1. Every sixth person in the world is an Indian and Every third poor person in the world also is an Indian.

 There is a very close relationship between unemployment and poverty. When unemployment increases poverty expands, and therefore, removal of unemployment has been accepted as one of the objectives of Indian Planning particularly after the Fifth five year plan.

 It was thought that with the economic development, due to spread (percolation) effect and trickle down effect the problems of poverty and unemployment would be automatically solved. However, this is an over simplification of the relationship between the two. In India the modernisation or urbanisation (Mahalanbis) model has not permitted this to happen. The benefits of planning have mainly gone to the upper classes and the poverty, inequalities and unemployment have increased in absolute number. The economic development has benefited the elite class in the country and has increased economic inequality and unemployment.


Generally a person who is not gainfully employed in any productive activity is called unemployed. Unemployment in economics generally refers to the open unemployment which can be defined as a situation where a person capable and willing to work at the wage rate prevailing in the market does not find productive employment due to paucity of adequate job opportunities in the market

(i) Voluntary unemployment: In every society, there are some people who are unwilling to work at the prevailing wage rate and there are some people who get a continuous flow of income from their property or other sources and need not work. All such people are voluntarily unemployed. Voluntary unemployment may be a national waste of human energy. ,but it is not a serious economic problem.

(ii) Frictional Unemployment: Frictional unemployment is a temporary phenomenon. It may result when some workers are temporarily out of work while changing jobs. It may also result when the work is suspended due to strikes or lockouts. To some extent, frictional unemployment is also caused by imperfect mobility of labour. We may also say that frictional unemployment is due to difficulties in getting workers and vacancies together.

(iii) Casual unemployment In industries, such as construction, catering or agriculture, where workers are employed on a day to day basis, there are chances of casual unemployment occurring due to short-term contracts, which are terminable any time.

(iv) Seasonal unemployment There are some industries and occupations such as agriculture, the catering trade in holiday resorts, some agro-based activities like sugar mills and rice mills, in which production activities are seasonal in nature. So they offer employment for only a certain period of time in a year People engaged in such type of work or activities may remain unemployed during the off-season. We call it seasonal unemployment.

(v) Structural Unemployment: Due to structural changes in the economy, structural unemployment may result. It is caused by a decline in demand for production in a particular industry, and consequent disinvestment and reduction in its manpower requirement. In fact, structural unemployment is a natural outcome of economic progress and innovation in a complex industrial economy of modern times.

(vi) Technological unemployment: Due to the introduction of new machinery, improvement in methods of production, labour-saving devices, etc. some workers tend to be replaced by machines. Their unemployment is termed as technological unemployment.

(vii) Cyclical unemployment: In industirally advanced capitalist countries this type of unemployment is found in recessionary and depressionary phases of trade cyclis During the contraction phase of a trade cycle in an economy, aggregate demand
falls which leads to disinvestment, decline in production and increase in unemployment. The solution for cyclical unemployment lies in measures for increasing total expenditure in the economy to increase in the volume of effective demand. Easy money policy and fiscal measures such as deficit financing may help for this purpose. When effective demand increases, there is a corresponding, increas in employment. Since cyclical phase is temporary, cyclical unemployment remains only a short-term phenomenon.

(viii) Chronic unemployment: When unemployment tends to be a long-term feature of country it is called chronic unemployment Underdeveloped countries sulter from chronic unemployment on account of the vicious circles of poverty, lack of developed resources and their under utilisation, high population growth, backward, even primitive state of technology, low capital formation, etc (The idea of vicious circl of perverty both on the demand and the supply safe is given by Prof Ragnar Nurk

(ix) Disguised unemployment: Disguised unemployment commonly refers to a situation of employment with surplus manpower in which some workers have zero for very small or negative) marginal productivity so that their removal will not affect the volume of total output. Disguised unemployment in the strict sense, means underemployment of labor to illustrate, suppose a family farm is property organized and four persons are working on it. There is no need of having any extra manpower on the farm as its productive capacity has been fully used. If however, two more workers are emplowed on it and there is no change in output we may say that these two workers are disguisedly unemployed. This kind of unemployment means surplus manpower in an activity and is a common feature of underdeveloped economies especially of their rural sector.

Meaning of labour force, work force and unemployment rate. An understanding of the meanings of the following terms is highly essential for understanding the nature of unemployment problem in India.

Labour force: Labour force is the sum total of employed people as well as unemployed people. It means economically active population in the age group 15 years to 64 years. It covers that part of total population which is ready, capable and willing to offer its services at the prevailing market wages. In other words they are the people in search of job.

Work-force: Work force is a part of labour force and refers to the population which s employed per 1000 people in the labour force. The employed people may be emploved for wages, for profits or in the self employment activities
Unemployed rate : Unemployment rate is defined as the number of persons unemployed per thousand persons in the labour-force.

