Unemployment

The Periodic Labour Force Survey (PLFS) provides crucial insights into India's employment landscape. In 2023, the survey revealed a notable decline in the unemployment rate, reaching 3.1%. This drop was observed across genders, with both males and females experiencing reduced unemployment rates compared to previous years. Urban and rural areas also saw improvements, with urban unemployment decreasing to 5.2% and rural unemployment dropping to 2.4% in 2023. The recovery in employment follows increased economic activity post the Covid-19 pandemic, aided by the lifting of lockdowns.

Additionally, the PLFS quarterly bulletin for October – December 2023 highlighted positive trends in labour force participation rates (LFPR) and worker population ratio (WPR) in urban areas. LFPR increased to 49.9%, and WPR rose to 46.6%, indicating a growing workforce engagement. These findings align with India's overall economic growth, which surged to 8.4% in the third quarter of 2023-24. Sectors such as manufacturing, mining & quarrying, and construction played significant roles in driving this growth.

The PLFS data underscores the importance of timely and comprehensive labour force assessments for informed policy-making and sustainable economic development.

The National Sample Survey Office (NSSO) conducts the Periodic Labour Force Survey (PLFS) to gather data on employment and unemployment in India. In 2023, the survey revealed a significant drop in the unemployment rate, marking the lowest figure in the past three years. According to the PLFS, the unemployment rate decreased to 3.1% in 2023, down from 3.6% in 2022 and 4.2% in 2021. This decline indicates a positive trend in the job market, reflecting improved employment opportunities for individuals aged 15 years and above.

Before PLFS, the National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation, used to conduct employment and unemployment surveys every five years. The last such survey was conducted in 2011-12.

The National Sample Survey Office (NSSO) initiated the Periodic Labour Force Survey (PLFS) in April 2017 to provide more frequent labour force data. The PLFS aims to estimate key employment and unemployment indicators to better understand the dynamics of the labour market.

The PLFS has two primary objectives:

1. Short-Term Estimates for Urban Areas: To estimate key employment and unemployment indicators (such as Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) within a short time interval of three months, focusing on urban areas only, and using the 'Current Weekly Status' (CWS).
2. Annual Estimates for Both Rural and Urban Areas: To estimate employment and unemployment indicators, considering both 'Usual Status' and CWS, for both rural and urban areas annually.

• Twenty Quarterly Bulletins of PLFS have been released covering the period from December 2018 to September 2023. These bulletins provide estimates of labour force indicators, specifically focusing on urban areas, including Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), Unemployment Rate (UR), and distribution of workers by broad status in employment and industry of work in the Current Weekly Status (CWS).
• Five Annual Reports have also been released, covering both rural and urban areas and giving estimates of all important parameters of employment and unemployment in both usual status and current weekly status (CWS). The latest Annual Report is based on PLFS conducted from July 2022 to June 2023.

• Labour Force Participation Rate (LFPR): The percentage of persons in the labour force (i.e., working or seeking or available for work) in the population.
• Worker Population Ratio (WPR): The percentage of employed persons in the population.
• Unemployment Rate (UR): The percentage of persons unemployed among the persons in the labour force.
• Activity Status - Usual Status: Determined based on the activities pursued by the person during the specified reference period of the last 365 days preceding the date of the survey.
• Activity Status - Current Weekly Status (CWS): Determined based on the activities pursued by the person during the reference period of the last 7 days preceding the date of the survey.

