UNEMPLOYMENT AND POVERTY IN INDIA

Unemployment and poverty are the two major challenges that are facing the world
economy at present. Unemployment leads to financial crisis and reduces the overall
purchasing capacity of a nation. This in turn results in poverty followed by increasing
burden of debt. Now, poverty can be described in several ways. As per the World Bank
definition, poverty implies a financial condition where people are unable to maintain the
minimum standard of living.

Unemployment in India:
Meaning of unemployment
Unemployment occurs when a person who is actively searching for employment is unable
to find work. Unemployment is often used as a measure of the health of the economy.
The most frequently cited measure of unemployment is the unemployment rate. This is
the number of unemployed persons divided by the number of people in the labour force.

Features of Unemployment in India

For many of us the notion of unemployment is one of those who do not have a job or, are
paid no salary. This is partly correct but not wholly. Such a notion would apply largely to
the educated people who are not able to find work or to those in urban areas who come
to seek employment. We will leave out a large section of people, in fact the majority, who
are engaged in agriculture and who may not be paid wages. For example, a person
cultivating a small piece of land which he owns is also employed; through he is not paid a
wage. He is more known as self-employed in agriculture. Similarly there are vast numbers
of people in rural and urban area who do not get wages for the work they do. These are
farmers, artisans, petty shop owners, small and big industrialists, taxi drivers, mechanics
etc. These people are also regarded as being employed. All these people as well as those
drawing salaries are regarded as being “gainfully employed” because they get some
material rewards (in cash or kind) for the work they do. Those who are not gainfully
employed are unemployed. The next problem is of identifying the unemployed. This is not
an easy task. Normally in our country we regard those people who are between the ages
15 and 58 as being “economically active”. In other words these people have the potential
of being gainfully employed. Therefore those who are not gainfully employed in this age
group are unemployed. This supposition will again not be fully correct. There could be a
large number of people in this age group who do not wish to seek employment. They
could be students or people who can depend on other people’s earnings and they do not
wish to be employed.

Till recently women were considered in this category since a large

section of women (married women mainly) do household work. However, in recent years,
this has been considered economic activities. The Census of 1991 and 2001 has taken this
into consideration.
Types of Unemployment in India
So, we can see unemployment is a serious problem which is not always easy to identify.
Let us discuss the different types of unemployment in India.

Seasonal Unemployment
Normally when we talk of employed people we mean those who have work throughout
the year. But this may not possible for all. In agriculture, work is seasonal even though
agricultural activities are performed throughout the year. During the peak agricultural
seasons (when the crop is ready for harvesting) more people are required for work.
Similarly in the sowing, weeding and transplantation period more labour is required.
Employment therefore increases at this time. In fact we will find that there is hardly any
unemployment in rural areas during these peak agricultural seasons. However, once these
seasons are over the agricultural workers, especially those who do not own land or whose
land is not sufficient to meet their basic requirement (these are landless labourers and
marginal farmers respectively), remain unemployed. This type of unemployment is known
as seasonal unemployment.

Voluntary Unemployment
People who are unwilling to work at prevailing wage rate and people who get a
continuous flow of income from their property or any other sources and need not to work,
such people are voluntarily unemployed.

Frictional Unemployment
Unemployment attributable to the time required to match production activities with
qualified resources. Frictional unemployment essentially occurs because resources,
especially labour, are in the process of moving from one production activity to another.
Employers are seeking workers and workers are seeking employment, the two sides just
haven't matched up. Hence unemployment of the frictional variety increases. This
mismatch is largely the result of limited information, which is often compounded by
geographic separation between producer and resource.

Causal Unemployment
Cyclical unemployment is based on a greater availability of workers than there are jobs for
workers. It is usually directly tied to the state of the economy. Lower demand for products
due to lack of consumer confidence, disinterest, or reduction in consumer spending results
in the workforce cutting back on production. Since production is reduced, companies that
retail such products may also cut back on workforce, creating yet more cyclical
unemployment.
Disguised Unemployment
There are also instances where we find too many people working when so many are not
required. In agriculture we may find that all members of the family work. It is possible
that 3-4 people can do a given work in the farm, but we find that the whole family of say
10 people doing the job. This may be because the excess people are not able to find
employment elsewhere, so rather than remain unemployed they prefer to do the work
along with others. This is known as disguised unemployment. This occurs when more than
the necessary numbers of people are employed for the specified work. Disguised
unemployment is found in agriculture because of the lack of employment opportunities
elsewhere. Similarly disguised unemployment can be found in industry and offices as well.

