Unemployment in India Page 1 of 5

India's employment perspective

Overview of unemployment
Sector-wise absorption of labour
Trends in Labour Force Participation
Labour Force Projections by Age Groups
Projections of work opportunities
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Underemployment
Age structure of population: 1997-2002
Participation in labour force by age & sex
Population & Labour Force: 1997-2012
Population, Labour Force & Employment

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Overview

 Economic reforms may have given a boost to industrial productivity and brought in foreign investment
in capital intensive areas. But the boom has not created jobs. This was not unexpected. According to
a report by the Washington-based Institute of Policy Studies (IPS), the combined sales of the world's
top 200 MNCs is now greater than the combined GDP of all but the world's nine largest national
economies. Yet, the total direct employment generated by these multinationals is a mere 18.8
millions -one-hundredth of one per cent of the global workforce.

 India's Ninth Five-Year Plan projects generation of 54 million new jobs during the Plan period (1997-
2002). But performance has always fallen short of target in the past, and few believe that the current
Plan will be able to meet its target.

 India's labour force is growing at a rate of 2.5 per cent annually, but employment is growing at only
2.3 per cent. Thus, the country is faced with the challenge of not only absorbing new entrants to the
job market (estimated at seven million people every year), but also clearing the backlog.

 Sixty per cent of India's workforce is self-employed, many of whom remain very poor. Nearly 30 per
cent are casual workers (i.e. they work only when they are able to get jobs and remain unpaid for the
rest of the days). Only about 10 per cent are regular employees, of which two-fifths are employed by
the public sector.

 More than 90 per cent of the labour force is employed in the "unorganised sector", i.e. sectors which
don't provide with the social security and other benefits of employment in the "organised sector."

 In the rural areas, agricultural workers form the bulk of the unorganised sector. In urban India,
contract and sub-contract as well as migratory agricultural labourers make up most of the
unorganised labour force.

 Unorganised sector is made up of jobs in which the Minimum Wage Act is either not, or only
marginally, implemented. The absence of unions in the unorganised sector does not provide any
opportunity for collective bargaining.

 Over 70 per cent of the labour force in all sector combined (organised and unorganised) is either
illiterate or educated below the primary level.

 The Ninth Plan projects a decline in the population growth rate to 1.59 per cent per annum by the end
of the Ninth Plan, from over 2 per cent in the last three decades. However, it expects the growth rate
of the labour force to reach a peak level of 2.54 per cent per annum over this period; the highest it
has ever been and is ever likely to attain. This is because of the change in age structure, with the

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Unemployment in India Page 2 of 5

highest growth occurring in the 15-19 years age group in the Ninth Plan period.

 The addition to the labour force during the Plan period is estimated to be 53 millions on the "usual
status" concept. The acceleration in the economy's growth rate to 7 per cent per annum, with special
emphasis on the agriculture sector, is expected to help in creating 54 million work opportunities over
the period. This would lead to a reduction in the open unemployment rate from 1.9 per cent in 1996-
97 to 1.47 per cent in the Plan's terminal year, that is, by about a million persons - from 7.5 million
to 6.63 million.

 In other words, if the economy maintains an annual growth of 7 per cent, it would be just sufficient to
absorb the new additions to the labour force. If the economy could grow at around 8 per cent per
annum during the Plan period, the incidence of open unemployment could be brought down by two
million persons, thus attaining near full employment by the end of the Plan period, according to the
Plan.

 However, there appears to be some confusion about the figure of open unemployment. The
unemployment figure given in the executive summary of the Ninth Plan, gives the figure of open
unemployment at 7.5 million while the annual report of the Labour Ministry, for 1995-96, puts the
figure for 1995 at 18.7 million. An internal government paper prepared in 1997 put the
unemployment figure at the beginning of the Eighth Plan at 17 millions and at 18.7 million at the end
of 1994-95. Perhaps the Planning Commission referred to the current figure while the Labour Ministry
figure referred to the accumulated unemployment backlog.

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Underemployment

 Open unemployment is not a true indicator of the gravity of the unemployment problem in an
economy such as India, characterised as it is by large-scale underemployment and poor employment
quality in the unorganised sector, which accounts for over 90 per cent of the total employment. The
organised sector contributes only about 9 per cent to the total employment.

 Underemployment in various segments of the labour force is quite high.

For instance, though open unemployment was only 2 per cent in 1993-94, the incidence of under-
employment and unemployment taken together was as much as 10 per cent that year. This, in spite
of the fact that the incidence of underemployment was reduced substantially in the decade ending
1993-94.

