Unemployment in India: Causes and Measures to Resolve it

Unemployment in India has become a critical problem. Since, there are so many factors which are responsible in increasing unemployment, increasing population is one of the major factor. In this article we will see the major causes of unemployment and the possible solutions to tackle unemployment in India.

unemployment in India

What is Unemployment?

Unemployment represents the number of people in the work force who want to work but do not have a job. It is generally stated as a percentage and calculated by dividing the number of people who are unemployed by the total work force.

The work force is made up of those people who want to work; it excludes people who are retired, disabled, and able to work but not currently looking for a position; for instance, they may be taking care of children or going to college.

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Unemployment in India

Unemployment has become the biggest social and economic problem in developing countries where sources are limited. Economists generally divide unemployment into two categories namely voluntary unemployment and involuntary unemployment.

Voluntary unemployment refers to a situation when a person leaves his/her job willingly for searching another employment, whereas unemployment is involuntary when a person is laid off and must now look for another job. A person is also called underemployed when the income and productivity of the person increase when he/she changes the occupation.

Types of Unemployment in India

Unemployment can be of various types. Different types of unemployment are listed below.

1. Open Unemployment

It is a situation when people have no work to do despite they are willing to work and have skills and abilities to work. This type of unemployment is generally found in the industrial sector.

2. Disguised Unemployment

This type of unemployment takes place when the number of people engaged in a work is more than the actual number of people required. In such a case, people may appear to be employed but they are actually not, which makes their contribution in the total output zero or negligible.

3. Seasonal Unemployment

This type of unemployment happens during some seasons of the year. Production activities happen only during certain seasons in some industries and occupations such as holiday resorts and agriculture. Therefore, these activities provide employment only during a particular time period in a year.

4. Cyclical Unemployment

This type of unemployment happens because of cyclical trends of growth in business at regular intervals. The rate of unemployment is low when trade cycles are at their peak and high when the gross output in the economy is low.

5. Structural Unemployment

This type of unemployment occurs because of major changes in the country’s economic structure. There are various factors that lead to structural changes such as changes in demand patterns, technological innovation etc. In India, structural unemployment is present in both rural and urban areas.

6. Underemployment

This is defined as a situation in which employed people have less contribution as compared to their production capacity. People are not completely employed in this type of employment.

7. Frictional Unemployment

It occurs when an individual is moving from one job to another. During this transition, the individual may be unemployed for some time. Thus, this type of unemployment is generally voluntary and occurs for a short time.

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Causes of Unemployment in India

The rate of unemployment differs across different states of India depending on various factors influencing unemployment. However, to solve the problem of unemployment, it is important to first understand the major causes of unemployment.

Some major causes of unemployment are listed below:

1. Rapid growth of population

This is the main reason for unemployment especially in Rural India. The fast growth of population has led to an increase in labour force. Such a condition requires equal expansion of job opportunities as the growth of population. However, in reality, the expansion of employment opportunities is not adequate to match the growth of the labour force.

A large number of population require additional expenditure on nurturing, maintenance and education. As a result, a large portion of resources is utilized on private consumption such as food, clothing and shelter. This has led to an increase in expenditures and reduction in savings and investment.

2. Seasonal Agriculture

In rural areas, most of the people depend directly or indirectly on agricultural operations. However, in India, agriculture is a seasonal affair. People get employed in rural areas only in a particular season of the year.

3. Lack of Infrastructure

Effective infrastructure requires adequate capital. Capital generally implies plant, machine, factory, buildings and more. As mentioned earlier, in countries like India, a large portion of income is spent on private consumption to meet the needs of growing population instead of savings and investment.

4. Ineffective Educational System

The educational system prevailing in India has certain drawbacks. The curriculum is theory-oriented and does not provide vocational training needed to match the current economic scenario of India.

5. Decline of Cottage Industries

In rural India, unskilled people generally strive to earn by carrying out small businesses from their homes along with agricultural operations. These small businesses include sewing, craft production, milk production, papad and pickle making, etc. and requires less capital. However, industrialization has adversely affected the activities of village and cottage industries.

6. Inadequate Employment Planning

The employment planning of the Indian government is not effective that it can match the growing rate of population. In other words, employment opportunities are not in proportion with the growth rate of population. Moreover, the government doesn’t take concrete measures to resolve the problem of unemployment.

7. Mechanization

It is also debatable that mechanization may also lead to certain level of unemployment. It is said that the job creation may become more challenging with upcoming innovations in computers, robotic technologies and other form of job automation. With improvement in technologies and mechanization, it is not easier to match or exceed the capability of human workers in many routine job categories. This may ultimately lessen the need for manpower.

8. Immobility of Labour and their Migratory Character

Sometimes, unemployment is likely to increase, when workers are not willing or able to move from one reason to another or from one job to another. It results into structural unemployment, which refers to a change in the structure of industry that leaves some people unable to respond by changing job, industry or location. As a result, such people remain temporarily or permanently unemployed.

