Growing Unemployment Problem in India

Growing Unemployment Problem in India

Source: http://newsgroups.derkeiler.com/Archive/Soc/soc.culture.pakistan/2008−09/msg00054.html

• From: Muhammad Javed Iqbal <kaleemjavediqbal@xxxxxxxxx>

• Date: Sat, 6 Sep 2008 22:57:45 −0700 (PDT)

The economists of Indian Economic and Planning Ministry had aimed to

reduce unemployment to 7% at the end of
10th 5 year plan. But they could not reach that target and official
unemployment still exceeeds 9%. In actual fact
it is far high, because most Indians engaged in un−organized sector
are paid very low salaries and are not provided
any benefits like social security, sick leave or bonus.:

Overview

Economic reforms may have given a boost to industrial productivity and

brought in foreign investment in capital intensive areas. But the boom
has not created jobs. This was not unexpected. According to a report
by the Washington−based Institute of Policy Studies (IPS), the
combined sales of the world's top 200 MNCs is now greater than the
combined GDP of all but the world's nine largest national economies.
Yet, the total direct employment generated by these multinationals is
a mere 18.8 millions −one−hundredth of one per cent of the global
workforce.

India's Ninth Five−Year Plan projects generation of 54 million new

jobs during the Plan period (1997−2002). But performance has always
fallen short of target in the past, and few believe that the current
Plan will be able to meet its target.

India's labour force is growing at a rate of 2.5 per cent annually,

but employment is growing at only 2.3 per cent. Thus, the country is
faced with the challenge of not only absorbing new entrants to the job
market (estimated at seven million people every year), but also
clearing the backlog.

Sixty per cent of India's workforce is self−employed, many of whom

remain very poor. Nearly 30 per cent are casual workers (i.e. they
work only when they are able to get jobs and remain unpaid for the
rest of the days). Only about 10 per cent are regular employees, of
which two−fifths are employed by the public sector.

More than 90 per cent of the labour force is employed in the

"unorganised sector", i.e. sectors which don't provide with the social

Growing Unemployment Problem in India 1

 Growing Unemployment Problem in India

security and other benefits of employment in the "organised sector."

In the rural areas, agricultural workers form the bulk of the

unorganised sector. In urban India, contract and sub−contract as well
as migratory agricultural labourers make up most of the unorganised
labour force.

Unorganised sector is made up of jobs in which the Minimum Wage Act is

either not, or only marginally, implemented. The absence of unions in
the unorganised sector does not provide any opportunity for collective
bargaining.

Over 70 per cent of the labour force in all sector combined (organised
and unorganised) is either illiterate or educated below the primary
level.

The Ninth Plan projects a decline in the population growth rate to

1.59 per cent per annum by the end of the Ninth Plan, from over 2 per
cent in the last three decades. However, it expects the growth rate of
the labour force to reach a peak level of 2.54 per cent per annum over
this period; the highest it has ever been and is ever likely to
attain. This is because of the change in age structure, with the
highest growth occurring in the 15−19 years age group in the Ninth
Plan period.

The addition to the labour force during the Plan period is estimated
to be 53 millions on the "usual status" concept. The acceleration in
the economy's growth rate to 7 per cent per annum, with special
emphasis on the agriculture sector, is expected to help in creating 54
million work opportunities over the period. This would lead to a
reduction in the open unemployment rate from 1.9 per cent in 1996−97
to 1.47 per cent in the Plan's terminal year, that is, by about a
million persons − from 7.5 million to 6.63 million.

In other words, if the economy maintains an annual growth of 7 per

cent, it would be just sufficient to absorb the new additions to the
labour force. If the economy could grow at around 8 per cent per annum
during the Plan period, the incidence of open unemployment could be
brought down by two million persons, thus attaining near full
employment by the end of the Plan period, according to the Plan.

However, there appears to be some confusion about the figure of open

unemployment. The unemployment figure given in the executive summary
of the Ninth Plan, gives the figure of open unemployment at 7.5
million while the annual report of the Labour Ministry, for 1995−96,
puts the figure for 1995 at 18.7 million. An internal government paper
prepared in 1997 put the unemployment figure at the beginning of the
Eighth Plan at 17 millions and at 18.7 million at the end of 1994−95.
Perhaps the Planning Commission referred to the current figure while
the Labour Ministry figure referred to the accumulated unemployment
backlog.

Growing Unemployment Problem in India 2

 Growing Unemployment Problem in India

Top

Underemployment

Open unemployment is not a true indicator of the gravity of the

unemployment problem in an economy such as India, characterised as it
is by large−scale underemployment and poor employment quality in the
unorganised sector, which accounts for over 90 per cent of the total
employment. The organised sector contributes only about 9 per cent to
the total employment.

Underemployment in various segments of the labour force is quite high.

For instance, though open unemployment was only 2 per cent in 1993−94,
the incidence of under−employment and unemployment taken together was
as much as 10 per cent that year. This, in spite of the fact that the
incidence of underemployment was reduced substantially in the decade
ending 1993−94.

