Unemployment in India UPSC Notes: Types, Causes & Government Measures

Unemployment refers to the condition where individuals who are capable of working and actively seeking employment are unable to find a job. It indicates the health of an economy and represents the underutilization of human resources. It is calculated as:

Key Facts about Unemployment in India:

• India's unemployment rate declined from 6.0% in 2017-18 to 3.2% in 2023-24.
• Employment in India rose to 64.33 crore in 2023-24 from 47.5 crore in 2017-18, adding 16.83 crore jobs over six years.
• Urban unemployment (6.5%) remains higher than rural unemployment (4.5%) (PLFS, MoSPI).
• Female Labour Force Participation Rate rises to 33.7% in August 2025 from 33.3% in July 2025 and 32.0% in June 2025.
• The PM Viksit Bharat Rozgar Yojana aims to create more than 3.5 crore jobs over a period of 2 years, with an outlay of Rs 99,446 crore.

Understanding the root causes of unemployment is crucial for developing effective solutions and policy interventions. Let's understand!

• Rapid population growth leads to more job seekers than available jobs.
• Slow industrial growth limits the creation of formal jobs.
• Seasonal agriculture creates employment only during certain periods.
• Informal sector dominance causes job insecurity and low wages.
• The education system is failing to provide the skills needed for emerging industries.
• Technology and automation are changing job requirements quickly.
• Socio-economic factors, including caste discrimination, gender barriers, and limited access to resources.

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India faces multiple forms of unemployment, each with distinct characteristics that reflect the country's diverse economic structure.

1. Disguised Unemployment:

• More people are employed than are actually needed for productive work.
• Primarily found in agricultural and unorganised sectors.
• Workers contribute little to no additional productivity.
• Common in family-run businesses and traditional farming.

2. Structural Unemployment:

• Results from a mismatch between available job skills and market requirements.
• Caused by changes in the economy and technological advancement.
• Affects workers whose skills become obsolete due to technological progress.
• Particularly impacts manufacturing workers due to automation.

3. Seasonal Unemployment:

• Occurs during specific seasons when demand for certain types of work decreases.
• Agricultural labourers often experience a lack of work throughout the year.
• Tourism and hospitality sectors face seasonal variations.
• Affects workers in weather-dependent industries.

4. Cyclical Unemployment:

• Result of business cycles where unemployment rises during recessions.
• Businesses lay off workers during economic downturns.
• Workers are rehired during recovery phases.
• Less significant in India compared to developed capitalist economies.

5. Frictional Unemployment:

• Temporary unemployment during job transitions.
• Time lag between leaving one job and finding another.
• Often voluntary as workers seek better opportunities.
• Natural part of a dynamic labour market.

6. Vulnerable Employment:

• People are working informally without proper job contracts.
• No legal protection or documented work records.
• One of the main types of unemployment in India.
• Affects millions in the informal sector.

India uses different surveys to measure unemployment, each looking at joblessness over different time periods and for different groups of people.

• Usual Status (US): Assesses activity over a long reference period (365 days), identifying persons usually employed or unemployed.
• Current Weekly Status (CWS): Captures work status during the seven days preceding the survey, distinguishing employed, unemployed, and outside labour force.
• Current Daily Status (CDS): Records work undertaken each day of the reference week, measuring day-to-day fluctuations in employment.
• Periodic Labour Force Survey (PLFS): Provides continuous quarterly estimates using a rotating panel design, emphasising CWS for timely labour market indicators.
• ILO's Labour Force Definition: Aligns with international standards, persons without work, available for work, and actively seeking employment, used broadly for comparability.

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The impact of unemployment extends far beyond individual joblessness, affecting society and the economy at multiple levels.

1. Economic Consequences:

• Reduced GDP and Productivity: Underutilization of human capital leads to a significant loss in potential GDP.
• Increased Government Burden: Higher spending on welfare programs and unemployment benefits.
• Loss of Tax Revenue: Unemployed individuals don't contribute to tax collections, reducing government resources.
• Decreased Consumer Spending: Limited income reduces demand for goods and services.
• Income Inequality: Unemployment widens the gap between different socio-economic groups.

2. Social Consequences:

• Mental Health Issues: Prolonged unemployment leads to depression, anxiety, and low self-esteem.
• Social Unrest and Crime: High unemployment contributes to increased crime rates and social tensions.
• Migration and Family Breakdown: Rural-urban migration puts pressure on urban infrastructure
• Loss of Human Capital: Skills deteriorate over time during prolonged unemployment periods.

3. Political and Societal Impact:

• Social Movements: Unemployment fuels demands for reservations and protests by various communities.
• Political Instability: High unemployment can lead to political unrest and dissatisfaction.
• Reduced Social Mobility: Limited opportunities for socio-economic advancement.
• Brain Drain: Qualified professionals migrate abroad seeking better opportunities.

State-wise unemployment data provides crucial insights into regional employment challenges and helps understand the diverse economic landscape across India's states and union territories.

Top 5 States with Highest Unemployment (Jan–Mar 2024, All-India, Persons):

1. Kerala: 10.7%
2. Jammu & Kashmir: 11.0%
3. Rajasthan: 9.6%
4. Himachal Pradesh: 9.1%
5. Telangana: 8.8%

Top 5 States with Lowest Unemployment (Jan–Mar 2024, All-India, Persons):

1. Assam: 6.1%
2. West Bengal: 5.2%
3. Gujarat: 4.6%
4. Delhi: 1.8%
5. Madhya Pradesh: 5.4%

The Government of India has implemented many schemes and policies to tackle unemployment through direct employment generation and skill development initiatives. Here are the major employment generation schemes:

1. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA):

• Provides 100 days of guaranteed wage employment to rural households.
• Focuses on creating durable assets in rural areas.
• Includes skill development components for transitioning to skilled labour.
• Reduces dependency on seasonal employment and migration.

2. Prime Minister's Employment Generation Programme (PMEGP):

• Credit-linked subsidy scheme for establishing micro-enterprises.
• Provides 15-35% subsidy on project cost depending on category and location.
• Maximum project cost: ₹50 lakh for manufacturing, ₹20 lakh for services.
• Implemented by Khadi and Village Industries Commission (KVIC).
• Targets both rural and urban areas for employment generation.

3. Pradhan Mantri Kaushal Vikas Yojana (PMKVY):

• Provides short-term training and certification in various skills.
• Focuses on employability and entrepreneurship development.
• Industry-aligned skill training programs.

4. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY):

• Targets rural youth from poor families.
• Provides training and placement opportunities.
• Aims to enhance employability in formal sector jobs.

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A mix of immediate job schemes and long-term reforms can sustainably lower unemployment.

• Scale up vocational training tied to industry needs.
• Incentivise labour-rich manufacturing and MSMEs.
• Diversify rural incomes via agro-industries and digital services.
• Enable women’s work through childcare support and flexible jobs.
• Use real-time PLFS data to fine-tune policies.

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