India’s Mass Unemployment 

India’s Mass Unemployment 

Context:

• The 2024 Budget announced five major employment schemes under the Employment Linked Initiative scheme, with a ₹2 lakh crore outlay over five years, to provide jobs and skilling opportunities for 4.1 crore youth. 
• This initiative complements the push for private sector job creation, which has been fueled by lower taxes and higher profits since 2019.

About India’s unemployment:

Key observation about India unemployment  according to PLFS data:

• Past trend since liberalisation: Unemployment rates remained stable at 3.6% to 4.0% from 1991 to the early 2000s but rose to 6.1% by 2018. 
• The COVID-19 pandemic caused a peak of 12.81% in mid-2021, with recovery bringing the rate down to 7.2% in 2022.

Current Trends: According to the Economic Survey 2023-24:

• Unemployment Rate: The unemployment rate has declined to 3.2% in 2022-23.
• Youth unemployment remains a critical issue, with approximately 18.4% of those with secondary education or higher being unemployed in 2022, despite a general decline in overall unemployment.
• The female labour force participation rate has been rising for six years, from 23.3% in 2017-18 to 37% in 2022-23, driven mainly by the rising participation of rural women.
• Additionally, gender gaps in employment are widening, and regional disparities in employment outcomes are significant across states.

Challenges in providing employment and proposed solution

Agriculture Sector:

• Employs 45% of the workforce, 
• Challenges:
  • • Facing disguised and seasonal unemployment due to low productivity and dependence on monsoons.
    • Economic Disparities: Regional disparities exist, with urban areas generally having better employment opportunities compared to rural regions.

• Solution:
  • • Diversification: Shift to labour-intensive, high-value crops like horticulture and animal husbandry to boost rural income and job creation.
    • Agro-Processing: Promote agro-processing to reduce waste, add value, and create rural jobs.
    • Pradhan Mantri Kisan SAMPADA Yojana (PMKSY): Launched in 2016 to enhance the food processing ecosystem by developing Mega Food Parks, integrated cold chains, and value addition infrastructure.
    • Mega Food Parks Scheme: Focuses on establishing food processing units in clusters to provide farmers with modern facilities and market access, reducing wastage and improving food quality.
    • Agro-Processing Clusters: Promotes the creation of clusters to support group entrepreneurship and develop modern infrastructure and common facilities for food processing.
    • Investment in Technology: Implement modern farming techniques to enhance productivity while supporting, not replacing, labour.

Manufacturing Sector:

• Accounts for 11.4% of employment, 
• Challenges:
  • • Faces structural unemployment due to skill mismatches and other challenges like slow investment and poor infrastructure.
    • In India, the impact of the Fourth Industrial Revolution is already visible. Automation and artificial intelligence are replacing routine tasks, leading to job losses in sectors like manufacturing and IT services. 

IMF study on the impact of AI:

• An IMF working paper highlights that AI’s impact varies by labour type and country. 
• Unlike previous disruptions that mainly affected low-skill jobs, AI is expected to significantly impact high-skill roles. 
• Advanced economies like the US and UK, with at least 60% of employment in high-exposure occupations, face significant exposure to AI. 
• In contrast, emerging markets like India, where less than 30% of employment is exposed to AI, and a larger share of jobs is in agriculture, face lower immediate risk from AI. 
• However, as AI advances, it could threaten labour-intensive sectors, such as call centres, potentially undermining these economies’ competitive advantages and complicating income convergence with advanced economies.

• Solution: According to the Economic Survey 2023-24: 
  • • Enhancing skill Development like PMKVY to align with industry needs; currently, only 4.4% of youth are formally skilled.
    • Community-Based Skilling: Implement decentralised, community-driven skilling programs to align with local needs and enhance job placement.
    • Balancing Technology and Labour so that  AI complements rather than replaces human labour, adapting technology to workforce needs.
    • Education-Employment Gap Bridging: Reform education to align with job market needs, improving employability.
    • Craftsmen Training Scheme at Industrial Training Institutes (ITI’s): ITIs have enrolled over a lakh persons in long-term training since 2014. Women’s participation in ITIs and NSTIs rose to 13% in FY24. A new Data-driven Grading Mechanism (DDGM) was introduced to evaluate ITIs.
    • Jan Shikshan Sansthan (JSS): Trained over 26 lakh individuals, with about 82% being women. 30 Model JSS are being developed with updated equipment and trained trainers.
    • National Apprenticeship Promotion Scheme (NAPS): Engaged 32 lakh apprentices from FY17 to FY24. Registered establishments on the NAPS portal increased significantly. Women’s participation grew by one-fifth in 2023-24, and a new stipend support scheme reimburses a portion of the stipend directly to apprentices.

Services Sector:

• Represents 28.9% of employment, 
• Challenges: Facing Frictional unemployment and a significant portion of workers in vulnerable, informal roles with low wages.
• Solution According to Economic Survey 2023-24 
  • • Focus on the gig economy and care economy, such as community-based crèche systems, to support working women.
    • Formalisation of Jobs: The net payroll additions under EPFO have more than doubled in the past five years, signalling healthy growth in formal employment.
    • Support for Emerging Services: Boost growth in high-potential sectors like IT, healthcare, and tourism for significant job creation.
    • Integrated Development Initiatives: Converge education, health, and employment programs with women’s collectives for holistic human development.
    • Vocational Training in Colleges: Mandate vocational courses alongside academic programs to improve employability.
    • Standardised Healthcare Training: Align nursing and allied health courses with international standards for better job quality.

Construction Sector:

• Engages 13% of the workforce,
• Challenges: Experiencing cyclical unemployment due to economic fluctuations and challenges like informal practices and skill shortages
• Solution: According to the Economic Survey 2023-24, enhancing the construction sector requires improving wages, formalising employment, increasing public expenditure on infrastructure, and investing in skill training.

Informal Sector:

• Over 90% of the workforce is in this sector, 
• Challenges: Facing vulnerable employment with low wages, poor working conditions, and minimal job security.
• Solution:
  • • Social Security Measures: Introduce safety nets for informal workers to enhance their working conditions and security.
    • Access to Finance: Improve credit access for informal workers and small entrepreneurs to boost economic stability and growth.