 According to the Planning Commission, the States which face the prospect of increased
unemployment in the post-Ninth Plan period (2002- 2007) are Bihar, Rajasthan, Uttar Pradesh,
Kerala and Punjab.

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Sector-wise absorption of labour

Agriculture 62 per cent
Manufacturing & construction 16 per cent
Services 10 per cent
Sundry / miscellaneous jobs 12 per cent

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Table 1 : Age structure of population: 1997-2002

Age-group 1997 2002

0 - 14 37.23% 33.59%

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15 - 59 56.07% 59.41%
60+ 6.70% 7.00%

Table 2 : Trends in Labour Force Participation Rates

(Per Thousand of Population)

Male Female
Age Group Period
Rural Urban Rural Urban
1977-78 879 746 515 257
15-29 1987-88 824 710 478 211
1993-94 804 684 455 204
1977-78 990 990 619 324
30-44 1987-88 988 987 603 301
1993-94 990 986 600 300
1977-78 963 940 538 291
45-59 1987-88 964 933 538 275
1993-94 968 937 543 283
1977-78 667 517 221 130
60+ 1987-88 670 482 220 123
1993-94 699 443 241 114
1977-78 904 831 517 269
All (15+) 1987-88 879 810 496 239
1993-94 877 811 491 238

Note: Constituent shares in labour force in 1993-94 are Rural Male 0.499, Rural Female 0.270,
Urban Male 0.182 and Urban Female 0.049.

Table 3: Participation in Labour Force by Age Group and by Sex: 1997 - 2012
(per thousand of population)

Male Female
Age
1997 2002 2007 2012 1997 2002 2007 2012
15-19 517 482 447 412 302 282 261 241
20-24 871 408
25-29 975 454
30-34 988 505
35-39 996 526
40-44 986 (a) 538 (a)
45-49 981 524
50-54 961 476
55-59 914 411
60+ 637 205

Note: (a) No change in labour force participation in age groups above 20 years.

Table 4 : Labour Force Projections by Age Groups

1997 2002 Growth

Age Group
(Million) (% p.a.)
40.31 45.03 2.24
15-19 55.45 62.91 2.55
20-24 56.89 61.47 1.56
25-29 52.64 58.88 2.26
30-34 46.60 52.80 2.53
35-39 39.56 46.04 3.08
40-44

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45-49 32.90 38.13 2.99

50-54 25.86 30.27 3.20
55-59 18.86 22.45 3.55
60+ 28.15 31.64 2.37
15+ 397.22 449.62 2.51

Table 5: Population and Labour Force: 1997 - 2012

(million - 1st April)

  1997 2002 2007 2012

Population 951.18 1028.93 1112.86 1196.41
Labour Force 397.22 449.62 507.94 562.91

Table 6 : Projections of Work opportunities 1997-2002

GDP Growth Work Opportunities

Sector (% p.a.) (Million)
1997-02 1997 2002
Agriculture 3.9 238.32 262.48
Mining & Quarrying 7.2 2.87 3.54
Manufacturing 8.2 43.56 48.22
Electricity 9.3 1.54 1.93
Construction 4.9 14.74 17.03
Wholesale & Retail Trade 6.7 34.78 41.67
Transport, Storage &
7.3 11.96 14.57
Communication
Financing, Real Estate,
8.5 4.55 5.68
Insurance and Business Services
Community, Social and Personal
7.1 38.98 46.41
Service
All Sectors 6.5 391.30 441.52

Table 7 : Population, Labour Force and Employment

(Million)

8th Plan 9th Plan 10th Plan

  1978 (a) 1983 (b) 1994 (a) (1992-97) (1997-02) (2002-07)
(f) (f) (f)

718.2 895.0 951.2 1028.9 1112.9

Population (c) 637.6
(2.19) (2.12) (1.89) (1.58) (1.58)
286.6 368.5
Labour Force 255.8 374.2 423.4 478.8
(2.09) (2.42)
281.2 361.5
Employment 249.1 367.2 416.4 474.7 (d)
(2.23) (2.42)
Unemployment 6.7 5.4 7.0 7.0 7.0 4.1 (e)
Rate (%) 2.63 1.89 1.89 1.87 1.66 0.86 (e)

Notes:
1. Estimates of labour force and employment are on usual status concept and pertain to 15 years
and above.
2. Figures in brackets are compound growth rates in the preceding period.

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Unemployment in India Page 5 of 5

(a) As on 1st January

(b) As on 1st July
(c) Population at the terminal year of the plan
(d) Required to attain near full employment.
(e) Unemployment reduces to negligible level by the year 2007
(f) Labour force, employment and unemployment are stated as annual averages during the Plan period.

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