Why in news: India’s job market is struggling to absorb its rising number of graduates. Despite growing formalisation, high youth unemployment and poor job-readiness signal a deep crisis in skills, employability, and structural reforms.
1. Context & Background
- Lakhs of students graduate each year from universities, ITIs, and skill programs.
- Yet, there is a mismatch between education output and meaningful employment.
- The issue is not just unemployment, but unemployability.
2. EPFO Data: Signs of Formalisation
- Post-pandemic dip in enrolments is now reversing—March 2025 data shows a rise in formal workforce participation.
- 18–25 age group forms a major portion of new enrolments (18–21 alone contributes 18–22%).
- Indicates formalisation but raises questions about job quality, wages, and long-term security.
3. Youth Unemployment Crisis India Employment Report 2024 (ILO + IHD):
- Youth account for 83% of India’s unemployed.
- Share of educated unemployed has doubled in two decades.
4. Economic Survey 2023-24:
- Only ~50% of graduates are job-ready.
- Major gaps in digital and professional skills.
5. AI & Technological Disruption
- Rapid tech transformation and AI pose risks to traditional job roles.
Future of Jobs Report 2025 (WEF):
- 170 million jobs may be created by 2030.
- 92 million jobs displaced, net gain of 78 million (7% growth).
- But without massive reskilling, most Indian youth will be unprepared.
6. Informality & Skill Deficit
- 90% of Indian workforce is informal; salaried jobs declining since 2018.
- Contractual jobs rising, but with limited social protection.
7. Alarming skill gaps:
- 75% can’t send email with attachment.
Unemployment – Meaning
- Unemployment refers to a situation where individuals are willing to work and are actively seeking jobs but are unable to find employment.
- It is an important indicator of a country’s economic performance.
As per the International Labour Organization (ILO), a person is unemployed if they are without work, available for work, and actively looking for a job.
Types of Unemployment
1. Involuntary Unemployment
- Occurs when people are actively seeking jobs but cannot find any due to lack of opportunities.
- Example: Fresh graduates applying for jobs but getting no offers.
2. Voluntary Unemployment
- When individuals choose not to work despite job availability, often due to dissatisfaction with salary or working conditions.
- Example: An engineer refusing a low-paying customer service job.
3. Structural Unemployment
- Arises from economic or technological changes leading to a mismatch between workers’ skills and job requirements.
- Example: Factory workers lose jobs as machines replace manual labor.
4. Seasonal Unemployment
- Occurs in industries with seasonal demand, where workers are unemployed during the off-season.
- Example: Tourist guides out of work during non-peak travel months.
5. Cyclical Unemployment
- Caused by economic downturns or recessions when businesses cut back on hiring or lay off workers.
- Example: Retail staff laid off during a financial crisis due to low sales.
6. Disguised Unemployment
- Seen when more people are employed than necessary, leading to low or zero productivity.
- Example: Several interns doing repetitive work that adds no real value.
7. Frictional Unemployment
- Short-term unemployment during job changes or transitions.
- Example: A person leaving one job to find a better opportunity elsewhere.
Causes of Unemployment in India
1. Sluggish Economic Growth
- India’s economy, despite growth, fails to generate enough jobs for its rapidly expanding workforce.
- Slow industrial and manufacturing sector growth limits employment opportunities.
2. Overpopulation and Demographic Pressure
- Rapid population growth increases the number of job seekers beyond available opportunities.
- This creates intense competition and a high unemployment rate
3. Seasonal Nature of Agriculture
- Agriculture, a major employer in rural India, offers seasonal and temporary jobs.
- Off-season periods lead to underemployment and disguised unemployment in rural areas.
4. Dominance of Informal Sector
- Over 80-90% of the workforce works in informal or unorganised sectors (gig workers, daily wage laborers) with low wages and job insecurity.
- Lack of formal contracts and social security make employment precarious.
5. Underperforming Service Sector Employment
- Although the service sector contributes over 50% of India’s GDP, it employs a smaller proportion of the workforce compared to developed countries, limiting job creation.
6. Mismatch between Education and Industry Needs
- Education system does not impart industry-relevant or practical skills.
