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India: High youth unemployment poses massive challenge

Charu Kartikeya in New Delhi
May 7, 2024

Millions of young people are entering India's labor market every year and generating decent jobs for them poses the biggest challenge for the nation's leadership.

Unemployed youth standing in line in front of a building
Nearly 16% of urban youth in the 15-29 age group remained jobless in 2022-23 due to poor skills and lack of quality jobs, government data showsImage: DW

In February 2019, Somesh Jha, an Indian journalist who used to work for the Business Standard newspaper, got his hands on a "smoking gun" of a story. 

Jha found out that an official survey had flagged shocking levels of unemployment in the country, but the authorities had chosen not to publish the findings, which had been made by the federal government's statistics department.

The newspaper published the report showing that India's unemployment rate stood at 6.1% in 2017-18. That is the highest unemployment percentage for India in the previous 45 years.

It is well known that post 2020, the COVID-19 pandemic and the consequent lockdowns imposed across the globe caused a dent in employment worldwide.

But the 2017-18 data data was from the pre-COVID era.

At the time, this would have been bad news for Prime Minister Narendra Modi, who has painstakingly crafted the image of his government as one that has taken India to unprecedented heights of economic growth.

High economic growth but insufficient jobs

Modi has often been blamed for what is now known as "demonetization," a drastic move in 2016 to ban all high-value currency notes in circulation at the time. The measure affected almost everyone in the country and the resulting cash crunch hit the economy hard and killed many jobs, according to economists. 

After denying the Business Standard report for months, Modi's government finally released unemployment figures in May 2019, which confirmed what the newspaper had claimed in February that year.

Five years later, India's labor market situation continues to be precarious, despite the Modi administration's efforts to accelerate economic development. 

Over the last three years, the government has stepped up spending on roads, bridges and other infrastructure as a way to boost the economy and create jobs.

But these efforts to create jobs remain inadequate.

Youth unemployment election issue in India

According to latest government estimates, the unemployment rate rose to 5.4% in the fiscal year that ended March 2023, from 4.9% in 2013/14 before Modi took over. In urban areas, the rate is higher at 6.5%.

Data from the Centre for Monitoring Indian Economy (CMIE), a private think tank, show that the jobless rate rose to 8% in February 2024.

"The problem of unemployment is indeed a huge one. There is unanimous opinion that there has not been any kind of improvement in overall employment scenario," said Praveen Jha, a professor at Jawaharlal Nehru University.

Youth unemployment rate a big worry

Many experts say they're particularly worried about the high youth unemployment rate.

Nearly 16% of urban youth in the 15-29 age group remained jobless in 2022-23 due to poor skills and lack of quality jobs, government data shows.

Estimates by private agencies are much higher. According to the CMIE, for instance, the youth unemployment rate stood at as high as 45.4%.

A recent report published jointly by the International Labor Organization and the Institute for Human Development (IHD), an Indian think tank, revealed that one in three young people in the South Asian nation was neither in education nor in employment or training.

It also pointed out that higher educated young people are more likely to be unemployed than those without any schooling.

The jobless rate for graduates was 29.1%, almost nine times higher than the 3.4% for those who can't read or write, the ILO/IHD report said. The unemployment rate for young people with secondary or higher education was six times higher at 18.4%.

Ravi Srivastava, director of the Center for Employment Studies at IHD, led the team that published the joint report.

He told DW that youth joblessness is at the heart of India's unemployment problem.

"The rest of it is underemployment, or what we call disguised unemployment, where people are working but are getting very low wages or working for very few days. But as far as open unemployment is concerned, the bulk of it is youth unemployment."

Demographic dividend or liability?

The lack of sufficient well-paying jobs poses a huge challenge to the nation's leadership as millions of young people enter the labor market every year.

While PM Modi and others talk of a "demographic dividend" of more workers, experts caution that the dividend could turn into a "liability" if the economy failed to create enough jobs to absorb the labor influx.

Arun Kumar, an economist, said his calculations indicate that there is a backlog of around 280 million jobs in the country. Adding to that, about 24 million young people are entering the workforce every year, he told DW.

"But the country ends up generating a measly half a million jobs in the organized sector, while all other jobs fall in the unorganized sector," he told DW.

Will India become an economic superpower?

Against this backdrop, unemployment remains one of the top concerns on voters' minds as they cast their ballots in the ongoing general election, which is being held in seven phases between April 19 and June 1, with vote counting on June 4.

In April, 62% of respondents of a poll by New Delhi-based think tank Centre for Study of Developing Societies (CSDS) said that finding a job is more difficult now than it was in the past. And 27% said unemployment was an important issue for them when deciding who to vote for in the elections.

The ruling BJP, however, has largely avoided discussing the issue during the election campaign.

Gopal Krishna Agarwal, the BJP's spokesperson on economic affairs, did not respond to DW's requests for comment.

The main opposition alliance, however, has tried to galvanize voters focusing on unemployment and other economic and social issues.

Now both sides are anxiously waiting for the day when the results of the election will be announced to find out whose pitch the voters have accepted.

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Edited by: Srinivas Mazumdaru