Rural and Urban Unemployment in India

The unemployment rate at all India level stood at 3.8 per cent while in rural and urban
areas it was 3.4 per cent and 5 per cent respectively. Unemployment rate is more in urban
areas than in rural areas as in urban areas educated unemployed are more in numbers
and also in urban areas it requires some vocational training or technical skill to do a job as
compared to rural areas. Urban unemployment is that unemployment which exit in urban
areas. It is not only painful at personal level but also at social level.

Despite this problem the government has not given attention to it. Urban unemployment
can be classified into two forms.

Industrial unemployment:
The exact size of the industrial unemployment is not known because the necessary data
for its estimation are not available.

Educated unemployment:
It constitutes large part of urban unemployment in India. Rural unemployment is the main
problem of Indian government and it requires huge capitalization of capital. Disguised
unemployment, seasonal unemployment etc are some of the example of rural
unemployment. The educated are not the only ones who face the problem of
unemployment in the urban areas. There are large numbers of people in the rural areas
who do not have a high level of education and who are unemployed.

Problems and Solutions to Unemployment in India

Unemployment means a person willing to work but unable to find a qualified job. Our
country is facing many problems but one of the serious problem is of unemployment.
Many graduates, doctors, engineers, scientist are unemployed or working
underemployed. Due to unemployment we are wasting our country’s human resource.
The unemployed rate in between age group 15- 29 has been increased since 2009-2010.
According to the Global Employment Trends 2014 the unemployment rate has raised to
3.8%, last year it was 3.7%. The International Labour Organisation (ILO) has said in the
recent report that India has shown rise in the unemployment in the last two years.If
the problem of unemployment is solved it will help in development of the country.
With Population of 1.20 billion in our country the unemployment rate is increasing day
by day. The problem of unemployment is rising but still many industries are facing the
problem of skilled candidate for their company. There is a boom of software
companies, Outsourcing companies in India, but still facing the problem of
unemployment.

Reasons of unemployment in India

1. There are employment opportunities in India, but the rising population problem
creates the unemployment. If the population grows in the same rate the next
generation will face more problems of unemployment. If there is vacancy for 1
position 100 or 1000 apply for the position and only one gets the job and others
remain unemployed.
2. Inflation.
3. Indians don’t take jobs which are below their grades. Many find it difficult to work
at the below qualification level job.
4. Low wages or salary below the market rate.
5. Many big industries look for the skilled candidate only, for their company.
6. Recession.
7. Many Employers give preference to the experienced candidates only and not the
fresher.
8. Not enough or new jobs: As per the experience & analysis from number of new
government jobs is decreasing every year. Government is not able to create enough
jobs keeping in mind the Indian population.
9. Slow business expansion.
10. Advanced Technology: Earlier for a task hundreds or thousand people were required
to do a work but now due to the advanced technology only one person can do many
people’s work. With the advanced technology companies are hiring few persons to
operate the machine. Give a command on computer and the work is done this has
cut off the employment of many.
11. Corruption: In Government sector and in some private sector people get the job by
giving the bribe. Even though the candidate is not that qualified but if he gives the
bribe he gets the job. So to get a government job give a bribe. The qualified
candidate remains unemployed as no money to give the bribe.

Problems caused due to unemployment

  Unemployment and poverty goes side by side. The problem of unemployment gives
rise to the problem of poverty.
 Young people after a long time of unemployment find the wrong way to earn
money.
 To get rid from the unemployment stress, they accept alcohol or drugs.
 Unemployed youths accepts suicide as the last option of their life.
 Lower economic growth.
 Increase rate in Crimes. As the employed youth don’t have anything to do they start
doing robbery, murder etc.
 Health issues i.e it affects mentally as well as physically.

Solutions to the unemployment in India

1. The very first solution for the unemployment is to control the rising population of our
country. Government should motivate people to have small families. Indian government
has started initiatives to control the population but still the population is rising.

2. The quality of Indian education should be improved. The current education system is
not up to the level. Government should keep a strict watch on the education system and
try to implement new ways to generate skilled labour force. Government should select a
committee to look after the schools and universities. The syllabus taught is of no use to
the industries so the education should be as per the current requirements of the
industries. Before completing the education a practical knowledge should be given.

3. Also today’s youth should join the institute or select the course where proper training is
given and the course is as per the current industries requirements. Take the course as per
your interest and which will bright your future.

4. Government should encourage and develop the agriculture based industries in rural
areas so that the rural candidates don’t migrate to the urban areas. More employment
should be generated in rural areas for the seasonal unemployment people.