1. India’s Unemployment Rate
   • India's unemployment rate for individuals aged 15 and above decreased to 3.1% in 2023, the lowest in the past three years.
   • In 2022, the unemployment rate was at 3.6%, and in 2021, it stood at 4.2%.
   • Among females, the unemployment rate dropped to 3% in 2023 from 3.3% in 2022 and 3.4% in 2021. Similarly, for males, it decreased to 3.2% in 2023 from 3.7% in 2022 and 4.5% in 2021.
2. Recovery in Employment Arena: Post the impact of the Covid-19 pandemic, there's been a recovery in the employment scenario, with increased economic activity following the lifting of lockdowns by the Centre and states.
3. Urban and Rural Unemployment
   • Urban areas witnessed a reduction in unemployment to 5.2% in 2023 from 5.9% in 2022 and 6.5% in 2021.
   • Rural areas experienced a decrease in unemployment to 2.4% in 2023 from 2.8% in 2022 and 3.3% in 2021.
   • The Labour Force Participation Rate (LFPR) in Current Weekly Status (CWS) for individuals aged 15 and above in urban areas rose to 56.2% in 2023, showing an upward trajectory from 52.8% in 2022 and 51.8% in 2021.
4. Economic Growth
   • India's economic growth surged to 8.4% in the third quarter of 2023-24.
   • Sectors like manufacturing, mining & quarrying, and construction played a pivotal role in driving this growth, as per data released by the NSO.
   • The NSO’s second advance estimate pegs India's growth at 7.6% for the entire fiscal year 2023-24, surpassing the initial projection of 7.3% released in January 2024.
5. Increasing Trend in Labour Force Participation Rate (LFPR: For males, LFPR increased from 73.3% to 74.1%, and for females, it increased from 22.3% to 25.0% during this period.
6. Increasing Trend in Worker Population Ratio (WPR)
   • WPR in urban areas increased from 44.7% in October – December 2022 to 46.6% in October – December 2023 for individuals aged 15 years and above.
   • For males, it increased from 68.6% to 69.8%, and for females, it increased from 20.2% to 22.9% during this period.
7. Unemployment Rate (UR)
   • UR in urban areas decreased from 7.2% in October – December 2022 to 6.5% in October – December 2023 for individuals aged 15 years and above.
   • For males, UR decreased from 6.5% to 5.8%, and for females, it decreased from 9.6% to 8.6% during this period.

According to the annual PLFS report, the data shows consistent growth in both the Labour Force Participation Rate (LFPR) and Worker Population Ratio (WPR) for individuals aged 15 years and above over the years from 2017-18 to 2022-23. Alongside this growth, there has been a noticeable decline in the Unemployment Rate (UR) during the same period.

Here are the trends:

• In 2017-18, the WPR was 46.8%, LFPR was 49.8%, and UR stood at 6.0%.
• By 2022-23, the WPR had risen to 56.0%, LFPR to 57.9%, and UR had decreased to 3.2%.

This indicates a positive trend where both the labour force and workforce in the country have been steadily increasing, while the unemployment rate has been on a decline.

In the rural sector, the Labour Force Participation Rate (LFPR) and Worker Population Ratio (WPR) for individuals aged 15 years and above have shown a consistent increase over the years. Additionally, the Unemployment Rate (UR) has witnessed a notable decline.

• The WPR in rural areas increased from 72.0% in 2017-18 to 78.0% in 2022-23 for males, and from 23.7% to 40.7% for females during the same period.
• Similarly, LFPR increased from 76.4% to 80.2% for males and from 24.6% to 41.5% for females from 2017-18 to 2022-23.
• The UR in rural areas decreased significantly from 5.7% in 2017-18 to 2.4% in 2022-23, indicating a positive trend in employment opportunities and reduced unemployment rates.

In the urban sector, there has been a consistent decline in the Unemployment Rate (UR) over the years, indicating an improvement in the employment scenario.

• The UR in urban areas decreased from 6.9% in 2017-18 to 5.4% in 2022-23.
• Both the LFPR and WPR in urban areas have remained relatively stable over the years.
• While LFPR fluctuated slightly, ranging from 74.5% to 71.0% for males and from 20.4% to 25.4% for females from 2017-18 to 2022-23, WPR remained consistent, ranging from 43.9% to 47.7% for males and from 18.2% to 23.5% for females during the same period.

