Economic Indicators and Various Reports On It- GDP, FD, EODB, WIR etc

On Unemployment in Indian States


From UPSC perspective, the following things are important :

Prelims level: Important reports in the News; Trends in unemployment

Mains level: Urbanisation and Unemployment;

Why in the news? 

A recent report by the International Labour Organization (ILO) and the Institute for Human Development (IHD) revealed that two out of every three unemployed individuals were young graduates.

Unemployment across Indian States: 

  • Highest Unemployment Rate: At almost 10%, Goa’s unemployment rate is more than three times the national average of 3.17%.
    • Four of the top five states with high unemployment rates (Goa, Kerala, Haryana, and Punjab) are comparatively richer states.
  • Lower Unemployment Rates: Maharashtra and Gujarat, which are rich states in western India, experience unemployment rates far less than the national average.
  • Unemployment in Northern and Southern states: All northern states (Jammu and Kashmir, Punjab, Haryana, Uttarakhand, and Himachal Pradesh) and most southern states have unemployment rates higher than the national average, except Karnataka.
  • Unemployment below the National Average: Out of the 27 states considered, 12 states have unemployment rates less than the national average.
  • Lower unemployment rates in poorer states: Except for Maharashtra and Gujarat, most states with unemployment rates lower than the national average also have per capita incomes lesser than the national average.

What is the Relationship between Urbanisation and Unemployment? (ILO observations)

  • Relationship between Self-employment and Unemployment: The trend line shows a downward slope, indicating a negative relationship between self-employment and unemployment.
  • Informal self-employment mainly in Agriculture and Rural Economy: A significant portion of informal self-employment is in agriculture and the rural sector.

  • Relationship between Labor Force and Unemployment: Figure 3 illustrates a positive relationship between the urban share of the labor force and the unemployment rate. Highly urbanized states tend to have higher unemployment rates (Positive relationship).
  • High Unemployment and Urbanized states: States like Goa and Kerala, which are highly urbanized, experience high unemployment rates. This is attributed to the limited scope for informal jobs in urban settings compared to rural agriculture, which acts as a reserve for absorbing surplus labor.
  • Limited Informal Sectors: Although informal sectors exist and thrive in urban settings, they have limited capacity to absorb job-seekers compared to rural agriculture.
  • Exceptions states: Gujarat and Maharashtra, despite being highly urbanized, have lower unemployment rates compared to states like Uttar Pradesh and Madhya Pradesh.

Nexus between Education and Employment:

  • Highly educated labor force and unemployment: Kerala, with a highly educated labor force (30% of graduates), faces high unemployment.
    • In contrast, Gujarat and Maharashtra have lower proportions of graduates in their labor force (14% and 20% respectively) and experience lower unemployment rates despite being richer and urbanized.
  • High unemployment among graduates: Graduates may lack the skills required for the growing modern sector, highlighting the need for improved teaching infrastructure and standards.
    • Graduates aspire to high-wage jobs that match their skills, leading to unemployment if the modern sector doesn’t expand enough to absorb them.

Conclusion: Addressing youth unemployment necessitates improving education quality to match job market demands, fostering skill development for the modern sector, promoting entrepreneurship, and enhancing rural employment opportunities. Policy interventions should target these areas for inclusive growth and employment generation.

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