Only 40% of Indians are employed or looking for work — Here's why

Mahesh Vyas, CMIE MD and CEO argues that the extremely low female labour force participation rate in India is at the root of the low overall labour force participation

Only 40 per cent of Indians are employed or looking for work, compared to 57-60 per cent in most countries. According to Centre for Monitoring Indian Economy (CMIE) data, unemployment in India has hit a six-month high of 8.1 per cent in February.

India's labour participation rate is very low. While in most countries only about 40 per cent of the population is out of the labour force, in India, 60 per cent of the population is neither working nor willing to work. This set of people is not looking for any work as well. They are sitting at home and they have decided they do not want to be engaged in any economic activity, CMIE MD and CEO Mahesh Vyas said in an interview with India Spend.

The labour force participation rate is close to 40 per cent in India. Whereas, in most countries, it is around 57-60 per cent. "If you're just sitting at home, and you decide that you do not want to work--you say, 'I'm a retired person, I do not want to work anymore, I have hung my boots, etc'-- then, you're not unemployed. You're just out of the labour force," Vyas says.

One is considered as unemployed if they are not engaged in any activity for wages or profits, and they are actively looking for work. Therefore, when we say only 40 per cent of Indians are employed or looking for work, it means that the rest of the 60 per cent of the population is simply out of the labour force. What could be the reason behind this?

Vyas argues that it is this extremely low female labour force participation rate in India that is at the root of the low overall labour force participation. "Women account for around 50 per cent of India's population. If a large chunk of them do not enter the labour markets, our labour force participation rate is going to be low," he says.

The female labour force participation rate in Bangladesh is around 53 per cent. In India, according to CMIE statistics, it is pretty low, it is around 11-12 per cent. However, according to official statistics, it is around 24 per cent, still less compared to Bangladesh.

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, which monitors the Indian economy, the unemployment rate has come down.