Essay on What Are The Reasons Behind High Unemployment Rate In India Coupled With Reducing Labour Force Participation Rate

Despite high GDP Growth for the last few years, the unemployment rate in India stands 45- year high at 6.1% in 2017-18, as per National Sample Survey Office (NSSO)'s Periodic Labour Force Survey. The Labour Force Participation Rate (LFPR)- the proportion of population working or seeking job or available for work- declined to 37.5% in 2018-19 from 39.5% in 2011-12.

A Global slowdown marked by protectionist trade policies combined with impacts of Covid19 has resulted in less exports which means less employment opportunities for the residents. India’s exports stand at USD 530 billion in 2019, ranked at 12th globally. On the other hand, china’s exports stand at USD 2600 billion in 2019, ranked at 1st. That is 5 times of India’s global exports.

Due to demonetization, haphazard GST rollout and destruction caused by covid-19, the MSME sector is facing a serious Cash crunch. This has resulted in a sizable portion of workers losing their jobs. According to ILO, MSME sector employs 11 crore workers in non- agriculture sectors alone, out of total workforce of 50 crore. Out of a total of 6 crore MSMEs in non-agriculture sector, more than 35% have started shutting shop due to covid.

According to NITI Aayog, The weight of organized employment in total employment stands between 85 - 92%. It is unsustainable to have such a large portion of working population to be employed without any social security benefits. During global lockdown, a major chunk of unorganized workers have lost their jobs in India.

The MSME sector is not able to scale up due to restrictive and unfriendly business policies of the government. A restricted MSME sector is not able to generate enough employment opportunities to the masses. Most of the big businesses in India follow capital intensive manufacturing, not generating enough employment.

Employment policies of the government are not friendly towards manufacturing and services. Thus, majority population in India is still employed in agriculture due to unavailability of organized jobs in manufacturing and service sector. In 2020, 41.5% of labour force in India is employed in agriculture, 32.5% in services and 26% in Industry.

A major portion of Indian youth is enrolled in primary and higher educational institutions. India’s Eligibility enrolment ratio stands at 65%, at par with developed countries.

One reason for the youth not getting job is the difference between skills that the industry requires and skills that the youth have. This is evident from the recent survey of NSSO which reveals that joblessness among trained youth stands at 12.4% in 2017-18, as compared to 5.9 % in 2011-12 

Despite having majority of our population in working age group, the LFPR is falling consistently due to the following reasons-

The youth, instead of looking for Jobs in the private sector, is either enrolled in higher education or working towards Jobs in the Government sector. Thus, They drop out of LFPR. The Labour Force Participation Rate (LFPR)- the proportion of population working or seeking job or available for workdeclined to 37.5% in 2018-19 from 39.5% in 2011-12.

The reason behind declining LFPR, especially among women, is increased enrolment for higher education, which allows them to pursue leisure and other non-work activities, reducing female labour force participation. As per AISHE, Women’s enrolment in higher education, which was less than 10% of the total enrolment on the eve of Independence, has risen to 48.6% in 2018-19.

As household income increases in married households, women are forced to leave their jobs to look after the family. Work is not considered a part of lifestyle for women, rather something to be done only in desperate times.

A cultural bend towards white collar jobs forces many in the working age population to drop out of the workforce, if they are unable to find a suitable job.

India is on the verge of converting its demographic dividend into a demographic disaster. If the youth and its needs are ignored any longer, a vicious cycle of unemployment, degrowth and underdevelopment will set in. A suitable policy, timely implementation and a long term vision to create productive employment inside the country can only take us back on track.

Bibliography

https:// theprint.in/india/education/study-shows-how-indias-higher-education- enrollment-canjump- to-65-from-27/441582/

https://www.statista.com/statistics/271320/distribution-of-the-workforc…- economicsectors- in-india/

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1629366 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3696778 Unemployment as on January 2021stands at 18 million

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