5. Rapid Industrialization should be created.

6. Development of the rural areas will stop the migration of the rural people to the urban
cities and this will not put more pressure on the urban city jobs.

7. Government should allow more foreign companies to open their unit in India, so that
more employment opportunities will be available.
Poverty

The magnitude of the literacy challenge facing many countries today is further
complicated by the strong links between illiteracy and poverty. For example, there is a
significant negative correlation between measures of poverty and the adult literacy rate,
at both the international level (Figure 7.5) and at the sub national level in countries such
as India that is, where poverty rates are higher, literacy rates tend to be lower.
Noteworthy exceptions include countries such as the Islamic Republic of Iran, Morocco
and Tunisia, which have relatively low poverty and literacy rates. Millions of people
cannot attend class because they are poor and they are needed to work to fulfil the needs
of their daily life. Hunger and poverty are the concerns of millions of people. They have
fewer choices in jobs, education, housing and other things. Poverty and illiteracy form a
cycle that is difficult to break.

Poverty : Measurement and Causes

Absolute Poverty
When Income of a person is not sufficient to provide the basic necessities of life, he/she is
said to be in absolute poverty.

Relative Poverty
Relative poverty occurs when a comparison of the standard of living or income
distribution of various income groups is undertaken in a country. The income inequalities
between different groups are a reflection of relative poverty. In India people living below
poverty line are quite high as compared to other Asian countries like Malaysia, Thailand
and China. According to the projections of the Planning Commission poverty is expected
to decline to 18 per cent in 2002 and further to 4 per cent in 2012.
Measurement of Poverty
The Planning Commission set up a Study Group in July 1962 to examine the question of
poverty in the country. The Study Group suggested a private consumption expenditure of
Rs. 20 (at 1960-61 prices) per capita per month as a basic minimum requirement of life,
below which are regarded as poor. In 1979, following the recommendation of the Task
Force on Projection of Minimum Needs and Effective Consumption Demand, the poverty
line is defined as “the per capita monthly expenditure needed to obtain the consumption
of 2,400 calories per-capita per day in rural areas and 2,100 in urban areas in the base year
1973-74.” The poverty line so defined was Rs. 49.10 for rural areas and Rs. 56.60 for urban
areas per capita per month. The same poverty line was updated for subsequent years
using stable indicators of changes in cost of living.

Poverty in India
State wise Poverty Comparison

Incidence of poverty varies largely across states. On the one end of the spectrum lie the
developed states like Punjab and Haryana where poverty ratio lies within a single digit,
while Orissa and Bihar lie at the other end with above 40 percent of the population
remaining below the poverty line in recent years. The overall ranking of states has not
undergone much change over the years. The highest poverty incidence continues to
prevail in Orissa for rural areas and in Madhya Pradesh for urban areas. Bihar and Uttar
Pradesh too have high poverty. Poverty incidence is the least in Punjab at 5-6% of the
population in both rural and urban areas. Haryana ranks second best with 8-10% poverty.
Kerala and Andhra Pradesh have made big progress in reducing rural poverty to a low
level of about 10% in rural areas, but not as much in urban areas. Kerala, Andhra Pradesh,
Punjab, Haryana and Gujarat are among the best performing states in terms of poverty
reduction. These are also the states which have been doing better than average on the
growth front. Karnataka and West Bengal, the two best performers on the growth front in
the post reform era, have reduced poverty only moderately.
Vicious Circle of Poverty
The vicious circle of poverty refers to the interconnectedness of different factors that
reinforce each other for generating poverty. According to Nurkse and Kindleberger the
reasons for this vicious circle of poverty can be classified into three groups.

1.Supply side factors

2.Demand side factors

3.Market imperfection

Supply Side Factors

The supply side of the vicious circle indicates that in underdeveloped countries,
productivity is so low that it is not enough for capital formation. According to Samuelson,
"The backward nations cannot get their heads above water because their production is so
low that they can spare nothing for capital formation by which their standard of living
could be raised." According to Nurkse on the supply side there is small capacity to save,
resulting from low level of national income. The low real income is the result of low
productivity, which in turn, is largely due to the lack of capital. The lack of capital is a
result of the small capacity to save, and so, the circle is vicious. Thus, it becomes clear
from the above diagram that the main reason of poverty is the low level of saving.
Consequently, investment is not possible in production channels. A huge chunk of GDP is
used for consumption purposes. People cannot save. So, there is lack of investment and
capital formation. Although rich people can save, they spend their surplus in some on
luxurious goods instead of saving. They gave preference to high priced items and foreign
products. Thus, their demand does not enlarge the size of the market. The developing
countries, therefore, lack investment facilities.