- Around 80% of engineering graduates reportedly lack employable skills.
This results in a high number of educated but unemployable youth.
7. Skill Gaps in Emerging Technologies
- Rapid growth in sectors like AI, data analytics, robotics, and blockchain demands specialized skills that many job seekers lack.
- The Economic Survey 2024 warns of AI’s disruptive potential, stressing the need for reskilling.
8. Automation and Technological Displacement
- Automation replaces routine jobs in manufacturing, services, and agriculture, reducing traditional employment.
- Demand shifts towards highly skilled workers, creating a skills divide.
9. Limited Accessibility and Social Barriers
- Issues like illiteracy, gender bias, poor communication skills, lack of transportation, and childcare facilities restrict workforce participation, especially among women and marginalized communities.
- Caste and regional disparities further limit access to employment.
10. Slow Growth of Manufacturing Sector
- Manufacturing sector growth remains below potential, limiting large-scale job creation.
- Challenges include infrastructure gaps, regulatory hurdles, and low investment.
11. Economic Informality and Lack of Social Security
- Absence of strong labour laws and social security discourages formal hiring by employers.
- Contractual and casual jobs grow, but with poor benefits and low wages.
12. Global Economic Factors
- External shocks, trade disruptions, and global recessions can slow economic growth and job creation in export-dependent sectors.
Unemployment Rate in India 2024
According to the latest Periodic Labour Force Survey (PLFS), is 3.2% in 2023–24 in the usual status category.
In the Current Weekly Status, the unemployment rate for individuals aged 15 and above decreased to 4.9% in 2024, down from 5% in the previous year.
Key Methodologies Used to Measure Unemployment in India
1. Periodic Labour Force Survey (PLFS)
- Conducted annually by the Ministry of Statistics and Programme Implementation (MoSPI) since 2017–18.
Measures employment using three reference periods:
- Usual Principal Status (UPS) – activity over the past 365 days.
- Usual Principal & Subsidiary Status (UPSS) – includes secondary activities.
- Current Weekly Status (CWS) – activity during the last 7 days.
Provides annual data for rural and urban areas; quarterly data for urban areas.
2. NSSO Employment–Unemployment Surveys
- Conducted quinquennially (every 5 years) and annually before PLFS was introduced.
- Offered detailed insights into employment patterns using similar reference periods (UPS, UPSS, CWS).
- Helped track long-term trends in workforce participation and joblessness.
3. Census of India (Decennial Census)
- Conducted every 10 years by the Registrar General and Census Commissioner.
- Divides workers into main and marginal categories.
- Provides data on employment status across geographical and demographic dimensions.
4. Economic Census by the Central Statistics Office (CSO)
- Conducted periodically to gather data on employment across agricultural and non-agricultural enterprises.
- Offers enterprise-level employment estimates.
5. Employment Exchange Statistics (EMIP)
- Part of the Employment Market Information Programme.
- Provides data on job seekers registered, vacancies notified, and placements made.
- Covers mostly the organized sector, hence not reflective of informal employment.
6. Centre for Monitoring Indian Economy (CMIE)
- A private data agency that conducts the Consumer Pyramids Household Survey (CPHS).
- Surveys around 200,000 households across India.
- Provides high-frequency, real-time data on employment, including informal sector trends.
- Often used for short-term analysis despite concerns over sample representation.
Impacts of Unemployment in India
1. Economic Impacts:
Under‑utilization of Human Resources
- A large share of the workforce remains idle, wasting valuable talent and dampening national economic growth .
Reduced Productivity & Growth
- High unemployment lowers aggregate productivity and consumption, thereby slowing GDP growth and burdening government finances .
Rising Poverty & Inequality
- Joblessness pushes households into poverty, intensifies income inequality, and increases reliance on debt—especially among lower-income and rural populations .
Fiscal Strain
- Lower tax revenues and increased social support needs place pressure on government budgets .
2. Social & Personal Consequences
Mental & Physical Health Problems
- Unemployment leads to stress, anxiety, depression, loss of self-esteem, insomnia, hypertension, poorer healthcare access, and social isolation .
