THE CATALYST GROUP

Most Trusted Study Group in India

INDIAN ECONOMY
Class - 6

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Unemployment in India
What is Unemployment?
 Unemployment occurs when a person who is actively searching for
employment is unable to find work. Unemployment is a situation in
which the person is capable of working both physically and mentally at
the existing wage rate, but does not get ajob to work. In other words
unemployment is asituation in which aperson who is willing to work at
the existing wage rate does not get a job.
 Unemployment may be defined as state of affairs in a country where

there are large number of able bodied persons of working age who are
willing to work But cannot find work at the current rate of wage level.

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Unemployment in India
What is Unemployment?
National Sample Survey Organization (NSSO) under MoSPI –
Ministry of Statistics and Programme Implementation defines
employment and unemployment on the following activity statuses of an
individual:
 Working (engaged in an economic activity) i.e. 'Employed'.
 Seeking or available for work i.e. 'Unemployed'.
 Neither seeking nor available for work.
 Unemployment rate = (Unemployed Workers / Total labour
force) × 100

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Measures of Unemployment
1.Usual Status Unemployment:
 Also known as open unemployment or chronic unemployment.
 This measure estimates the number of persons who remained
unemployed for a major part of the year.
 This measure gives the lowest estimates of unemployment.
 This concept used to determine the usual activity status of a person as
employed or unemployed or outside the labour force. ( Less then 30
days)
2- Weekly Status Unemployment:
 The estimate measures unemployment with respect to one week.
 According to this estimate a person is said to be employed for the week
even if he/she is employed only for an hour in a day during that week.

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Measures of Unemployment
3- Current Daily Status Unemployment:
 It considers the activity status of a person for each day of the preceding
seven days.
 The reference period here is a day.
 If a person did not find work on a day or some days during the survey
week, he/she is regarded as unemployed.
 Normally if a person works for four hours or more during a day, he or
she is considered as employed for the whole day.
 The daily status unemployment is considered to be a comprehensive
measure of unemployment.

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CAUSES OF UNEMPLOYMENT IN INDIA

1) Rapid rate of population growth :
At the current rate of population growth, world population by2000 is
expected to reach 7 billion or more, with developing countries
accounting for some 5.4 billion, and economically advanced nations
accounting for 1.6 billion. Other serious consequences of rapid
population growth are maternal death and illness, and physical and
mental retardation of children of very poor families.
2) Slow economic growth:
Asluggish economic is a state of an economy in which growth is slow,
flat or declining.The term can refer to the economy asawhole or a
component of the economy, such asweak housing starts, Extended
periods of sluggishness can easily lead into arecession, so asluggish
economy is often considered a leading indicator of a potentially steeper
downturn.

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CAUSES OF UNEMPLOYMENT IN INDIA

3)Lack of funds to invest :We have no funds to invest and to increase our
economic growth, which results in unemployment.
4)Use of inappropriate technology :In our Development plans more
attention has been given to capital intensive rather than labour intensive
technologyWhich provide more employment.
5)Backwardness in agriculture:The backward nature of our farming results
in unemployment because agriculture cannot provide employment
opportunities to rural population.
6) Small holding :Majorly of the agriculture hold small holding i.e 1 or 2
acres. Therefore they cannot employ others.
7)Immobility of labour:People are reluctant to live their native place and
relatives which results in unemployment.
8)Seasonal nature of agricultural:Agricultural labourer do not have work
over the year.

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CAUSES OF UNEMPLOYMENT IN INDIA

9)Illiteracy :Illiteracy is the one of the main cause of unemployment.They
have to go to hard work. Majority of illiterate labourer remain
unemployed hall of the year.
10)Inappropriate educational system: The Indian universities are producing
graduates.The system of education does not make the educated fit or
employment in industry, Trade, etc.
11)Science and Technology :Now aday’s science and technology has been
tremendously developed. It introduced many new instrument appliances
etc. which results in unemployment.
12)Modernization :Some industries havebeen trying to reduce cost of
production by introducing a measure of modernization.Which results in
retrenchment and unemployment.
13) High rate of taxes:
The gout imposers taxes an income,Wealth, Excise , custom etc. at a
very high rate.Therefore manufactures employ minimum employers and
even the citizens cannot start private businesses due to heavy taxes.

