India's unemployment rate has dropped to 2%, the lowest among G20 nations, indicating the effectiveness of government schemes and economic growth in creating employment opportunities.
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Picture Courtesy: PIB
The Union Minister for Labour & Employment stated that the unemployment rate in India reduced due to government initiatives and robust economic growth.
Unemployment is the condition of being jobless while actively seeking work. A person is considered unemployed if they are part of the labor force (age 15-59 in India) but are not currently engaged in any economic activity.
Frictional: Temporary joblessness during transitions (e.g., between jobs, entering the workforce). It's a normal part of a dynamic labor market.
Structural: Mismatch between available skills and job market demands, caused by economic shifts or technological changes.
Cyclical: Fluctuations tied to the business cycle; unemployment rises during recessions and falls during booms. It is often short-term.
Seasonal: Occurs in industries with seasonal demand for labor, such as agriculture or tourism. Agricultural workers may be unemployed during the off-season.
Disguised: More people are employed than technically needed, especially in the agriculture and unorganized sectors, leading to low or zero marginal productivity.
Educated: Individuals with formal education struggle to find jobs matching their qualifications.
How unemployment is measured in India?
The Ministry of Statistics and Programme Implementation's (MoSPI) Periodic Labour Force Survey (PLFS) is the primary source.
Data from the monthly PLFS for July 2025
Structural and economic issues
Skills mismatch: Education system often produces graduates lacking practical and industry-relevant skills, creating a mismatch with market demands. For example, Economic Survey 2023-24 highlighted that only 51% of Indian graduates are considered employable.
Jobless growth: Economic growth hasn't translated into sufficient job creation, particularly in labor-intensive manufacturing sectors, to absorb the large workforce.
Dominance of informal sector: Around 90% of the workforce is in the informal sector, which lacks job security, social protection, and steady income, leading to widespread underemployment.
Capital-intensive techniques: Companies increasingly favor capital-intensive, labor-saving technologies over traditional labor, reducing overall employment potential.
Demographic and social factors
Demographic pressures: India's large, youthful population means millions of new job seekers enter the market each year, intensifying competition for limited positions.
Low female labor force participation: Social norms and lack of suitable opportunities have historically kept female participation low, recently increasing to 41.7% in 2023-24.
Limited labor mobility: Factors like cultural ties, language barriers, and lack of information inhibit workers from relocating for job opportunities.
Social inequalities: Marginalized groups often face discrimination and have limited access to quality jobs despite targeted policies.
Agricultural and seasonal employment
Disguised unemployment in agriculture: More people are employed in agriculture than are needed to maintain current output levels.
Seasonal unemployment: Seasonal nature of agriculture leaves millions of workers without a steady income for a significant part of the year.
Low rural income: A 2021–22 NABARD survey revealed that the average monthly income of farming households was just ₹13,661, with a mere ₹4,476 (33%) coming from cultivation alone.
MGNREGA: Guarantees 100 days of rural employment. Generated over 3,029 crore person-days of work between FY 2014-15 and FY 2024-25, with increasing women's participation (58%+).
Aatmanirbhar Bharat Rojgar Yojana (ABRY): Incentivized new hires during the pandemic by subsidizing provident fund contributions.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Offers skill training with focus on emerging technologies. Trained over 1.6 crore youths since 2015, including 25+ lakh under PMKVY 4.0 as of July 2025.
National Career Service (NCS) Portal: Connects job seekers with employers. Posted over 1.12 crore vacancies in FY 2024-25.
Entrepreneurship and financial support
Pradhan Mantri MUDRA Yojana (PMMY): Provides collateral-free loans to micro and small businesses.
PM Vishwakarma Scheme: Supports artisans and craftspeople with training, tools, and collateral-free credit.
PM SVANidhi: Offers working capital loans to street vendors.
Prime Minister's Employment Generation Programme (PMEGP): Provides credit-linked subsidies for new units in the non-farm sector.
Production-Linked Incentive (PLI) Schemes: Incentivize domestic manufacturing to create jobs across 14 sectors. Aims to create 60 lakh new jobs.
PM GatiShakti: National master plan to provide multimodal infrastructure, creating job opportunities.
PM-MITRA: Establishes mega textile parks to generate employment.
Pradhan Mantri Viksit Bharat Rozgar Yojana (PM-VBRY): Employment promotion scheme aimed at boosting job creation and formalizing the workforce.
Address skills mismatch
Targeted skilling: Align training programs like PMKVY with industry demand in areas like AI, green energy, and tech.
Boost vocational training: Improve the quality of ITIs and vocational centers, focusing on practical skills relevant to emerging sectors.
Enhance digital literacy: Expand digital training, especially in rural areas, to empower the workforce for the digital economy.
Formalize and strengthen social security
Implement Social Security Code 2020: For gig, platform, and informal workers to provide a safety net.
Incentivize formal jobs: Use schemes like the Employment Linked Incentive (ELI) Scheme to encourage employers to create new formal jobs.
Monitor formalization: Utilize data from sources beyond EPFO, such as the expanded monthly PLFS, to accurately track formal job creation.
Boost labor-intensive sectors and MSMEs
Prioritize key sectors: Focus incentives on labor-intensive sectors like textiles and apparel. The PM-MITRA parks are a start, but broader support is needed.
Support MSMEs: Simplify regulations and expand financial and market access for MSMEs, which are major employment generators.
Diversify rural economy: Reduce over-reliance on agriculture by promoting rural manufacturing and agro-processing.
Promote inclusive and sustainable employment
Increase female participation: Address barriers like safety, social norms, and pay gaps. Expand childcare facilities and promote flexible work.
Decentralize development: Incentivize companies to set up in high-unemployment areas to reduce regional disparities and urban migration.
Empower women in agriculture: Improve access to credit, land ownership, and training for women farmers and entrepreneurs.
Unemployment rate reduced, but sustained efforts in skilling, formalization, and inclusive policies are crucial to address structural challenges and harness the demographic dividend.
Source: PIB
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PRACTICE QUESTION Q. Indian demographic dividend presents a unique opportunity and a challenge. Critically analyze 150 words |
Unemployment refers to a person being without a job but actively seeking one, while underemployment occurs when a person is employed but their work does not fully utilize their skills, education, or time.
India's official unemployment rate is measured by the Periodic Labour Force Survey (PLFS).
PMKVY is a skill development scheme that provides short-duration skill training and certification to Indian youth, making them more employable and capable of earning their livelihood.
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