The Gaping Maw Of Unemployment In India

The unemployment rate in 2012 will increase up to 202 million and it is on an upward trend for 2013, the International Labour Organization (ILO) reported on Monday.  Experts predict an unemployment rate reaching 6.2 per cent by 2013.

Source: www.financialexpress.com, May 01, 2012

Against the global unemployment rate, consider this- the unemployment rate in India has been consistently increasing, and stands at 9.8% in 2010-2011!

Over the past decade, India has been regarded as the success story of globalization. India’s success is attributed to off-shoring of IT-enabled services, backed by reforms leading to global economic integration and domestic deregulation. Yet, even before the global economic crisis, in spite of high income growth in the organised sector, India faced the challenges of increasing inequalities and falling standards of living among marginalized groups.  

In order to understand the Indian unemployment crisis, it is important to understand these basic terms.

• Labour Force: The labour force is defined as the number of people employed plus the number unemployed but seeking work. 
• Unemployment Rate: The unemployment rate can be defined as the number of people actively looking for a job as a percentage of the labour force.
• Gross Domestic Product (GDP): The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
• Primary Sector: Where the economic activity involves exploitation of natural resources. Typically, agriculture and agriculture related activities are the primary sectors of economy.
• Secondary Sector: When the main activity involves manufacturing then it is the secondary sector. All industrial production where physical goods are produced come under the secondary sector.
• Tertiary Sector: When the activity involves providing intangible goods like services. Financial services, Information Technology etc. are in the tertiary sector.

In the last four decades, the share of the primary sector in GDP decreased, the share of the secondary sector remained static and the share of the tertiary sector grew. However, the share in providing employment was not in tune with the share in GDP.

• In 1973, the agriculture (primary) sector had a 45% share in the GDP and a 75% share in the labour force. Today, it constitutes only about 25% of the GDP, but still has a 60% share in the labour force.
• In 1973, the manufacturing (secondary sector) had a 20% share in the GDP and a 10% share in the labour force. Today, it still constitutes 20% of the GDP, and has an 18% share in the labour force.
• In 1973, the services (tertiary) sector had a 35% share in the GDP and a 15% share in the labour force. Today, it constitutes 55% of the GDP, but only has a 22% share in the labour force.

It is quite clear that majority of the people are still employed in agricultural activities. As agriculture provides seasonal employment during cropping season, chances of hidden unemployment are big. The fallacy has been in assuming that IT-enabled services would become the engine of growth for the entire economy. Although educated and skilled workers do get employed in secondary and tertiary sector, for unskilled and semi-skilled workers there is still shortage of employment avenues. The inability to undertake land reforms or other strategies that would have involved substantial redistribution of assets means that wealth and income inequalities continue to be very high. Hence the most important current problem is the resolution of the agrarian crisis and the need to ensure sustainable productive employment for the majority of the labour force.

For urban India, deregulation took away the advantage of increase in export employment. The employment loss because of import competition, especially in small enterprises, was not compensated.  Also, there was a decline in organized sector employment due to the decline in public sector employment.  Further, several “economic reform” measures such as trade liberalization, the reduction of credit allocation to the priority sector and the removal of various forms of support worked against the interests of most small producers, who accounted for labour-intensive forms of urban manufacturing employment.

Economic inequalities have increased in India in the post-reform period.  The benefits of growth have been concentrated and have not trickled down sufficiently. The economic growth process in India has been unable reduce poverty, as it failed to deliver proportional structural change in the output to employment ratio. It was unsuccessful, despite high rates of output growth, to generate sufficient opportunities for work to meet the needs of the growing labour force.

To add to all this is the global economic crisis, which puts forward further challenges of sustainability of economic growth.  All this means that government mediation in the process of global economic integration is the need of the hour. However, India’s turbulent political environment of coalition governance is marked by ineptitude and indecision. The problem is further aggravated by large scale corruption that does not allow whatever minimal affirmative action that is taken to reach its intended beneficiaries. 

It is no wonder, therefore, that in India, the problem of unemployment takes on epic proportions! 

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