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CONSEQUENCES OF UNEMPLOYMENT:

• It involves wastage or under utilization of valuable human resources.

•Frustrated young persons are liable to be exploited for unsocial
purposes and indulge in anti-social activities,
• Fall off standard of living and increase of poverty among public.
• Mass illiteracy and ill health are the result of unemployment.
• Backwardness and under development of unemployed people.
• The time and energies of a large mass of people are not gainfully used

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Types OF UNEMPLOYMENT:
1. Frictional Unemployment
 The Frictional Unemployment also called as Search Unemployment,
refers to the time lag between thejobs when an individual is searching
for a new job or is switching between the jobs.
 In other words, an employee requires time for searching a new job or
shifting from the existing to a new job, this inevitable time delay causes
the frictional unemployment. It is often considered as a voluntary
unemployment because it is not caused due to the shortage of job, but
in fact, the workers themselves quit their jobs in search of better
opportunities.

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Types OF UNEMPLOYMENT:
2.Structural Unemployment:
 It is a category of unemployment arising from the mismatch between the
jobs available in the market and the skills of the available workers in the
market.
⚫ Many people in India do not get job due to lack of requisite skills and
due to poor education level, it becomes difficult to train them.

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Types OF UNEMPLOYMENT:
3.Cyclical Unemployment:
⚫ It is result of the business cycle, where unemployment rises during
recessions and declines with economic growth.
⚫ Cyclical unemployment figures in India are negligible. It is a phenomenon
that is mostly found in capitalist economies.

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Types OF UNEMPLOYMENT:
4.Seasonal Unemployment:It is an unemployment that occurs during
certain seasons of the year.
Agricultural labourers in India rarely have work throughout the year.

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Types OF UNEMPLOYMENT:
6. Vulnerable Unemployment: People are deemed unemployed under
this unemployment. People are employed but informally i.e. without
proper job contracts and thus records of their work are never
maintained. It is one of the main types of unemployment in India.
7. Technological Unemployment: the situation when people lose their
jobs due to advancement in technologies. In 2016, the data of the World
Bankpredicted that the proportion of jobs threatened byautomation in
India is 69% year-on-year

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Types OF UNEMPLOYMENT:
Occupational structure in India

Occupational Sector Share in

structure in India Employment Share
in GDP

Primary Sector 50%

14%
Secondary Sector 15%
21%
Tertiary Sector 30%
65%

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Unemployment Trap
 It is a situation when unemployment benefits discourage the unemployed
to go to work. People find the opportunity cost of going to work too
high when one can simply enjoy the benefits by doing nothing.
 Description:While the purpose of social security and welfare systems is
to provide relief to the unemployed, they end up providing them with an
incentive not to return to work.
An unemployment trap arises when opportunity cost of going to work is
higher than the income received, discouraging people from returning to
work and being productive.

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Harmonised unemployment
 the rates define the unemployed as people of working age who are
without work, are available for work, and havetaken specific steps to
find work.The uniform application of this definition results in estimates
of unemployment rates that are more internationally comparable than
estimates based on national definitions of unemployment.
 This indicator is measured in numbers of unemployed people as a
percentage of the labour force and it is seasonally adjusted.The labour
force is defined as the total number of unemployed people plus those in
civilian employment.

