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Explain the various causes of unemployment in India

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  • Last Updated : 24 Feb, 2023
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Unemployment refers to a situation when a person searches for a job actively and is unable to find work. Unemployment is an important indicator of the economy. The unemployment rate is the number of people unemployed divided by the working population or people working under the labor force.


Unemployment in India

Unemployment in the context of India is a very complicated issue with many overlapping and interrelated causes; however certain important causes can be identified. This can range from the macro-level, like the overall slow economic growth to the micro-level, i.e government policies. Understanding the causes of unemployment is the first step in resolving this huge issue and fostering a society where a stable source of income can be assured for own selves and one’s family.

The unemployment rate in India, amidst lockdown and restrictions on mobility, is 12.81% as of June 8th, 2021. In 2020, the unemployment rate in India fell to 7% in September 2020 and as high as 29% since the country went on lockdown in March 2020. However, later it decreased to 9.1% in December 2020.

Unemployment in India is measured by three approaches:

  1. Daily Status Approach: It is measured for each day in a reference week. A person having no gainful work even for an hour a day is described as unemployed for the day.
  2. Weekly Status Approach: Those people are recorded who didn’t have gainful work or even unemployed for an hour on any day of the week preceding the date of the survey.
  3. Usual Status Approach: Estimates of those people who were unemployed or had no gainful work for major time of the 365 days.

Causes of Unemployment in India

The Caste System

The caste system is one of the most important factors in generating unemployment in India since time immemorial. Certain kinds of work are prohibited for members of particular castes in certain locations. Work is often given to members of a certain community, rather than to those who truly deserve the job and have the right skills to. This results in a high rate of unemployment.

Inadequate Economic Growth

Economic growth in India is inadequate and hence the economy is underdeveloped. The slow growth fails to provide enough unemployment opportunities to the ever-increasing population. With the increase in population, the economy couldn’t keep up with the demands for employment and an increasing share of people are not able to find jobs. This results in insufficient levels of employment nationwide.

Increase in Population Rate

There is a prediction of India’s population exceeding China’s by the year 2024, it will furthermore be the most populous country. Population growth couldn’t be matched by the economic growth of the country, which leads to the majority of society being unemployed.

Agriculture is a Seasonal Occupation

Only for certain months of the year, does agriculture provide employment to a huge segment of the population; which results in a considerable portion of the year, many agricultural workers lack needed employment and income.

Decrease in Small-Scale/ Cottage Industries

The advancement of industrial development has made the cottage industries to be considerably less economically attractive, as they do not offer economies of scale mass production of goods. The demand for cheap, mass-produced goods outweighs the desire for goods that are handcrafted by those with very specific skills and expertise. This results in the decline of small-scale industries and artisans have become unemployed as a result.

Low Rates of Saving and Investment

India has a scarcity of sufficient capital across the board. Because of this savings are low and this results in lesser investment. With the presence of higher rates of investment, new jobs could be created and the economy would be in a boom. Also, there is a lack of investment in rural areas and 2 & 3-tier cities, because of which there is large-scale untapped employment potential.

Ineffective Economic Planning

There is a lack of nationwide plans on account of the significant gap between labor supply and labor demand. It is important that the supply and demand for labor are balanced, to ensure that those who need jobs are able to get them, or in that case, many individuals will compete for the same job.

Immobility of the Labour

Attachment and maintenance of proximity to family play a major role for Indian citizens. Because of this, people avoid traveling long distances from their families in pursuit of employment. Also, language, religion, and climate play important roles to contribute to the low mobility of labor. So, people who might otherwise be suitable for the jobs are unable to travel to reach the, unemployment is magnified.

Job Specialisation

Jobs in developed countries have become highly specialized, but the education system of India doesn’t match the right training and specialization needed for these kinds of jobs. Thus, many people who are willing to work become unemployable due to a lack of appropriate skills.

Biased Distribution of Land

One more reason for joblessness winning in emerging nations like India is the biased appropriation of land with the goal that numerous farming families have no satisfactory admittance to the land which is a significant resource for horticultural creation and work.

Sub-division of land property under the strain of fast populace development beginning around 1951 has additionally diminished admittance to land for a few rural families. Accordingly, numerous people who were independently employed in agribusiness have become landless horticultural workers who experience the ill effects of intense joblessness and underemployment.

Rigid Protective Labor Legislation

One more justification behind the sluggish development of work in the coordinated area has been the presence of unduly unbending defensive work regulation which makes it truly challenging to conserve a laborer who has been utilized for 240 days.

Work regulation is such a lot of unbending that shutting down the unit and quitting the industry is even more troublesome. Consequently, this exorbitantly defensive work regulation prompts private business people to favor the most extreme utilization of capital instead of work.

FAQs on Causes of Unemployment in India

Question 1: What are the causes of unemployment in India?


The main causes of unemployment in India are the caste system, inadequate economic growth, increase in population, agriculture as a seasonal occupation, loss of small-scale industries, and so forth.

Question 2: What are the causes of increasing unemployment in India?


Inadequate irrigation facilities, fertilizers, and unsatisfactory growth of the infrastructure are some of the causes of increasing unemployment in India.

Question 3: Which major process is caused for unemployment in India?


Inadequate economic growth as the economy couldn’t take the rise in population, and a major chunk of people are not able to find jobs.

Question 4: Which type of unemployment is found in India?


Disguised unemployment is the type of unemployment found in India.

Question 5: How to reduce unemployment in India?


By the following methods, unemployment can be reduced in India, which includes the use of labour-intensive technology, accelerating investment in agriculture, diversification of agriculture, and so forth.

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