conditions and the quality of work, one of the most important dimensions is
that of the income provided. While unemployment in 1999-00 was only 2.33%, the percentage of
the population in poverty in the same survey was high as high as 26.1%. This indicates that a
quarter of Indian population is in employments that do not guarantee adequate income to consider
them as having gainful employment .

EMPLOYMENT PROGRAMS IN INDIA

As discussed above there is open unemployment disguised unemployment and seasonal

unemployment in India this has always being a great concern to the policy makers and they are
continuously searching some ways and means to solve it . Productive absorption of
underemployed and surplus labour force in the rural sector has been a major force for planning
for rural development in order to provide direct supplementary wage employment to the rural
poor through public works, many programs were initiated by the Govt. of India , namely,
National Rural Employment Program (NREP) Rural Landless Employment Guarantee
Programme (RLEGP) and Jwahar Rojgar Yojana (JRY).

Currently Sampoorna Gramin Rojgar Yojana is being implemented all over the country with the
objective to provide supplementary wage employment in rural areas create durable rural
infrastructure and to ensure food security. Though the SJRY is providing some relief to the rural
poor, its reach has been inadequate in view of the dimension of the unemployment in rural areas.

It has been indicated in the statement of the object and reasons annexed to the bill that the scale
of the unemployment generation under SGRY in 2002-03 and 2003-04 was barely adequate to
provide on an average 20 days and employment to each Below Poverty Line(BPL) house hold in
the rural areas. Secondly, there is no guarantee that employment will be available tot he rural
hose on demand as SGRY is an allocation programme. The situation of unemployment has been
compounded by the absence of any social security mechanism.

Taking into account of the experience of 30 years gained under the Employment Guarantee
Scheme in Maharastra the Parliament has approved the National Rural Employemnt Bill, 2005
seeking to provide 100 days assured every year to every rural house hold in 200 districts. This
landmark legislation was past by LoakSabha on Aug 23,2005 and the Rajya Sabha on Aug
24,2005 .This new employment guarantee scheme provides and indispensable lifeline to the
millions of poors in the rural areas of the country. This social security measure, for the first time
make the right to work a fundamental legal right- a new radical deal for India’s poor .

The legislation constitute a pioneer endeavor to secure wage employment for the households in
the rural areas as a guaranteed entitlement on this scale . the bill drafted after wide consultation
fulful a measure promise of the UPA’s National Common Minimum Programme . The
legislation has wide support among political parties, social movements and public at large.

Conclusion
The problem of unemployment in India can be solved by adopting a multi dimensional strategy.
The present system of education should undergo fundamental changes. It should be made job
oriented. Vocational education should be given importance. The economy of villages should be
developed by setting up small scale and agro based industries. More labor intensive industries
should be set up in the country. The pace of industrialization in the country should be stepped up
to create more jobs. Measures should be taken to reduce the seasonal unemployment. Activities
allied to agriculture, like dairy farming, horticulture, etc. should be developed. This would
provide additional employment to the agricultural labor force throughout the year. Emphasis
should be laid on self employment. The government must sponsor schemes for budding
entrepreneurs5• Loans should be provided to them to overcome their monetary constraints.
Training should also be provided to them to help them start their own business successfully.
The unemployment issue must be tackled with utmost care. The future of the country lies in the
hands of the youth. Their betterment would be tantamount to the betterment of the country as a
whole.