Demand Side Factors

According to Nurkse, poverty is caused by several factors in the demand side. In
underdeveloped countries the inducement to invest is low because of the low purchasing
power of the people, which is due to their small real income. The main reason for poverty
in these countries is the low level of demand. Consequently, the sizes of markets remain
low. The small size of the market becomes a hurdle in the path of inducement to invest.

Market Imperfections
According to Meier and Baldwin, the existence of market imperfections prevents
optimum allocation and utilization of natural resources, and the result is
underdevelopment, and this, in turn, leads to poverty. The development of natural
resources depends upon the character of human resources. But due to lack of skill and low
level of knowledge, natural resources remain unutilized, underutilised and misused.
Causes of Poverty in India
Colonial Exploitation:
Colonial rule in India is the main reason of poverty and backwardness in India. The Indian
economy was purposely and severely de-industrialized through colonial privatizations.
British rule replaced the wasteful warlord aristocracy by a bureaucratic-military
establishment. However, colonial exploitation caused backwardness in India. In 1830,
India accounted for 17.6 per cent of global industrial production against Britain's 9.5 per
cent, but, by 1900, India's share was down to 1.7 per cent against Britain's 18.5 per cent.
This view claims that British policies in India exacerbated by the weather conditions led to
mass famines, roughly 30 to 60 million deaths from starvation in the Indian colonies.
Community grain banks were forcibly disabled; land was converted from food crops for
local consumption to cotton, opium, tea, and grain for export, largely for animal feed.

Lack of Investment for the Poor:

There is lack of investment for the development of poorer section of the society. Over the
past 60 years, India decided to focus on creating world class educational institutions for
the elite, whilst neglecting basic literacy for the majority. This has denied the illiterate
population – 33 per cent of India – of even the possibility of escaping poverty. Thus, there
is no focus on creating permanent income-generating assets for the poor people.

Social System in India:

The social system is another cause of poverty in India. The social subsystems are so
strongly interlocked that the poor are incapable of overcoming the obstacles.

India's Economic Policies:

In 1947, the average annual income in India was US$439, compared with US619 for China,
US$770 for South Korea. But South Korea became a developed country by the 2000s.
License Raj prevailed with elaborate licenses, regulations and accompanying red tape.
Corruption flourished under this system.

Over-reliance on Agriculture:
In India there is high level of dependence on primitive methods of agriculture. There is a
surplus of labour in agriculture. Farmers are a large vote bank and use their votes to resist
reallocation of land for higher-income industrial projects. While services and industry
have grown at double digit figures, the agriculture growth rate has dropped from 4.8 per
cent to 2 per cent. About 60 per cent of the population depends on agriculture, whereas
the contribution of agriculture to the GDP is below 18 per cent. The agricultural sector has
remained very unproductive. There is no modernization of agriculture despite some
mechanization in some regions of India.
High Illiteracy:
Indian literacy rate rose almost tenfold during the British era. In 1947, India's literacy rate
matched China's. However, in 2007, China reported at 91 per cent literacy rate versus 66
per cent for India. Now India suffers from about 35 per cent illiteracy among the adult
population. Literacy levels among SC, ST and females are very low.

High Unemployment:
There is high degree of underutilization of resources. The whole country suffers from a
high degree of unemployment. India is marching with jobless economic growth.
Employment is not growing, neither in the private sector, nor in the public sector. The IT
sector has become elitist, which does not improve the poverty situation in the country.
Disguised unemployment and seasonal unemployment is very high in the agricultural
sector of India. It is the main cause of rural poverty in India.

Lack of Entrepreneurship:
The industrial base of India has remained very slender. The industrial sickness is very
widespread. The whole industrial sector suffers from capital deficiency and lack of
entrepreneurial spirit.

Three ways to end poverty

However, we see three effective ways to address the challenge of poverty:

(a) By helping poor people develop income-generating businesses of their own.

(b) providing jobs that allow them to increase their incomes through wages or salaries.
(c) selling them products that enable them to earn or save money.

We're all familiar with the global effort to help poor people build their own businesses
through microcredit -- an effort that has brought mixed results. (The biggest problem is
that most microloans are used for consumption, not to build businesses.) But where are
the market-based solutions that deliver jobs in large numbers to the bottom billions or
products that help them increase their incomes Sadly, there are all too few, and none has
reached meaningful scale.