Page 84 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Indian Economic Policy Dilfraz Singh, Lovely Professional University

Notes Unit 8: Unemployment in India: Concept, Causes and
Government Policies

CONTENTS
Objective
Introduction
8.1 Concept of Unemployment in India
8.2 Causes of Unemployment in India
8.3 Government Policies for Employment
8.4 Summary
8.5 Key-Words
8.6 Review Questions
8.7 Further Readings

Objectives

After reading this Unit students will be able to:
• Explain the Concept and Causes of Unemployment.
• Describe the Government Policies for Employment.
Introduction

The total population of an area, region or country has three components : the workforce (the employed),
the unemployed and the non-workers. Taken together, the workforce and the unemployed together
make up the labour force. A person who participates in any economic activity is called a worker and
his or her human capital endowment is utilised by the economy. In the process, he or she earns a
living. Thus, all workers constitute the workforce or the employed. On the contrary, those who are
not workers are called non-workers. Among the non-workers, there may be some who are looking
for work or are available for work and are called the unemployed. While the worker is engaged in
economic activity and produces the national product, the unemployed is available for being engaged
in such activity but the economy is unable to utilise it and the non-worker is not available for utilisation
in economic activity of the society. This unit explains how the three components of the population
enumerated and what their proportion in the population is.

8.1 Concept of Unemployment in India

India is a developing economy, the nature of unemployment, therefore, sharply differs from the one
that prevails in industrially advanced countries. Lord Keynes diagnosed unemployment in advanced
economies to be the result of a deficiency of effective demand. It implied that in such economies
machines become idle and demand for labour falls because the demand for the products of industry
is no longer there. Thus Keynesian remedies of unemployment concentrated measures to keep the
level of effective demand sufficiently high so that the economic machine does not slacken the
production of goods and services.
This type of unemployment caused by economic fluctuations did arise in India during the depression
in the 1930’s which caused untold misery. But with the growth of Keynesian remedies, it has been
possible to mitigate cyclical unemployment. Similarly, after the Second World War, when war-time
industries were being closed, there was a good deal of frictional unemployment caused by
retrenchment in the army, ordnance factories, etc. These workers were to be absorbed in peacetime

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