THE CAUSES AND

IMPACT OF UNEMPLOYMENT IN
INDIA
INTRODUCTION
When a person who is actively searching
for employment is unable to find a
suitable work, unemployment arises in
the economy. The Indian economy is
facing a major slowdown due to the
increasing rate of unemployment. As
India is a developing economy, nature
of unemployment is quite different
from the scenario of unemployment
prevailing in developed countries. In
India, unemployment exists in both
rural and urban areas. The stagnant
rate of growth and high rates of
unemployment occurs as a result
of a shortage in capital equipment.
Unemployment leads to under-
utilization of labour and human capital
resulting in lower productivity in the
economy. This will further aggravate
poverty, malnutrition and lower per-
capita income of the population.
However, frictional unemployment
can be present in the economy with
the rate of unemployment from two
to three percent and is unavoidable.
Despite the measures taken by the
government to reduce unemployment
rates, there exists an increasing trend
in the rate of unemployment in the
country.

OBJECTIVES
1. To analyze the current scenario
of unemployment in rural and urban
areas
2. To identify the causes of
unemployment in India
3. To recommend strategies for
improving the status of employment
in the economy

REVIEW OF LITERATURE
Abraham Vinoj (2009) shows that
when there is a distress, level of
income falls below the sustenance
level, and the proportion of population
that is not working must enter the
labour market for supplementing
the household income. The distress
that most commonly occurs in the
agricultural sector leads to lower levels
of productivity, lower income and
stagnation. The paper shows that the
income crisis that gripped farming led
to employment growth in rural areas.
BairagyaIndrajit (2018) shows that
the rate of unemployment was
higher among the educated than
the uneducated and the rate of
unemployment increases with higher
education levels. The paper analyzes
the factors responsible for higher rates
of unemployment in the economy.
The article proves that as levels of
education becomes higher, people
tend to demand jobs with a good pay-
scale and do not prefer jobs in the
informal sector. The paper reinforces
the need to enhance capital formation
in order to reduce unemployment rate
in India.
THE INDIAN SCENARIO
The huge population in India has led to a greater
need for employment opportunities.
However, the jobs
available are lesser than the number of job-seekers
in the country. The low level of education and
vocational skills of the people have further led to an
increase in unemployment rate.
The society does not receive adequate support from
the government and poor infrastructural facilities has
created a situation of crisis in the economy. As India
is a developing country with a majority of population
living in the rural areas, people are more dependent
on informal jobs that are irregular in nature with
several health hazards. In the primary sector, a low
productivity and lack of alternative opportunities for
agricultural workers makes it difficult for transition
from agricultural to industrial or services sector. A
lower investment and inadequate growth of the
manufacturing sector also restricts its employment
potential.
The problem of unemployment leads to lesser rate of
growth and development in the economy. It increases
the level of poverty and malnutrition due to low or no
income for the population, thus affecting the health
status of the people.

GOVERNMENT INITIATIVES
The following are the initiatives taken by the
government to increase employment opportunities in
the economy:
Integrated Rural Development
Programme (IRDP): Launched in 1980, this scheme
aims to create full employment in rural areas.
Training of Rural Youth for Self-Employment
(TRYSEM): Launched in 1979, this scheme aims to
make unemployed youth in rural areas between 18-
35 years to acquire self-employment skills.
Mahatma
Gandhi
National
Rural Employment Guarantee Act
(MGNREGA): This scheme, launched in 2005, aims
at providing social security by guaranteeing minimum
100 days of paid work in a year to families that have
adult members opting for an unskilled labour-
intensive work.
Pradhan
Mantri
Kaushal
VikasYojana (PMKVY): The scheme launched in
2015, aims to enable a large number of youth in the
country to take up skills training required for
industries.
• Start Up India Scheme:
Launched in 2016, the objective of the scheme was
to develop an ecosystem that promote
entrepreneurship in the country.
Stand Up India Scheme:
Launched in 2016, the objective of this scheme was
to provide bank loans from Rs. 10 Lakh to Rs. 1
Crore for atleast one SC/ST borrower and to
minimum one woman borrower per branch of the
bank to set up a greenfield enterprise.
CAUSES OF UNEMPLOYMENT IN • INDIA
In India, the rate of unemployment has been
increasing over the past few years in both rural and
urban areas.
This has led to a slow rate of growth in the economy
and hinders economic
Lack of full employment: The industrial sector does
not work to its maximum capacity due to lack of
adequate machinery and supply of raw materials due
to which they are unable to hire maximum workers in
factories.
development. The following are the main reasons for
unemployment in India:
• Higher population: The rate of growth of population
is increasing continuously for the past decades.
The number of people in the country, especially the
youth population, is much greater compared to the
number of jobs available. This creates a situation of
unemployment in the economy.
• Poverty and Illiteracy: One of the main reasons for
unemployment is due to a lesser number of people
being educated and literate. As they do not possess
the skills necessary for employment due to low levels
of income and standard of living, they often find it
difficult to obtain jobs in the formal sector.
Inflation: A continuous rise in prices without a
proportionate increase in goods and services
produced, leads to fall in real income in the hands of
RECOMMENDATIONS AND SUGGESTIONS
The following are the suggestions made in order to
reduce the problem of unemployment in India and to
improve the status of workers:
• By providing
adequate
Skill-
based and vocational training, unemployed youth can
obtain jobs in industrial and services sector.
• An increased investment from the government and
diversification in the agricultural sector will not only
increase productivity but also helps to reduce
unemployment.
Labour- intensive technology has to be adopted by
the formal and informal sectors in order to increase
employment opportunities in both rural and urban
areas.
• An increased
and continual
growth in services sector can create greater
employment opportunities for highly-skilled workers
and improve the standard of living in the society.
the public. When there is an increase in population,
supply of labour is
Improvement in education and
greater than the demand which has an
health care services increases human
adverse impact on wages. This leads capital
formation and provides more to more people being
unemployed as employment opportunities to the they
are not satisfied with the current public. wages being
offered to them.
• On-the Job training and
Agricultural workers: The
employment subsidies can be provided
people who are employed in the
to the existing employees to improve
agricultural sector are employed only
their current skills and to increase job
upto a certain period of time and are
satisfaction and reduce shift from one
unable to find jobs for other parts of job to another.
the year.
Casual and informal labour:
As the number of jobs available is much lesser
compared to those who are in need of work, people
tend to work in the informal sector which comprises
of low and irregular wages.

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