Disguised Unemployment in India

The unemployment scenario is quite bleak in India. With every passing day, we are heading
towards a more precarious situation. A developing economy like India is defined by its large
population and large-scale unemployment, further leading to socio-economic issues like
malnutrition, poverty, drug & substance abuse and anti-social & criminal activities, etc.
At the core of such socio-economic issues lie several types of unemployment structural,
frictional or seasonal. However, one which is more severe and even more difficult to track is the
disguised unemployment. Such an unemployment cannot even be reflected in the official
unemployment records.
Meaning:
Let us look at what Disguised Unemployment actually is. In laymans language, it is the
phenomenon wherein more people are employed than actually needed. Usually, this has been
witnessed in developing economies and more so in labour-intensive economies.
Disguised unemployment is primarily traced in the agricultural and the unorganised sectors of
the economy. As the primary sector of the Indian economy, Agriculture provides employment to
almost 51% of the total population. However, the sectors contribution to the countrys GDP is
just 12-13%.

Disguised Unemployment Poisoning Indias GDP

The gross domestic product (GDP) data for 2015-2016 was declared sometime back. As per
this data, agriculture (actually agriculture, forestry and fishing), made up for around 14.1% of
the GDP, during the course of the financial year. The trouble is that close to 50% of the
population continues to depend on agriculture for a living.
This basically means that agriculture formed around one seventh of the Indian economy
during the last financial year. At the same time around half of the population is dependent on
it. The point being that it employs many people than it actually should. Hence, there is a huge
disguised unemployment in the rural areas.
Disguised employment essentially means that there are way too many people trying to make
a living out of agriculture. On the face of it they seem employed. Nevertheless, their

employment is not wholly productive, given that agricultural production does not suffer, even
if some of these employed people stop working
There are many more people than the sector requires and this leads to lower incomes for
those who work in agriculture. The broader point is that if the average incomes need to go up,
people need to be moved away from agriculture. But a new analysis suggests that this will
not happen at the pace it was earlier expected to be.
Akhilesh Tilotia of Kotak Institutional Equities makes this point in a recent research note
titled Forecasts of fewer jobs dull demographic sheen. Tilotia is also the author of The
Making of India. He reviewed a set of 24 industry reports commissioned by the National
Skills Development Council (NSDC) and compare them with similar reports that NSDC had
put together around the end of the last decade.
The earlier reports had put the size of the Indian workforce at 65.4 crore by 2022. The
number is now a lot lower at 57.5 crore. As far as number of people employed in agriculture
in 2022 is concerned, the earlier estimates put the number at 11.4 crore or 18% of the
workforce. As per new estimates the number of people who are expected to be working in
agriculture in 2022, stands at 21.6 crore or around 38% of the workforce.
This basically means that nearly 10.2 crore more Indians will be dependent on agriculture as
a mode of living, than was expected earlier. Further, by 2022, agriculture is expected to form
around one-ninth of the GDP or the overall economic size of the country.
The automobile sector which was earlier expected to employ 4.8 crore individuals is now
expected to employ only around 1.5 crore individuals. The same goes for the food processing
sector, which was earlier expected to employ around 1.8 crore individuals, but is now
expected to employ only 40 lakh individuals. On the other hand, the numbers for organised
retail have gone up dramatically from 1.8 crore individuals earlier, to 5.6 crore individuals, as
per the latest estimates.
Long story short, enough jobs will not be created to move people out of agriculture into other
sectors where they can make a living.
In fact, as the Economic Survey of 2014-2015 points out: The data on longer-term
employment trends are difficult to interpret because of the bewildering multiplicity of data
sources, methodology and coverage. One tentative conclusion is that there has probably been

a decline in long run employment growth in the 2000s relative to the 1990s and probably also
a decline in the employment elasticity of growth: that is, a given amount of growth leads to
fewer jobs created than in the past. Given the fact that labour force growth (roughly 2.2-2.3
percent) exceeds employment growth (roughly about 1 percent), the challenge of creating
opportunities will remain significant.
As the Survey further points out: Regardless of which data source is used, it seems clear that
employment growth is lagging behind growth in the labour force. For example, according to
the Census, between 2001 and 2011, labour force growth was 2.23 percent (male and female
combined). This is lower than most estimates of employment growth in this decade of closer
to 1.4 percent. Creating more rapid employment opportunities is clearly a major policy
challenge.
One reason why enough jobs are not being created is because of what economists call falling
labour intensity. Economic growth now generates fewer jobs in the non-farm sector (industry
including manufacturing, construction, mining and utilities plus services sector) than it used
to earlier. For every 1% increase in the gross domestic product, the non-agricultural
employment went up by 0.52%, between 1999-2000 and 2004-2005. This fell to 0.38%
between 2004-2005 and 2011-2012.
Further, people dependent on agriculture are low on skill-sets that are needed for jobs in
other sectors. It also needs to be pointed out here that moving people from agriculture into
other areas is not so easy.
In fact, other countries which have grown at a very fast pace in the past, have experienced the
same phenomenon. Take the case of Thailand. Agriculture still constitutes close to 40% of its
workforce Or China, which has become the factory of the world. Around 35 per cent of the
workforce is still engaged in agriculture, even though it produces just 10 per cent of the
Chinese economic output.

Causes of Disguised Unemployment

The causes for such an unemployment are many. Few of which are:
1. Population growth: High growth in population leads to surplus labour, especially in the
rural areas. India, being the second most-populous country, has almost 70% of its total
population in the rural areas (2011 census). Surplus labour exists in the rural areas,

however, employment in such areas mostly remains seasonal, thus causing disguised
unemployment.
2. Poverty: Poverty results in inability to purchase land and thus people have access to
limited capital. Limited capital: It further increases dependency of more and more people
on limited means.
3. Labour-intensive economies: With such high population, labour is available at cheaper
rates. Thus, more people are easily employed for a particular work, which can be done by
lesser number of people.
4. Limited skills and knowledge about better opportunities: Disguised unemployment is also
caused by limited skills of the labourers. At the time when majority of Indias most
population lives in the rural areas with limited means, people lack proper skills to be
recruited at better places.

Meassures to Solve:
India, as an economy, has all the above features as a developing country. From a holistic point of
view, several solutions of tackling disguised unemployment can be:
1. Educating the masses for the population control measure through family planning
programmes.
2. Making credit available to the people for self-employment.
3. Providing skill development and entrepreneurship programmes.
4. Encouraging mobility of the workforce from rural to urban areas.

Measures Taken by the Government

The Indian Government has taken several measures to curb disguised unemployment and
unemployment as a whole. Many self-employment schemes have been launched and older ones
modified to curb this social problem. Some of the Governments efforts have been:
1. MNREGA and RAY: The MNREGA, Mahatma Gandhi National Rural Employment
Guarantee Act, passed in the year 2005, was introduced as a social security measure to
guarantee the right to work. Essentially, it provided at least 100 days of wage
employment in a year to each households adult members. RAY (Rajiv Awas Yojana), on
the other hand, provides for affordable housing for the slum dwellers in the urban areas,
thereby reducing the burden on the unemployed.
2. The National Policy on Voluntary sector (2007) envisages government collaboration with
the voluntary organizations in poverty alleviation, skill promotion and entrepreneurship
development.
3. SHGs (Self-Help Groups): Self-help groups are being promoted with broad anti-poverty
agendas. Women empowerment and increased self-employment are the objectives

embedded in the activities of these groups. Such groups have proved to be phenomenal in
Andhra Pradesh and Kerala. Thus, this model is being replicated in the other states of the
country.