Unemployment in India

Definitions

Labour Force: The segment of the population that is either working (employed) or actively looking for work (unemployed). People who are retired, students not seeking jobs, or homemakers not looking for paid work are generally not counted in the labour force.
Workforce: The total number of people actually employed at a given time.
Unemployment: A situation where a person is actively searching for employment but is unable to find work.
Unemployment Rate (UR): The percentage of the labour force that is unemployed.

 
Major Types of Unemployment in India
 
Type of Unemployment
Meaning / Characteristics
Sector Most Affected
Disguised Unemployment
More people are engaged in a job than actually required. If some workers are removed, total production does not decrease (marginal productivity of surplus labour is zero).
Agriculture
Seasonal Unemployment
Unemployment that occurs during certain seasons of the year (e.g., agricultural labourers lacking work between sowing and harvesting seasons).
Agriculture & Agro-based industries
Structural Unemployment
Caused by a mismatch between the skills workers possess and the skills demanded by employers, or due to structural shifts/technological changes in the economy.
Manufacturing & Industrial sector
Frictional Unemployment
Temporary unemployment that occurs when a person is transitioning from one job to another, or entering the job market for the first time (search unemployment).
Urban / Corporate sector
Cyclical Unemployment
Caused by business cycles—unemployment rises during economic recessions or downturns and falls during economic booms.
Industries sensitive to economic cycles
Educated Unemployment
A situation where educated youth are unable to find jobs matching their qualifications, often due to a mismatch between formal education and market skill requirements.
Urban / Semi-urban educated youth
 
How Unemployment is Measured in India
The National Statistical Office (NSO), under the Ministry of Statistics and Programme Implementation (MoSPI), measures unemployment using different reference periods through periodic labour force surveys (PLFS).
 
Measurement Approach
Reference Period
What It Captures
Usual Principal Status (UPS)
365 days (one year preceding the survey)
Identifies chronic unemployment by looking at the major time spent working or being available for work over the year.
Usual Principal and Subsidiary Status (UPSS)
365 days
Includes those who had work for at least 30 days during the year as employed (broader definition than UPS).
Current Weekly Status (CWS)
7 days preceding the survey
Captures short-term unemployment; a person is considered unemployed if they did not get work even for one hour on any day of the week.
Current Daily Status (CDS)
Each day of the 7 preceding days
Captures the activity status of a person for each day of the reference week. It is considered the most comprehensive measure of unemployment and underemployment.
 
Causes of Unemployment in India
Rapid Population Growth: The growth rate of the labour force outpaces the rate of job creation.
Heavy Dependence on Agriculture: Agriculture suffers from seasonal variations and disguised unemployment, failing to provide year-round stable income.
Slow Industrialization: The secondary sector has not grown fast enough to absorb the surplus labour migrating from rural agricultural areas.
Defective Educational System: Traditional education focuses more on theoretical degrees rather than vocational or practical skill development, leading to employability gaps.
Lack of Capital and Investment: Insufficient capital formation limits the expansion of industries and infrastructure projects that generate large-scale employment.
 
Government Employment & Skill Schemes
MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act, 2005):
Provides at least 100 days of guaranteed wage employment in every financial year to every rural household whose adult members volunteer to do unskilled manual work.
PMEGP (Prime Minister’s Employment Generation Programme):
A credit-linked subsidy scheme aimed at generating self-employment opportunities through micro-enterprises in the non-farm sector.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY):
Implements industry-relevant skill training to help youth secure better livelihoods and bridge the skill gap.
National Career Service (NCS) Portal:
A digital platform acting as a common meeting ground for job seekers and employers to bridge information asymmetries.
West Bengal State Initiatives:
Utkarsh Bangla: A flagship skill development initiative in West Bengal to train youth in vocational trades.
Gatidhara: A scheme by the Government of West Bengal to provide self-employment to unemployed youth by financial assistance for purchasing commercial vehicles.
Karma Sathi Prakalpa: Provides soft loans and subsidies to unemployed youth for setting up income-generating projects.
 
PYQs
 
1. If the withdrawal of a worker from employment does not cause any loss in total output, this situation is known as:   [Clerkship 2015]
(A) Seasonal Unemployment
(B) Voluntary Unemployment
(C) Disguised Unemployment
(D) Frictional Unemployment
Answer: (C) Disguised Unemployment
 
2. According to the Census definition, a ‘Marginal Worker’ is a person who works for:[Clerkship 2015]
(A) Less than 183 days in a year
(B) More than 183 days in a year
(C) Exactly 365 days in a year
(D) None of the above
Answer: (A) Less than 183 days in a year
 
3. In India, MGNREGA provides a legal guarantee of wage employment in rural areas for at least how many days per financial year? [Clerkship 2019]
(A) 50 days
(B) 100 days
(C) 150 days
(D) 200 days
Answer: (B) 100 days
 
4. Unemployment caused by a mismatch between the skills workers possess and the skills required by employers is called:  [Clerkship 2019]
(A) Cyclical Unemployment
(B) Frictional Unemployment
(C) Structural Unemployment
(D) Seasonal Unemployment
Answer: (C) Structural Unemployment
 
5. Which sector in India suffers most predominantly from ‘Seasonal Unemployment’?  [Clerkship 2023]
(A) Manufacturing Sector
(B) Information Technology Sector
(C) Agricultural Sector
(D) Banking Sector
Answer: (C) Agricultural Sector