9. Slow Progress of Industrialization

Slow industrial growth rate is also one of the major reason behind unemployment. In a country like India, despite a long history and much potential, the pace and level of India’s industrial development is much below and far short of the expectations. This poorly affects the rate of employment within the country.

Effect of Unemployment in India

Unemployment is not only an indicator of the financial health of a nation but also has adverse impact on psychological well-being of people in terms of lack of motivation, high level of anxiety, increased level of stress and many more. Some of the adverse effects of unemployment are explained below:

1. Increase in Poverty

Unemployment causes deprivation of basic resources to lead a life such as food, clothing and shelter and loss of savings and investment. This situation leads to an increase in debts and generates poverty.

2. Loss of Government Revenues

In the situation of unemployment, a few people are employed and submit tax. In such a case, less tax is collected by the government. The money collected through taxes is used by the government for the well-being of the nation.

3. Surplus Labour

When people are in dire search of job, they are ready to do any kind of work. As a result, industries have enhanced choice of employment and select skilled worker, which is too on lower wages.

4. Political Instability

A country suffering from unemployment also suffers political instability. People who are unemployed can be easily lured by antisocial elements and lose faith in peaceful means and democratic values. They start believing that the government is incompetent to provide them work.

5. Exploitation of Labour

In the situation of unemployment, the supply of labour is increased. Due to this, the rate of wages reduces as a large number of people are ready to work. In this way, industries gain a positive effect, Whereas the labour is exploited to a large extent and is made to work even under adverse situation.

6. Low Standard of Living

When people are unemployed, they do not spend much on luxuries and buy goods for their basic living or may be inclined towards inferior goods, which, in turn, leads to a low standard of living of people.

Measures to Resolve Unemployment in India

One of the objectives of development in each Five-Year Plan is the expansion of employment opportunities. However, the problem of unemployment still persists in spite of all plan announcements. The Indian government needs to take some concrete measures to overcome the problem of unemployment, which are not only mentioned in Five-Year Plan but also worked upon. The followings are some suggested measures for solving the problem of unemployment:

1. Promoting Small Scale and Cottage Industries

With industrialization, small scale and cottage industries have been declined to a great extent. Cottage industries such as dairy farming, poultry farming, furniture making, basket making, bee keeping, weaving, tailoring ad matchstick making, should be encouraged to provide employment opportunities to the rural people.

2. Population Control

In order to solve unemployment problem it is important to check the growth of population. For this, family planning programme should be implemented extensively and effectively.

3. National Employment Policy

A strong National Employment Policy (NEP) is needed to cover a range of social and economic issues related to labour and employment. The policy needs to act as a critical tool to achieve the goals of the 2030 Agenda for Sustainable development. The NEP must include policies related to enhancing human capital through skill development; creating sufficient number of decent quality jobs for all citizens; strengthening social unity and equity in the labour market.

4. Change in Education System

There is a strong need to bring changes in our existing education system. A key defect in our education system is that it focuses on just earning a degree. There should be more diversification in the education system. It should include more vocational courses focusing on developing the skills of people required for performing particular jobs. Developing a quality education system is a key requirement to development to develop a strong nation, as this  will resolve all of its major concerns including unemployment. Therefore, in public expenditure, education needs the high priority.

5. Promoting Exports

Increasing exports evidently results in increasing employment. If a country produces products and services for export, then the production translates into more jobs related to export of those products and services.

6. Encouraging Capital Formation

Capital formation refers to the process of reinforcing capital stock of a country by investing in productive economic activities. The increased investment in various sectors leads to increased employment opportunities in a country. It also helps in raising national output which results in raising the rate and level of national income.

7. Promoting Non-farm Employment in Rural Areas

Promoting non-agricultural activities may help not only in lessening unemployment in rural areas, but also in reducing burden on urban areas. The non-farm sector includes all non-agricultural activities such as mining, household and non-household manufacturing, processing, repair, construction, trade and commerce, transport and other services in villages and rural towns. Growth in the non-farm sector can create opportunities for employment and higher income among the rural poor by decreasing the dependency on agricultural activities for livelihood.

8. Modernization of Agricultural Techniques

In rural areas, most of the people are involved in agricultural activities. If the methods of agriculture are improved, the problem of unemployment can be reduced to a large extent. This can be done by:

  • Consolidating the holding practice and making it economic.
  • Freeing farms from the dependence on nature through the modernization of agriculture methods.
  • Planning the system of crops scientifically and developing sufficiently.
  • Providing modern agricultural equipment, good seeds and fertilizers and proper agricultural guidance to the rural farmers.
  • Making land more cultivable through scientific methods.


In this article we read about the unemployment in India and types of unemployment. We also read about types of unemployment and the major causes of unemployment in India. At the end we also saw some measures to resolve the unemployment problem in India. If you like this article, don’t forget to share it with your friends and families. Thank You!

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