When India gained Independence in 1947, there were numerous challenges that the new republic was facing. Creating appropriate employment opportunities for its population was one of those biggest challenges. The long British colonial rule had wrecked the economy, which meant that India had to begin from the beginning to rebuild.
Over the decades, the nature and structure of unemployment in India has changed. It has reflected the economic transformation in the country and the policy interventions. At the same time, shifts in global power, technological advancements and other factors have also had a huge impact on India’s employment landscape.
Historical Trends
During the early years of Independence, as mentioned above, India faced many challenges including high unemployment rates. The measurement of unemployment during this time was also done through rudimentary methods, mainly based on census data and some surveys. This meant that the nuances of unemployment were not observed at the time while the focus was solely on finding out how many people were out of work. It took India some time to develop the right tools and processes to gauge the depth of the problem in order to create effective solutions.
In the 1970s and 1980s, the National Sample Survey Office (NSSO) began conducting more comprehensive surveys, providing a clearer picture of unemployment. Some new processes like understanding the Current Daily Status and the Usual Status helped with more nuanced exploration of unemployment patterns in the country.
One of the biggest shifts in the Indian employment landscape happened after the liberalisation of the economy in 1990. The policy change created big changes in the labour market as the Indian economy was opened to international trade which meant companies from around the world could now establish their presence in the country. This led to widespread employment generation in the following decades. The shift from an agrarian economy to a more industrial and service-oriented one led to changes in employment patterns.
During this time, the NSSO surveys also kept evolving with new methodologies introduced in them to improve efficiency of the data collected. In 2017, Periodic Labour Force Survey (PLFS) was introduced which further refined the measurement process of unemployment in the country through quarterly assessment and including informal employment too.
Unemployment in India and Changes in Labour Market
While the measurement of employment saw massive shifts in the decades following Independence, the labour market also evolved with changing conditions. One of the biggest shifts was moving from a predominantly agrarian economy to creating opportunities in the industrial sector. In the 1950s, agriculture accounted for over 70% of employment, but this has declined to around 42% in recent years.
Another change that has happened in the last two decades is the impressive growth in the services sector like Information Technology (IT). This has created new opportunities for Indian youth and has also established India as a reliable centre for skilled workforce in these industries.
Another factor that has played a crucial role during this time is urbanization. As more and more people migrated from rural parts of the country to the cities, it led to an expansion of the informal sector. According to the International Labour Organization (ILO), around 81 per cent of India’s working population is employed in the informal sector. While it is a great source of employment for millions of Indians, there are also concerns regarding the poor working conditions and lack of job security.
Lately, with the rise of technology-based startups in the country, the gig economy has also ballooned which has created more employment. However, it has also been mostly informal in nature, not providing the workers necessary benefits and security.
Unemployment Numbers Over the Years
Now that we have understood the changes in the unemployment landscape and measurement techniques over the decades, let us see how the unemployment rate in India has fluctuated over time.
1960s-70s: While the data is sparse and not reliable, some estimates suggest that the majority of the population was employed in the agriculture sector, which meant that the actual unemployment rate at the time was relatively low, around 2-3 percent. However, there was no way to measure issues like seasonal unemployment and nuances of poverty at the time.
1980s: During this decade, the recorded unemployment rate remained low at around 2.8 per cent according to the World Bank data. This can be attributed to the same factors that majority of people were employed in the agriculture sector and the measurement of employment was primarily done through rudimentary tools like surveys.
1990s: This was the time of post-liberalisation which witnessed the biggest shifts in the labour market. New opportunities created by liberalisation pushed people from rural areas to migrate to cities in search of better jobs and incomes. It could also be that the government had gauged the rural distress and brought this significant change in India’s economic policy due to the increasing unemployment which was not being measured by the surveys in the past. This is perhaps the reason behind the increase in unemployment rate at the time which reached around 7 per cent.
2000s: The Indian economy benefitted from liberalisation in the following decades and the unemployment rates fell in the following years. At this time, the recorded unemployment rate was between 4-5 per cent. However, it fluctuated a lot as the world witnessed the global financial crisis in 2008.
2010s: During this decade, the unemployment rate remained stable at around 5-6 per cent. However, the introduction of PLFS revealed a bleaker picture with the unemployment rate at 6.1 per cent in 2017-18.
2020s: The unemployment rates peaked at this time because of the covid-19 pandemic and the subsequent impact on the world economy as well as Indian economy. The lockdown halted all the activities severely impacting those working in the informal sector. The unemployment measurement also paused during this time. However, the economy has recovered gradually since 2022 and the unemployment rate is again stabilising.
Challenges in Addressing Unemployment
Even today, with all the transformations and policy interventions, India continues to struggle with the problem of unemployment. The growth is often seen as V-shaped with the rich becoming richer and the poor becoming poorer. The unemployment rate for the younger population is higher than the national average and the lack of new opportunities is a grave concern for the country.
At the same time, the dominance of the informal sector in providing the majority of jobs is a concern too because of the job security issues and the poor working conditions. Gender disparities in employment also persist. Women’s labour force participation rate in India is among the lowest in the world, with cultural and social norms often restricting women’s access to employment opportunities. Addressing these disparities is crucial for achieving inclusive economic growth.
Solutions and Future Scenario
To address these challenges, there needs to be a concerted effort to improve the measurement techniques and to provide better job opportunities. Here are some of the immediate steps that can be taken:
- Skill development: Investing in education and skill development is essential to bridge the skills gap and enhance employability. There are many initiatives like the Skill India Mission which aim to provide vocational training to millions of young people to prepare them for the modern job market. Putting stronger emphasis on STEM (Science, Technology, Engineering and Mathematics) education can also prepare the workforce for emerging industries.
- Promoting Entrepreneurship: A good way to create job opportunities is to start new businesses. Government programmes like Startup India and the Atal Innovation Mission provide support to startups and entrepreneurs. Access to credit and financial services for small and medium enterprises (SMEs) is also crucial for promoting entrepreneurship. More work should be done in this area to support entrepreneurs from rural areas and those who are not connected to the urban networks.
- Strengthening Rural Economy: Rural unemployment is one of the biggest challenges for India and it also needs to reduce the burden of migration to ensure that the growth is sustainable. Initiatives like MNREGA work towards addressing this issue. However, bringing in more investments in rural areas can further help with strengthening the rural economy.
- Supporting Informal Sector: Government needs to come forward and institute checks and balances ensuring that the workers in the informal sector have the right security and benefits. More and more work should be done to formalize the informal sector by providing social security benefits, access to credit and skill development. Minimum wages and redressal mechanisms for workers can also help in bringing in more structure to the informal sector.
- Leveraging Technology: One of the biggest opportunities available to us today is the new technology that is rapidly changing and how we can use it for our benefit. We have already seen innovations in India in digital payments that have provided a boost to the economy. Also, the growth of the gig economy, driven by platforms like Uber and Swiggy, has created flexible job opportunities for many. However, ensuring fair wages and social protection for gig workers is essential.
By addressing the challenges and implementing these solutions, India can make the most of the demographic dividend that it has right now. The country can use its young population to grow the economy and improve the lives of millions in the near future.