These trends indicate an overall improvement in the employment scenario in both rural and urban sectors, with decreasing unemployment rates and increasing participation in the workforce.

The data provided presents gender-wise insights into employment indicators such as Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and Unemployment Rate (UR) for individuals aged 15 years and above.

For Males:

• There has been a notable increase in both WPR and LFPR for males over the years.
• The Worker Population Ratio (WPR) for males rose from 71.2% in 2017-18 to 76.0% in 2022-23.
• Similarly, the Labour Force Participation Rate (LFPR) increased from 75.8% to 78.5% during the same period.
• Additionally, the Unemployment Rate (UR) for males declined from 6.1% in 2017-18 to 3.3% in 2022-23, indicating improved employment opportunities and reduced unemployment rates.

For Females:

• There is also a positive trend for females, with an increasing WPR and LFPR observed over the years.
• The Worker Population Ratio (WPR) for females showed a steady rise, from 22.0% in 2017-18 to 35.9% in 2022-23.
• Similarly, the Labour Force Participation Rate (LFPR) increased from 23.3% to 37.0% during the same period.
• Furthermore, the Unemployment Rate (UR) for females exhibited a declining trend, decreasing from 5.6% in 2017-18 to 2.9% in 2022-23, indicating improved employment prospects and reduced unemployment rates among females.

These trends reflect positive advancements in employment opportunities and labour force participation for both males and females, with declining unemployment rates across genders.

The data presents the percentage distribution of workers across various broad industry divisions according to the NIC 2008 classification from the PLFS reports spanning from 2017-18 to 2022-23.

1. Agriculture:
   • The percentage distribution of workers in the agriculture sector ranged from 42.5% to 46.5% during the period (an increasing trend).
   • Despite minor fluctuations, agriculture consistently remains the dominant sector, with approximately 45-46% of the workforce engaged in agricultural activities.
2. Trade, Hotel & Restaurant:
   • Workers in the trade, hotel, and restaurant sector accounted for around 12-13% of the workforce across the years.
   • This sector has maintained a relatively stable percentage distribution, hovering around 12-13%.
3. Construction:
   • The construction industry witnessed a slight increase in the percentage distribution of workers over the years, ranging from 11.6% to 13.0%.
4. Manufacturing:
   • The manufacturing sector experienced fluctuations, with the percentage distribution of workers ranging from 10.9% to 12.1%.
5. Transport, Storage & Communications:
   • Workers in the transport, storage, and communications sector accounted for around 5-6% of the workforce consistently over the years.
6. Electricity, Water, etc.:
   • The percentage distribution of workers in the electricity, water, and related sectors remained minimal, ranging from 0.5% to 0.6%.
   • Despite its small share, this sector plays a crucial role in infrastructure development and utilities.
7. Mining & Quarrying:
   • The mining and quarrying sector maintained a marginal presence, with the percentage distribution of workers remaining around 0.3-0.4%.
   • Although small, this sector contributes to the extraction of natural resources and raw materials.

The provided data offers insights into the distribution of employment across the organised and unorganised sectors, categorised into formal and informal employment.

• In 2017-18, the total employment stood at 47.13 crores, with 9.05 crores in the organised sector and 38.07 crores in the unorganised sector. Within this, formal employment accounted for 4.70 crores, while informal employment was substantially higher at 42.43 crores.
• By 2018-19, total employment rose to 48.78 crores, with a slight increase in both organised and unorganised sectors. Formal employment increased to 5.35 crores, while informal employment saw a rise to 43.43 crores.
• In 2019-20, the total employment further increased to 53.53 crores. Notably, the majority of the growth in employment, particularly in the unorganised sector, was informal in nature. Formal employment rose to 5.89 crores, whereas informal employment saw a significant surge to 47.64 crores.

