Page 85 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

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

industries. Similarly, the process of rationalization which started in India since 1950, also caused Notes
displacement of labour. The flexibility of an economy can be judged from the speed with which it
heals frictional unemployment.
But more serious than cyclical unemployment or frictional unemployment in a developing economy
like India is the prevalence of chronic under-employment or disguised unemployment in the rural
sector and the existence of urban unemployment among the educated classes. It would be worthwhile
to emphasize here that unemployment in developing economies like India is not the result of deficiency
of effective demand in the Keynesian sense, but a consequence of shortage of capital equipment or
other complementary resources.

The total number of persons requiring employment during the Eight Plan would
be around 65 million. It is expected that during 1995-2000, labour force would increase
by 41 million.

8.2 Causes of Unemployment in India

It is obvious that the unemployment situation is grim indeed. It has, therefore, to be tackled with
appropriate measures and on an urgent basis. However, before we discussed the ways and means of
removing unemployment, it is necessary that we understand the causes that given rise to it. The
major causes which have been responsible for the wide spread unemployment can be spelt out as
under.
(1) Rapid Population Growth
It is the leading cause of unemployment in Rural India. In India, particularly in rural areas, the
population is increasing rapidly. It has adversely affected the unemployment situation largely
in two ways. In the first place, the growth of population directly encouraged the unemployment
by making large addition to labour force. It is because the rate of job expansion could never
have been as high as population growth would have required.
It is true that the increasing labour force requires the creation of new job opportunities at an
increasing rate. But in actual practice employment expansion has not been sufficient to match
the growth of the labor force, and to reduce the back leg of unemployment. This leads to
unemployment situation secondly; the rapid population growth indirectly affected the
unemployment situation by reducing the resources for capital formation. Any rise in population,
over a large absolute base as in India, implies a large absolute number.
(2) Limited land
Land is the gift of nature. It is always constant and cannot expand like population growth.
Since, India population increasing rapidly, therefore, the land is not sufficient for the growing
population. As a result, there is heavy pressure on the land. In rural areas, most of the people
depend directly on land for their livelihood. Land is very limited in comparison to population.
It creates the unemployment situation for a large number of persons who depend on agriculture
in rural areas.
(3) Seasonal Agriculture
In Rural Society agriculture is the only means of employment. However, most of the rural
people are engaged directly as well as indirectly in agricultural operation. But, agriculture in
India is basically a seasonal affair. It provides employment facilities to the rural people only in
a particular season of the year. For example, during the sowing and harvesting period, people
are fully employed and the period between the post harvest and before the next sowing they
remain unemployed. It has adversely affected their standard of living.

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