Print Friendly, PDF & Email

Skill Development as a solution to India’s unemployment problem

Syllabus: Unemployment

Source: IE


Context: Economic growth alone hasn’t solved India’s job problem over the past 50 years. Job availability has lagged behind economic growth, particularly affecting the young population.


Status of High unemployment rate in India:

  • The unemployment rate in the country has consistently increased over the last two decades – from 2% in 2010 to 5% in 2015 and at 9.2 percent in June 2024. (According to the Center for Monitoring Indian Economy)
  • Over 42% of India’s graduates under 25 were unemployed in 2021-22 as per the State of Working India 2023.
  • Despite a rise in GDP growth during the 2000s, the employment growth rate remained unresponsive, indicating a phenomenon of jobless growth


Types of Employment in India:

Wage EmploymentRegular Wage Jobs: Formal, structured positions with fixed salaries, found in government organizations, private companies, and multinational corporations.
Casual or Daily Wage Labor: Involves daily wage labour, prevalent in sectors like construction, agriculture, and unorganized labour markets.
Self-EmploymentEntrepreneurship: Individuals engaged in entrepreneurial activities, running small businesses or enterprises such as shops, local services, or manufacturing units.
Farmers: Agriculture serves as a significant source of self-employment, with individuals owning and operating farms independently or as part of a family-run enterprise.
Freelancing and Informal Work: Reflects the gig economy trend, with individuals working as freelancers, consultants, or in part-time roles.

Why Is India’s Economic Growth Not Corresponding with Sufficient Job Creation?

High-Skill, Low-Employment SectorsEconomic growth driven by services and capital-intensive sectors generates fewer jobs.IT sector contributes significantly to GDP but employs only about 4.5 million directly.
Premature DeindustrializationDecline in manufacturing’s share of GDP and employment at low per capita income.Limits absorption of surplus agricultural labor, a key job creation pathway.
Skill MismatchGap between skills demanded by job market and workforce capabilities.Only 4.7% of workforce had formal skill training as per 2015 report.
Informal Sector DominanceOver 90% of workforce in low-productivity, insecure jobs.Gig economy offers flexible work but lacks security and benefits.
Global Economic TrendsJob market affected by global protectionism and economic disruptions.4.25 lakh tech employees lost jobs in 2023 due to global recession.
Impact of Automation and AIEmerging technologies displacing low-skill jobs.9% of workforce could be displaced by automation by 2030.
Academia-Industry MismatchEducation system fails to meet modern job market needs.Only 47% of Indian graduates were employable in 2019.
‘Missing Middle’ in MSMEsPredominance of very small and very large firms hampers job creation.Lack of mid-sized firms limits employment potential.
Regional DisparitiesEconomic growth concentrated in few urban centers.Migration pressures from less developed regions to urban areas.
Demographic Dividend ChallengeNeed to create 10-12 million jobs annually for new entrants.Economy consistently falls short of job creation target.

Jobless Growth in India:

  • Two types of jobless growth in India:
    • Weak Responsiveness: Automation and tech introduction lead to jobless growth, but increasing GDP can still boost employment.
    • High Responsiveness: In India, labour productivity growth is strongly linked to output growth. So even though GDP increases, output will increase only if labour productivity increases.


Social Impact of Unemployment in India:

Social ImpactDetails
Marginalisation of PeopleProlonged unemployment leads to the erosion of skills, reducing employability even when jobs become available. Perpetuates a cycle of joblessness as skills diminish over time.
Social UnrestHigh unemployment can result in dissatisfaction, social unrest, and various forms of manifestation such as protests, crime rates, and civil unrest.
MigrationHigh unemployment often drives rural-to-urban migration in search of better opportunities. This migration can strain urban infrastructure, leading to the development of slums and inadequate living conditions.
Impact on EducationFinancial struggles due to high unemployment may deter families from investing in education. Immediate earning potential may take precedence over education, perpetuating a cycle of limited opportunities for future generations.
Disproportionate Impact on Social GroupsDisadvantaged groups like youth, women, rural labourers, minorities, and scheduled castes are disproportionately affected by unemployment. – Exacerbates existing inequalities in society.
Increased CrimeLack of lawful income sources due to unemployment can drive individuals toward illegal activities. Unemployment is linked to higher crime rates in affected areas.

Measures to address unemployment:

  • India needs good infrastructure, both physical and human, to create more jobs.
  • There has to be a convergence in the paths of urbanisation and industrialisation to streamline job creation.
  • Tier II cities should be focused as these new cities have the potential to generate 70% of the country’s new jobs and GDP over the next 20 years.
  • National Employment Policy (NEP): Implement a focused policy considering both the demand and supply sides. Enhance workforce quality, bridge skills gaps, and create public jobs.
  • Urban MGNREGA: Introduce an urban version to provide income security for informal jobs and create public assets in urban areas.
  • Industrialization and Agricultural Investment: Rapid industrialization and increased investment in agriculture create more jobs and boost productivity.
  • Diversify Agriculture and Promote Agro-Processing: Shift to labour-intensive crops, promote agro-processing for export, reduce wastage, and increase value addition.
  • Expand Education and Healthcare: Enhance human capital through education and healthcare expansion, providing employment in the social sector.
  • Reform Education, Provide Vocational Training: Improve skills and employability through education system reforms and vocational/technical training.



More than 50% of India’s population is below the age of 25 and more than 65% Is below the age of 35. India’s young demographic is an asset in an ageing world. This clearly presents the case for India to address the jobless growth scenario.


Mains Links:

Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (UPSC 2023)

Prelims Links:

Disguised unemployment generally means (UPSC 2013)

(a) a large number of people remain unemployed
(b) alternative employment is not available
(c) the marginal productivity of labour is zero
(d) productivity of workers is low



Ans: C