• Across all three years, the informal sector consistently dominated the employment landscape, comprising a substantial majority of the workforce.
• In 2019-20, close to 90% of the additional workers joined the informal sector, highlighting the prevalence of informal employment opportunities.

As per the data released by The Centre for Monitoring Indian Economy (CMIE) in December 2023, state wise unwmployment rate in India -

Prior to the onset of the COVID-19 pandemic, the urban labour market exhibited positive trends in terms of Labor Force Participation Rate (LFPR), Worker Population Ratio (WPR), and Unemployment Rates (UR). However, the nationwide lockdown imposed in late March 2020 had adverse effects on the urban labour market. In the first quarter of 2020-21, the unemployment rate for the urban sector surged to 20.8%. Concurrently, both LFPR and WPR witnessed significant declines during this period.

As the economy began to revive in subsequent quarters of 2020-21, all three labour market indicators displayed swift recoveries. The Unemployment Rate gradually declined during this period, reaching 9.3% in the last quarter of 2020-21 (January-March 2021).

Presently, the Unemployment Rate has further decreased to 3.1 percent in 2023, indicating a significant recovery from the peak experienced during the initial phases of the pandemic-induced lockdown.

Globalization, characterised by the spread of products, technology, information, and jobs across borders, has significantly influenced India's employment landscape, particularly in the formal sector. Following the adoption of the LPG policy in 1991, India embraced liberalization, privatization, and globalization, which led to greater integration with the global economy. However, despite higher economic growth rates, there has been a reduction in formal sector employment.

• One major contributor to this decline is the reduction in public sector employment, which has historically been a stable source of formal jobs. The emphasis on liberalization often entails downsizing the public sector workforce. Moreover, restrictive labor laws and the lack of labor reforms have pushed industries towards contract hiring, resulting in a shift from formal to informal employment arrangements.
• Impact of Global Competition: Global competition has also played a role, prompting formal firms to transition their workforce into informal arrangements to remain competitive. Additionally, the growth of the service sector, which requires skilled labour, has not been met with an adequate supply of skilled workers, leading to a dearth of formal job opportunities.
• Gender Dynamics and Informalization: The decline in decent formal jobs has forced many men into unemployment, leading to a rise in women seeking employment in the informal sector to support their households.
• Furthermore, the rise of capital-intensive industries and mechanisation has replaced many manual jobs with automated processes, further reducing formal sector employment.

The increasing informalization of the economy poses several challenges to economic development. Informal workers often receive lower wages and lack access to essential welfare benefits such as healthcare and education, exacerbating inequality and poverty. Moreover, the informal sector's cash-based nature contributes to tax evasion and hampers the government's ability to collect legitimate taxes, leading to fiscal deficits and macroeconomic instability.

