Youth unemployment crisis in India

“Post-Covid, the unemployment rate is lower than it was pre-Covid, for all education levels. But it remains above 15% for graduates, and more worryingly, it touches a huge 42% for graduates under 25 years,” said the State of Working India 2023 report, which was released last month by Azim Premji University.

“Between 2017 and 2021, there was a slowdown in overall regular wage job creation, but formal jobs (with a written contract and welfare benefits) as a share of all regular wage work rose from 25% to 35%,” it said, adding that in 2020-21, which was the pandemic year, regular wage employment fell by 2.2 million. Demonetization and the pandemic had a profound adverse impact on the creation of overall wage employment in India. There was an increase in formal employment by 3 million jobs and a loss of about 5.2 million jobs in semi- and informal regular-wage employment during 2020–21.

What’s worse for India is that its economic growth is producing much fewer jobs than it used to, and the disheartened jobseekers instead take menial roles as delivery boys, telecallers, construction workers, or vendors of street food. Critics say such hopelessness among India’s youth is one of the biggest failures of the Modi government. Accentuating the youth unemployment crisis in India is the fact that nearly two-thirds of its 1.43 billion people are under 35 years of age. Moreover, 12 million additional people reach employment age every year in India.

Half of the lost employment is accounted for by women, leading to a deterioration in women’s participation rate in the labour force. A staggering 42% unemployment rate among young graduates under 25 years old presents a rudderless future for the educated youth of the country. The only rudder they can hope to find to steer the ship of life is in ‘pakodanomics’.

The media regularly quotes the increase in formal jobs. Just presenting the formal employment data based on the new provident fund accounts opened is at best an incomplete picture of the employment scene in the country and, at worst, a distracting picture of the employment data. Formal jobs (with a written contract and retirement benefits) as a share of regular wage work are increasing, while the overall wage employment rate is falling.

India’s unemployment rate is estimated to have exceeded the global rate in five of the last six years preceding 2022, as per data from the Centre for Monitoring Indian Economy (CMIE) and the International Labour Organisation (ILO), due to an economic slowdown that was exacerbated by the shock demonetisation and the black swan event of the pandemic.

“The situation is worse than what the unemployment rate shows,” CMIE Managing Director Mahesh Vyas told Reuters in 2022. “The unemployment rate only measures the proportion of those who do not find jobs to those who are actively seeking jobs. The problem is that the proportion seeking jobs itself is shrinking.” Unemployment is a situation when a person actively searches for a job but is unable to find work.

Unemployment, both in terms of magnitude and severity, is the biggest challenge for the country. Both the organised and unorganised sectors must adopt labour-intensive technology if sufficient employment opportunities are to be generated, and the women’s participation rate in the labour force should improve. Bangladesh has achieved this by establishing a vibrant garment industry to cater to the clothing needs of the world. To solve the unemployment problem in urban areas, the organised industrial sector must also absorb a sufficient number of workers. The failure of the organised industrial sector to generate enough employment opportunities is due to the use of capital-intensive technologies. In order to encourage the use of relatively more labour-intensive technologies and thereby generate more employment opportunities, fiscal and monetary concessions like liberal depreciation, investment allowances, etc. on the use of capital must be withdrawn or reduced.

In addition to the above, the promotion of value-added agro-processing industries for export purposes has huge employment potential. The expansion of and more investments in the education and health care sectors not only promotes the accumulation of human capital but will also generate a good deal of employment opportunities. More investments and concessions in labour-intensive services such as trade, hotels, and tourism also have significant employment potential.

Last but not least, there is also a need for a national employment policy (NEP) and a decentralised model of development.

(The writer is a retired corporate professional)