The Scale of the Problem
According to the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate has fluctuated significantly in recent years, peaking at 23.5% in April 2020 during the COVID-19 pandemic lockdown. While the rate has since come down, it still hovers around 7-8%, reflecting a persistent challenge. Even more worrying is the issue of underemployment, where individuals are engaged in work that does not fully utilize their skills or potential, resulting in lower productivity and income levels.
The National Sample Survey Office (NSSO) data indicates that the Labour Force Participation Rate (LFPR) for the age group 15-29 has been declining, standing at around 38.2% in 2019-20. This suggests that a significant portion of the working-age population is either not seeking employment or unable to find suitable opportunities. The situation is particularly dire for women, whose participation in the workforce has dropped from 35% in 1990 to around 21% in 2020, one of the lowest in the world.
Job Creation Lagging Behind Economic Growth
India’s GDP growth rate has averaged around 6-7% over the last decade, but this has not translated into proportional job creation. The 'jobless growth' phenomenon is evident as sectors like agriculture continue to employ a large portion of the population (about 42%) while contributing only 15% to the GDP. On the other hand, the service sector, which contributes over 50% to the GDP, employs only around 30% of the workforce.
The manufacturing sector, which has the potential to absorb a significant portion of the workforce, has also not lived up to expectations. The much-celebrated 'Make in India' initiative has struggled to generate the millions of jobs that were envisioned. The sector's share in employment has remained stagnant, partly due to structural issues and the increasing adoption of automation.
Automation and the Future of Work
The advent of automation and artificial intelligence (AI) poses another significant challenge to India’s employment scenario. A 2019 report by the World Bank estimated that 69% of jobs in India are at risk of being automated. The manufacturing sector, particularly labor-intensive industries like textiles and apparel, is already seeing a shift towards automated processes. Similarly, the IT and services sectors, which have been the backbone of India's growth story, are also increasingly leveraging AI and machine learning, reducing the need for human intervention in repetitive and process-driven tasks.
While automation promises increased efficiency and lower costs, it also threatens to displace a large segment of the workforce, particularly those engaged in low-skilled jobs. This technological shift necessitates a robust skilling and reskilling framework to prepare the workforce for new-age jobs that require digital literacy and advanced technical skills.
The Need for a Comprehensive Skilling Strategy
To address the dual challenges of unemployment and underemployment, India must prioritize human capital development through a comprehensive skilling and reskilling strategy. The government has launched several initiatives, such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and Skill India Mission, aiming to train millions of youth in various skills. However, the effectiveness of these programs has been mixed, with reports highlighting issues such as a mismatch between skills imparted and industry requirements, lack of quality trainers, and inadequate infrastructure.
A more targeted approach is needed, focusing on the following key areas:
• Alignment with Industry Needs: Skilling programs must be designed in collaboration with industry stakeholders to ensure that the training provided is relevant to the current and future job market demands. This includes developing sector-specific skills, especially in emerging fields like AI, robotics, data analytics, and renewable energy.
• Emphasis on Digital Literacy: As the economy becomes increasingly digital, basic digital literacy must be integrated into the education and skilling ecosystem. This is particularly important for rural and semi-urban populations, who are at risk of being left behind in the digital economy.
• Lifelong Learning and Reskilling: The concept of a job for life is becoming obsolete. The workforce must be prepared for continuous learning and upskilling throughout their careers. Government and private sector partnerships can play a crucial role in creating platforms for lifelong learning.
• Promotion of Entrepreneurship: Encouraging entrepreneurship can be a viable solution to absorb the burgeoning workforce. The government’s efforts through schemes like Startup India need to be complemented with easier access to credit, simplified regulatory frameworks, and mentorship programs.
The Way Forward
The challenges of rising unemployment and underemployment are complex and multifaceted, requiring coordinated efforts from the government, private sector, and civil society. Creating an ecosystem that fosters job creation, promotes skill development, and prepares the workforce for the future is not just an economic imperative but a social necessity.
India's demographic dividend can be a significant advantage, but only if the country can harness the potential of its youth through gainful employment. Failure to do so could lead to economic stagnation and social unrest. As India aspires to become a $5 trillion economy, addressing the employment challenge with urgency and innovation will be crucial in ensuring sustainable and inclusive growth for all its citizens.
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