1. Digital India by Ministry of Electronics and Information Technology: Aims to ensure broadband connectivity at the village level, enhance access to services through IT-enabled platforms, promote transparency in government processes, and increase indigenous production of IT hardware and software for both domestic use and export.
2. Atal Mission for Rejuvenation and Urban Transformation (AMRUT) by Ministry of Housing and Urban Affairs: AMRUT focuses on providing basic services to households and developing amenities in cities to enhance the quality of life for all residents, with a particular emphasis on improving infrastructure in urban areas.
3. Make in India by DPIIT, Ministry of Commerce & Industry: Make in India seeks to facilitate investment, foster innovation, enhance skill development, protect intellectual property, and build world-class manufacturing infrastructure to promote indigenous manufacturing and job creation.
4. Smart Cities by Ministry of Housing & Urban Affairs: The Smart Cities mission aims to develop cities that provide essential infrastructure, ensure a decent quality of life for residents, foster a clean and sustainable environment, and implement smart solutions to urban challenges.
5. Shyama Prasad Mukherji Rurban Mission by Ministry of Rural Development: This mission aims to deliver integrated infrastructure projects in rural areas, including the development of economic activities and skill enhancement, to bridge the rural-urban divide and promote holistic rural development.
6. National Industrial Corridor Authority by Ministry of Finance: It coordinates the development of industrial corridors linked to smart cities and transport connectivity to drive India's growth in manufacturing and urbanisation, thereby generating employment opportunities.
7. Stand up India Scheme by Department of Financial Services, Ministry of Finance: This scheme facilitates bank loans to entrepreneurs from marginalized communities (SC/ST/women) to establish new enterprises in manufacturing, trading, or the services sector, promoting inclusive growth and entrepreneurship.
8. Start-up India by DPIIT, Ministry of Commerce & Industry: Start-up India aims to empower startups through innovation and design, providing them with the support and resources necessary to grow and thrive in the competitive business landscape.
9. Pradhan Mantri Awas Yojana (PMAY) by Ministry of Housing & Urban Affairs: PMAY aims to provide affordable housing to all eligible families by offering central assistance to implementing agencies through states/union territories, addressing the housing needs of the urban population and generating employment in the construction sector.
10. Swachh Bharat Mission - Grameen by Ministry of Jal Shakti: This mission accelerates efforts to achieve universal sanitation coverage in rural areas and emphasizes the importance of sanitation to public health and well-being.
11. Swachh Bharat Mission - Urban (SBM-U) by Ministry of Housing & Urban Affairs: SBM-U aims to eliminate open defecation and ensure 100% scientific management of municipal solid waste in urban areas, promoting cleanliness, hygiene, and a healthier environment for urban residents.
12. Smart City Mission by Ministry of Housing & Urban Affairs: Similar to the Smart Cities mission mentioned earlier, this initiative promotes sustainable and inclusive urban development, focusing on core infrastructure, quality of life improvements, environmental sustainability, and the implementation of smart solutions.
13. Atal Mission for Rejuvenation and Urban Transformation (AMRUT) by Ministry of Housing & Urban Affairs: AMRUT, reiterated here, focuses on providing basic services and building amenities in cities to enhance the quality of life for all residents, particularly the poor and disadvantaged, thus addressing the critical need for urban infrastructure development.

• Aatmanirbhar Bharat Package: The government introduced the Aatmanirbhar Bharat package to stimulate business and alleviate the impact of Covid-19. This comprehensive package, totaling over Rs. 27 lakh crore, includes long-term schemes and policies aimed at fostering self-reliance and creating employment opportunities.
• Investments in Infrastructure: Increasing investments in infrastructure and productive capacity have a significant multiplier effect on growth and employment. The budget for 2023-24 proposes a steep increase in capital investment outlay, reaching Rs. 10 lakh crore, contributing to efforts to enhance growth potential and job creation.
• Aatmanirbhar Bharat Rojgar Yojana (ABRY): Launched as part of the Aatmanirbhar Bharat package 3.0, ABRY incentivizes employers to create new employment opportunities while providing social security benefits and restoring lost employment during the Covid-19 pandemic.
• Pradhan Mantri Mudra Yojana (PMMY): PMMY facilitates self-employment by providing collateral-free loans of up to Rs. 10 lakh to micro and small business enterprises, enabling them to establish or expand their business activities.
• Production Linked Incentive Schemes: Implemented by the government, these schemes have the potential to create 60 lakh new jobs.
• Garib Kalyan Rojgar Abhiyaan (GKRA): Launched to boost employment and livelihood opportunities for returnee migrant workers and affected individuals, the GKRA provided employment for 125 days in selected districts across six states.
• PM GatiShakti: A transformative approach for economic growth, PM GatiShakti focuses on infrastructure development in sectors like roads, railways, airports, ports, and logistics, leading to job and entrepreneurial opportunities.
• Production Linked Incentive schemes: Budget 2021-22 introduced Production Linked Incentive schemes which has now been expanded for 14 sectors like electronics, solar, and automobiles. This aims to boost domestic manufacturing, reduce reliance on imports, and create jobs.