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Steps Taken by Government

⚫ Integrated Rural Development Programme (IRDP) was launched in
1980 to create full employment opportunities in rural areas.
⚫ Training of RuralYouth for Self-Employment (TRYSEM):This scheme
was started in 1979 with objective to help unemployed rural youth between
the age of 18 and 35 years to acquire skills for self-employment. Priority was
given to SC/STYouth andWomen.
⚫ Pradhan Mantri KaushalVikasYojana (PMKVY), launched in 2015 has
an objective of enabling a large number of Indian youth to take up industry-
relevant skill training that will help them in securing a better livelihood.
⚫ Start Up India Scheme, launched in 2016 aims at developing an ecosystem
that promotes and nurtures entrepreneurship across the country.
⚫ Stand Up India Scheme, launched in 2016 aims to facilitate bank loans
between Rs 10 lakh and Rs. 1 crore to at least one SC or STborrower and at
least one women borrower per bank branch for setting up a greenfield
enterprise.
.

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Mahatma Gandhi National Rural Employment Guarantee Act

⚫ MNREGAis one of the largest work guarantee programmes in
the world.
⚫ Objective:The primary objective of the scheme is to guarantee 100
days of employment in every financial year to adult members of any rural
household willing to do public work-related unskilled manual work.
⚫ Legal Right to Work: Unlike earlier employment guarantee schemes,
the act aims at addressing the causes of chronic poverty through a rights-
based framework.At least one-third of beneficiaries have to be women.
⚫.
.

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MCQ
⚫ Q1. Unemployment that occurs during the normal workings of an
economy as people change jobs and move across the country is called
.
A. structural unemployment.
B. natural unemployment
C. frictional unemployment
D. cyclical unemployment

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MCQ
⚫ Q2. The natural rate of unemployment is generally thought of as the
A. the sum of frictional unemployment and structural unemployment
B. the ratio of the frictional unemployment rate to the cyclical
unemployment rate
C. the sum of frictional unemployment and cyclical unemployment
D. the sum of structural unemployment and cyclical unemployment

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MCQ
Q3.A sales manager of an equipment manufacturing company loses his job
because the company relocated the unit to another country is an example
of unemployment.
A. Seasonal unemployment
B. Frictional unemployment
C. Cyclical unemployment
D. Structural unemployment

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MCQ

Q4.When the rate of unemployment increases because of recession or

depression. It is which type of unemployment?
A. Structural unemployment
B. Seasonal unemployment
C. Cyclical Unemployment
D. Frictional Unemployment

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MCQ

Q5.What type of unemployment is found in developed

countries?
⚫ (a) Involuntary unemployment
⚫ (b)Voluntary unemployment
⚫ (c) Structural unemployment
⚫ (d) Disguised Unemployment

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MCQ

Q6.If new computers are being installed in a company and some

employees are fired from the job due to lack of computer
knowledge then what kind of unemployment will it be
called?
⚫ (a) Disguised Unemployment
⚫ (b) Structural unemployment
⚫ (c) Hidden unemployment
⚫ (d) Frictional unemployment

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MCQ
Q7.Who developed the concept of disguised unemployment?
⚫ (a) John Keynes
⚫ (b)Amartya Sen
⚫ (c) John Robinson
⚫ (d)Alfred Marshall

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MCQ
Q8.Who are counted in the labour force of a country?
⚫ (a)The population of 18 to 60 years of age
⚫ (b)The population of 15 to 65 years of age
⚫ (c)The population of 18 to 65 years of age
⚫ (d) Population of 21 to 62 years of age

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MCQ
Q9.What is the right formula to know the unemployment rate?
⚫ (a)Total number of unemployed / total labour force X 100
⚫ (b)Total labour force / Total number of unemployed x 100
⚫ (c)Total number of unemployed / total labour force x 1000
⚫ (d)Total labour force / Total number of unemployed x 1000

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MCQ

Q10.In which type of unemployment do the marginal

productivity of the workers is zero?
⚫ (a) Disguised Unemployment
⚫ (b) Involuntary unemployment
⚫ (c) Seasonal unemployment
⚫ (d) Structural Unemployment

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MCQ
1.C
2.A
3.D
4.C
5.B
6.D
7.C
8.B
9.A
10.A

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