For example – if the number of the people in the labour force is 1,000 and the number of employed people is 920 and that of unemployed people is 80 then the unemployment percentage is 8%

Measurement of Unemployment:

There are three main measures of employment and unemployment

1. Usual Principal Status (UPS): Current yearly status or long run status: This measure estimates the number of persons who may be said to be chronically unemployed. This measure generally gives the lowest estimate of unemployment especially for a poor economy because only a few can afford to remain without work over a long period.

2. Current Weekly Status (CWS): This estimate reduces the reference period i.e. the period for which data is collected to one week. According to this estimate a person is said to be employed for the week even if he is employed only for a day during that week. He is regarded as unemployed only when he has been out of job for the entire week.

3. Current Daily Status (CDS): The reference period here is a day. It counts every half day’s activity status of the unemployed person over the week.

A person is said to be unemployed on a given day when he has not been employed even for a single hour on that day. This measure gives the highest estimate of unemployment because it covers all the three types of unemployment.

Unemployment rate in India


As per the 61st round of NSSO during the period 2004-09 the unemployment in India had actually increase and the current daily status unemployment was larger than the usual principal status unemployment.
NSSO-66th Round

NSSO-66th Round the latest round of National Sample Survey on employment was conducted

by National Sample Survey Organisation (NSSO) during 2009-10.

NSSO – 68th Round

NSSO-68th Round the latest round of National Sample Survey on employment was conducted

by National Sample Survey Organisation (NSSO) during 2011-12.

The following table shows that the labour force participate rate, work force participation rat and person unemployed in 2011-12 in India.

WPR – Work Force Participation Rate

PU Persons Unemployed

LFPR – Labour Force Participation Rate

Salient features of unemployment problem in India : As per the Survey, the following are the salient features of the trend of employment and unemployment in India:

According to the usual status, 40 per cent of population belonged to the labour force About 98 per cent of the Labour force was employed according to usual status.

The male WPR in both the rural and urban areas was considerably higher than lenal WPR. Women comprise 48,3% of the population but have only 26% share in persons employed.

The WPRS according to the CDS were the lowest.

At the all India level, unemployment rate was 5.6 per cent in the CDS approach. The unemployment rate stood at 3.7 per cent in CWS approach and 2.3 per cent in the US approach.

In the rural areas, the female unemployment rate was almost the same as the male unemployment rate.

In the urban areas, generally, the female unemployment rate was higher than the mal unemployment rate.

Factors Responsible For Unemployment

1. Excessive Population Growth: Population growth is the most important factor responsible for the unemployment problem in the country. It is estimated that at present the labour supply is increasing at the rate of 6 million people per year. For a developing economy like India, it is impossible to absorb such a growing labour force.

2. Economic Growth without job opportunities: The other fundamental as for unemployment in India is the low economic growth in India during tse plan period During the period 1951 to 1980, the average growth rate has been around on Socha slow growth was not able to create employment opportunity on a large scale Sin the growth rate has gone up to 50% per year but the job creating capacity of the economy has not improved much

3. Faulty Education System: Faulty education system is one more reason particularly impossible for the educated unemployment in the country. It provides only liberal education, which does not have much practical utility

4. Inappropriate Technology With the introduction of new technology in industry as well as agriculture  the problem of urban and rural unemployment both has become quite serious. This new technology favours the use of labour saving machines. The use at these machines has resulted in unemployment for lakhs of workers

Measures taken by the government for solving unemployment problem:

Policies of the Eleventh plan

The Eleventh Plan targeted generation of additional employments opportunities in services and manufacturing in particular, labour intensive manufacturing sectors such as food processing, leather products, footwear and textiles and in services sectors such as tourism and construction and village and small scale enterprises

It underlined the need to have a proper policy on developing skills. Therefore, a National Policy on Skill Development was formulated in 2009 which envisions empowering all individuals through improved skills, knowledge, and nationally and internationally recognized qualification to gain access to decent employments and ensure India’s competitiveness in the global market.

Policies in the 12th plan.

Educated youth are expected to join the labour force in increasing numbers during the 12th Plan. The 12th Plan therefore lays great stress on improving job opportunities in manufacturing sector, agro-processing, supply chains, rural infrastructure and services.

It has identified priority sectors for employment generation and skill development. These include, Textiles and Garments, Leather and Footwear, Gems and Jewellery, Food Processing Industries, Handlooms and Handicrafts, Machine Tools, IT Hardware and Electronics, Telecommunications equipment. Aerospace Shipping, Defense Equipment.

All India Labour force Participation Rate (2011-12) (NSSO – 68th round)

(Number of persons per thousand population)


PU/LFPR ” 100

CWS 364143773.7%

 Read More –

Objectives of monetary policy


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