• Definition: Unemployment refers to the situation where individuals who are capable of working actively seek employment but are unable to find suitable jobs. An unemployed person is someone who is part of the labour force, possesses the necessary skills, but currently lacks gainful employment. Essentially, they are of working age, jobless, able and available to work, and actively looking for a job.
• Measuring Unemployment: The unemployment rate in a country is commonly calculated using a formula: Unemployment rate = (Number of Unemployed Workers/Total Labor Force) ×100. Here, the 'total labour force' includes both the employed and the unemployed. Those who are neither employed nor actively seeking employment, such as students, are not considered part of the labour force.
• Types of Unemployment:
  1. Structural Unemployment: This type of unemployment arises from mismatches between the skills possessed by the workforce and the requirements of available positions. It underscores systemic issues within the labour market.
  2. Cyclical Unemployment: Tied to economic cycles, cyclical unemployment escalates during economic downturns and diminishes during periods of expansion. It demonstrates the sensitivity of job availability to macroeconomic conditions.
  3. Frictional Unemployment/Transitional Unemployment: Also known as transitional unemployment, this type occurs due to the natural transition between jobs. It reflects the temporary period individuals spend searching for new employment opportunities.
  4. Underemployment: Although not strictly unemployment, underemployment pertains to individuals employed in positions that underutilize their skills or provide insufficient working hours. It contributes to a sense of economic inefficiency.
  5. Hidden Unemployment: Hidden unemployment refers to individuals who are not actively seeking employment due to discouragement or other factors but could potentially enter the job market if conditions improve.
  6. Disguised Unemployment: Disguised unemployment arises when more labourers work in a factory/land than are required, leading to reduced productivity. This concept highlights the inefficiencies in labour allocation.

Labour productivity refers to the measure of output of goods and services per worker within a given timeframe. It indicates how efficiently workers are producing goods or services, typically measured as output per hour worked or output per worker. In India, labour productivity has seen an increase since the economic reforms of 1991. This increase can be attributed to several factors, including capital deepening, which means higher capital investment per worker, advancements in technology, and improvements in the quality of labour.

Despite a decline in the share of the workforce engaged in agriculture from 58% to 45% over the last decade, the agricultural sector's contribution to India's GDP has remained significant at around 17%. This suggests that even though fewer people are working in agriculture, their productivity has increased, leading to sustained output levels.

Post-1991 reforms, the manufacturing sector's share in India's GDP and employment has remained stagnant at 17% and 12%, respectively. In contrast, the services sector has witnessed significant growth, contributing around 55% to India's GDP. This disparity may be due to various factors, including the complexity of labour laws and government incentives favouring capital-intensive industries.

Interestingly, rural India has seen a doubling in its contribution to manufacturing output, from 25% in 1970-71 to 50% in 2011-12. However, between 2005-2012, rural areas experienced a negative employment growth rate of -2.8%. This suggests that while productivity has increased, it has not translated into sufficient job creation, posing challenges for rural employment and economic growth.

Moving forward, to address the employment challenges highlighted by the data, a multi-faceted approach is essential. Firstly, aligning education with market demands is crucial, necessitating curriculum updates to impart relevant skills and emphasise vocational training (ready-to-work skill sets). Promoting tech-driven learning can further enhance employability in rapidly evolving sectors.

Prioritising labour-intensive industries over capital-intensive ones and bridging the gap between college education and industry requirements is imperative.

Additionally, fostering a conducive environment for startups through financial incentives (initial thrust), reduced bureaucratic hurdles (red tape), and mentorship programs can stimulate entrepreneurship and create job opportunities.

Moreover, long-term policy interventions like investments in infrastructure, industry-friendly regulations, and fiscal incentives for employment-generating businesses, are essential for sustainable economic growth and widespread employment opportunities. By implementing these strategies, we can strive towards a more inclusive and robust labour market, ensuring prosperity for all segments of society.