According to the Planning Commission, the States which face the

prospect of increased unemployment in the post−Ninth Plan period
(2002− 2007) are Bihar, Rajasthan, Uttar Pradesh, Kerala and Punjab.

Top

Sector−wise absorption of labour Agriculture 62 per cent

Manufacturing & construction 16 per cent
Services 10 per cent
Sundry / miscellaneous jobs
12 per cent

Top

Table 1 : Age structure of population: 1997−2002

Age−group 1997 2002
0 − 14 37.23% 33.59%
15 − 59 56.07% 59.41%
60+ 6.70% 7.00%

Table 2 : Trends in Labour Force Participation Rates

(Per Thousand of Population)
Age Group Period Male Female
Rural Urban Rural Urban
15−29 1977−78
1987−88
1993−94 879
824
804 746

Growing Unemployment Problem in India 3

 Growing Unemployment Problem in India
710
684 515
478
455 257
211
204
30−44 1977−78
1987−88
1993−94 990
988
990 990
987
986 619
603
600 324
301
300
45−59 1977−78
1987−88
1993−94 963
964
968 940
933
937 538
538
543 291
275
283
60+ 1977−78
1987−88
1993−94 667
670
699 517
482
443 221
220
241 130
123
114
All (15+) 1977−78
1987−88
1993−94 904
879
877 831
810
811 517
496
491 269
239
238

Growing Unemployment Problem in India 4

 Growing Unemployment Problem in India
Note: Constituent shares in labour force in 1993−94 are Rural Male
0.499, Rural Female 0.270,
Urban Male 0.182 and Urban Female 0.049.
Table 3: Participation in Labour Force by Age Group and by Sex: 1997 −
2012
(per thousand of population)
Age Male Female
1997 2002 2007 2012 1997 2002 2007 2012
15−19
20−24
25−29
30−34
35−39
40−44
45−49
50−54
55−59
60+ 517
871
975
988
996
986
981
961
914
637 482 447

(a) 412 302

408
454
505
526
538
524
476
411
205 282 261

(a) 241

Note: (a) No change in labour force participation in age groups above

20 years.

Growing Unemployment Problem in India 5

 Growing Unemployment Problem in India
Table 4 : Labour Force Projections by Age Groups
Age Group 1997 2002 Growth
(Million) (% p.a.)
15−19
20−24
25−29
30−34
35−39
40−44
45−49
50−54
55−59
60+
40.31
55.45
56.89
52.64
46.60
39.56
32.90
25.86
18.86
28.15 45.03
62.91
61.47
58.88
52.80
46.04
38.13
30.27
22.45
31.64 2.24
2.55
1.56
2.26
2.53
3.08
2.99
3.20
3.55
2.37
15+
397.22 449.62 2.51

Table 5: Population and Labour Force: 1997 − 2012

(million − 1st April)
1997 2002 2007 2012
Population 951.18 1028.93 1112.86 1196.41
Labour Force 397.22 449.62 507.94 562.91

Growing Unemployment Problem in India 6

 Growing Unemployment Problem in India

Table 6 : Projections of Work opportunities 1997−2002

Sector GDP Growth
(% p.a.) Work Opportunities
(Million)
1997−02 1997 2002
Agriculture
3.9 238.32 262.48
Mining & Quarrying
7.2 2.87 3.54
Manufacturing
8.2 43.56 48.22
Electricity
9.3 1.54 1.93
Construction
4.9 14.74 17.03
Wholesale & Retail Trade
6.7 34.78 41.67
Transport, Storage & Communication
7.3 11.96 14.57
Financing, Real Estate, Insurance and Business Services
8.5 4.55 5.68
Community, Social and Personal Service
7.1 38.98 46.41
All Sectors
6.5 391.30 441.52

Table 7 : Population, Labour Force and Employment

(Million)
1978 (a) 1983 (b) 1994 (a) 8th Plan 9th Plan 10th Plan
(1992−97) (f) (1997−02) (f) (2002−07) (f)
Population (c)
637.6 718.2
(2.19) 895.0
(2.12) 951.2
(1.89) 1028.9
(1.58) 1112.9
(1.58)
Labour Force
255.8 286.6
(2.09) 368.5
(2.42) 374.2 423.4 478.8
Employment
249.1 281.2
(2.23) 361.5
(2.42) 367.2 416.4 474.7 (d)
Unemployment 6.7 5.4 7.0 7.0 7.0 4.1 (e)
Rate (%)
2.63 1.89 1.89 1.87 1.66 0.86 (e)

Growing Unemployment Problem in India 7

 Growing Unemployment Problem in India

Notes:
1. Estimates of labour force and employment are on usual status
concept and pertain to 15 years
and above.
2. Figures in brackets are compound growth rates in the preceding
period.

(a) As on 1st January

(b) As on 1st July
(c) Population at the terminal year of the plan
(d) Required to attain near full employment.
(e) Unemployment reduces to negligible level by the year 2007
(f) Labour force, employment and unemployment are stated as annual
averages during the Plan period.

M. Javed Iqbal
.

Growing Unemployment Problem in India 8