Social Disintegration & Crime
- Desperation fosters antisocial behavior—rising instances of crime, corruption, gambling, substance abuse, vandalism, and even suicide or domestic violence have been linked to joblessness .
Family Strains
- Financial hardship and role changes within families can trigger conflict and exacerbate mental health issues .
3. Labour Market and Industrial Effects
Exploitation & Informality
- Workers accept subpar wages and unsafe conditions, especially in the informal economy, where labor rights are weak .
Skill Degradation & Underemployment
- Long-term unemployment erodes acquired skills, causing inefficiencies and trapping workers in low-quality or part-time roles .
Industrial Conflicts
- Joblessness intensifies tensions between employers and workers, leading to strikes and workplace disturbances .
4. Youth‑Specific Consequences
Wasted Demographic Dividend
- A significant portion of youth—especially graduates—fail to find suitable jobs, squandering India’s demographic potential .
“Scarring” Effect
- Early-career unemployment leads to persistently lower earnings, reduced innovation, social exclusion, and decreased job satisfaction .
Political & Civic Disillusionment
- Frustrations among young job-seekers have sparked protests (e.g., smoke-bombing Parliament) and growing distrust in government .
5. Broader Socio‑Political Consequences
Political Instability & Unrest
- High unemployment fuels protests, strikes, migration pressures, and voter backlash—especially when government jobs remain unfilled .
Intergenerational Poverty
- Continued joblessness perpetuates cycles of poverty, particularly among marginalized castes, fostering systemic inequities and debt bondage .
Government Initiatives to Tackle Unemployment in India:
1. Job Matching & Career Support
- National Career Service (NCS): Online platform for job matching, career counselling, skill training, and internships.
- FutureSkills PRIME: Digital reskilling for youth in AI, cloud, and other tech fields.
2. Rural & Urban Employment Schemes
- MGNREGA: Guarantees 100 days of rural employment per household.
- DAY-NULM & NRLM: Promote self-employment, skills, and support for urban and rural poor.
- DDU-GKY: Skill training and placement for rural youth.
3. Entrepreneurship & Livelihood Support
- PMEGP: Credit-linked subsidies for starting micro-enterprises.
- Pradhan Mantri Mudra Yojana (PMMY): Collateral-free loans to MSMEs.
- Stand-Up India: Loans to SC/ST and women entrepreneurs.
4. Skill Development & Apprenticeship
- PMKVY: Industry-relevant skill training and certification.
- National Apprenticeship Promotion Scheme (NAPS): Incentives for employers to train apprentices.
- PM Vishwakarma Scheme: Toolkit and training for traditional artisans.
5. Industrial & Economic Boost
- PLI Scheme: Encourages manufacturing and job creation in 14 sectors.
- Employment-Linked Incentive (ELI) Scheme (2025): ₹1 trillion initiative to generate 35 million jobs with wage subsidies.
6. Education & Institutional Reforms
- NEP 2020: Integrates vocational training into education.
- ITI & NSTI Upgradation: Modernizes training infrastructure for 2 million youth.
7. State-Level Initiatives
- Aizawl Pilot Scheme: Paid apprenticeships for Northeast youth.
- TN Recruitment Portal (2025): Free portal to connect certified candidates with employers.
Way forward
A. Education Reforms
- Strong industry-academia collaboration—possibly made mandatory.
- Institutions must be accountable for placements, not just degrees.
- Introduce accreditation linked to employment outcomes.
B. Skill Integration
- Mandatory Idea Labs, Tinker Labs, soft skills, and foreign languages.
- Focus on humanities integration to build holistic professionals.
C. Global Skilling Outlook
- Align skilling with demands of ageing foreign economies (e.g., EU, Japan).
- Leverage projects like EU’s Link4Skills to enable international mobility.
D. Institutional Overhaul
- Proposal for an Indian Education Services (IES) to bring top talent into education.
- Invite industry professionals into teaching roles to bridge theory-practice divide.
E. Strengthen Social Safety Nets & Urban Employment
- Expand employment guarantee schemes like MGNREGA to urban areas and improve social security measures to protect vulnerable populations.
F. Promote Apprenticeships and On-the-Job Training
- Increase adoption of apprenticeship schemes to provide practical experience and improve workforce readiness.
