India’s Employment Story Over a Decade

Context

Job creation has been a topic of debate in the country, again brought to the fore by recent youth protests and the employment data, which has shown that economic growth is not necessarily tied to employment generation.

Key Highlights

• Employment generation has again been at the heart of policy debates, as such issues are becoming more prominent in public debates and among the youth.
• Recent indicators of employment suggest that the Indian economy has grown considerably but employment has not increased sufficiently to match the increasing population of working age India.
• There are more concerns about the quality, quantity and sustainability of employment.

Understanding Employment Data

• Employment Rate (ER)

  • The Employment Rate is the percentage of working-age persons who are employed.
  • It is expressed as the proportion of economically active people to the number of working-age population.
  • It gives a more reliable indication of jobs than the unemployment rate.

• Unemployment Rate (UER)

  • Unemployment Rate is the percentage of people who are looking for work but don’t have a job.
  • When the unemployment rate falls, it does not necessarily mean that more jobs are being created because many discouraged workers may cease to look for employment.

• Labour Force Participation Rate (LFPR)

  • The Labour Force Participation rate (LFPR) is the percentage of the working-age population who are either employed or in the labour force.
  • LFPR varies widely across India and is a better measure in India than the Employment Rate.

Key Employment Trends (2016-17 to 2025-26)

• Overall Employment Decline
  • The Employment Rate declined from approximately 42.7% in 2016-17 to 38.7% in 2025-26.
  • The jobs gap closed from 406 million to 438 million.
  • But the job creation was not able to keep pace with a rapidly expanding working-age population.
• Gender-wise Trends
  • The Male Employment Rate went down to 64.8 per cent from approximately 70.5 per cent.
  • The rate of female employment dropped from 11.8% to 9.4%.
  • The figures point to the continuing problems of women’s labour force participation.
• Age-wise Trends
  • The overall employment rate was down in most age groups.
  • Modest improvements were only reported for the age categories 25-29 and 55-59 years.
  • Lower age groups of workers still encounter major obstacles to employment.
• Education-wise Trends
  • All educational groups saw Employment Rates fall.
  • There was the highest drop among those with just a primary education.
  • In addition, there was a slight drop in the number of graduates in work despite not being quite so pronounced as the drop in employment.
• Religion-wise Trends
  • There was a decrease in employment among all three religions namely Hindu, Muslim and Sikh.
  • The only group to show a slight improvement was Christians.
  • Overall, it appears that unemployment is impacting all communities.
• Caste-wise Trends
  • The employment rate has decreased among all the scheduled castes, scheduled tribes, OBCs and other castes.
  • The overall job growth downturn was not to be avoided by any large segment of society.

Major Causes of Employment Challenges

• Jobless Growth
  • More and more capital-intensive sectors have been responsible for economic growth than labour-intensive sectors.
  • Lack of employment opportunities in manufacturing.
• Skill Mismatch
  • Lots of graduates are not skilled in industry.
  • Labour market requirements do not align with the outcomes of education.
• Slow Manufacturing Expansion
  • India has not followed the labour-intensive industrialisation model followed by East Asian economies.
  • Employment in manufacturing is still small.
• Informal Sector Dominance
  • Much work is precarious, low-paid and without any rights.
  • The pace of job creation in the formal sector has been fairly low.
• Automation and Artificial Intelligence
  • Demand for repetitive tasks is decreasing due to the quick pace of technology.
  • AI has created new opportunities for blue and white collar jobs.
• Global Economic Challenges
  • The opportunities for export-led job creation have been diminished by protectionism and the slowdown.
  • Labour intensive industries are impacted by the rise in trade barriers.

Implications for India

• Economic Implications
  • Higher unemployment reduces the incomes of households and their demand for consumption.
  • Unemployment growth can have a negative effect on the sustainability of the economy.
• Social Implications
  • Unemployment can be a breeding ground for social grievances and youth discontent.
  • Economic insecurity can create economic inequalities.
• Demographic Implications
  • The demographic dividend of India can turn into a demographic liability if jobs are not provided.
  • Hiring young people into productive employment is key to unlocking their potential in India.

Government Initiatives

• Skill India Mission.
• Make in India Programme.
• Production Linked Incentive (PLI) Scheme.
• Startup India Initiative.
• Digital India Programme.
• PM Vishwakarma Scheme.
• National Apprenticeship Promotion Scheme (NAPS).

Challenges in Existing Policies

• The focus on current growth strategies is typically on GDP growth rather than employment.
• There is need for increased policy support for labour-intensive industries.
• Economic planning is not always linked to employment.

Way Forward

• Promote Labour-Intensive Manufacturing
  • Stimulate industrial sectors like textiles, footwear, food processing and electronics assembly.
• Improve Skill Development
  • Make education and vocational training more relevant to industry.
  • Strengthen apprenticeship programmes.
• Increase Female Workforce Participation
  • Expand childcare facilities.
  • Enhance safety and flexibility in the workplace.
• Support MSMEs
  • Promote financial, technological and market access for small enterprises.
  • MSMEs continue to be the major employment creators.
• Encourage Export-Led Growth
  • Improve global competitiveness.
  • Engage more fully in global value chains.
• Prepare for AI and Automation
  • Support reskilling and lifelong learning.
  • Promote digital and emerging technology skills.

Source: The Indian Express

Mains PYQ

Q. Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (2023)

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