Business and Employment

Urban Unemployment in India

Thanks to lock down in India, the unemployment rate has seen a high like never before. While unemployment has been a big issue for both educated and uneducated Indians, still it is more difficult for an educated and urban youth to land up a job. This problem has been hugely impacting young graduates. And the biggest issue is that urban unemployment has been continuously seeing an upward trend since the last 20 years. Unfortunately it’s been observed that higher education worsens the unemployment rate. This is a cause of serious worry because India is a young country with a major percentage of it’s workforce being educated. Let us check out some major reasons which have led to alarming unemployment rates in urban India.

1) Unemployment Due to Technology Advancement

Technological innovation does not directly reduce the employment rate rather it just changes the types of jobs that are created in the society. Let us discuss an example for a better understanding of the situation. A bank teller is no longer needed in a job after you can check your balance at a single mouse click by logging onto a website or just giving a missed call on some toll free number. And, most of these existing bank tellers may lack adequate skills required to work with advanced technology systems. Hence, they end up losing the job indirectly due to technological advancements. 
 
One of the major reasons behind increased urban unemployment is that technologies have advanced way faster than India’s urban infrastructure. There has been a huge lag in up-gradation of skills of an average urban Indian required to match the demands of today’s urban job market. Digitization era has brought a new set of challenges for the current crop of urban Indians. It has given rise to the need of re educating an urban individual. The country has seen a continuous increase in the unemployment rate because of its failure in providing class education and better levels of skills to the upcoming urban Indian skilled workers.

2) Rural to Urban Migration

Normally people migrate from rural to urban India as a response to social and environmental adversities. Contrary to the popular fact, increase in job opportunities in urban areas may sometimes lead to increased rates of unemployment. It usually leads to a higher rate of migrants from different places around the country which indirectly leads to unemployment. As you know more and more MNCs are coming up in metro cities, hence it has led to the population explosion in those places as migrants from all around the country land up in those cities. As a result what we get is a higher urban unemployment rate in the country.   
 
The Government is required to do its bit to encourage reverse migration  by providing substantial employment opportunities to people without any agricultural land so that they are not forced to migrate for better opportunities. The Government can come up with subsidies for non technical back office rural delivery centers to encourage more and more business houses to set up value adding activities in rural places. Not just that, a serious introspection is required to address the need for good quality infrastructure related to supply of water and electricity as it forms another important reason driving migrants to move from rural to urban India. 

3) Defective Education System

One of the most important reasons behind urban unemployment is the defective education system. A defective education system results in formation of a weak base of knowledge. Some of the major issues that need to be addressed right away are outdated syllabus and quality of teachers. As a result what we get are students ill equipped to handle the practical realities of everyday life. The current education system is busy minting money by producing worthless engineers, doctors, lawyers etc. most of whom are unable to land up a decent job. The major issue is that India’s current education system has failed to confirm with the requirements of current times. 
 
And the worst affected section as a result of urban unemployment is the middle class society. And FYI a major chunk of this society goes to government funded schools which lack the basic infrastructure to provide quality education to the students. And so most of the students passing out of such institutions find it tremendously difficult to adapt to the requirements of the practical world and have to stay jobless for a relatively higher period of time. The Government needs to come up with an updated education system and should try innovative and fresh ways to generate a skilled urban force.

4) Huge Population Growth

Surprisingly, urban unemployment reached record high figures of 16% in the year 2018 which was a major spike when compared to those levels of 2016. A lot of it is related to the tremendous increase in population in urban areas. This forms one of the biggest reasons for urban unemployment. The rate at which the urban population is witnessing an increase in India is almost twice that of the rate of increase of rural population. But we have failed to achieve the corresponding economic growth which has led to an increasing urban unemployment. Due to the lack of economic growth, a bigger percentage of the urban population is unable to land up a job. Hence, what we get is inadequate levels of unemployment countrywide. This weaker employment generation has been found to be highly prevalent among the densely populated urban society.  
 
The Government has to roll out policies to put a cap on this geometrical progression growth of population. Family Planning should be listed as one of the most important priorities of the Government. It needs to implement family planning programs throughout the country to educate the population as a whole. The Government needs to pay due importance to population stabilization measures in order to check tremendously higher rates of unemployment. Some of the key topics that need an open discussion are – choice about delayed pregnancy, warranting adequate gaps between child birth, easy access to contraceptives, addressing stigmas related to contraception etc. 

5) Fall of Cottage and Small Industries

Industrial development has had a dampening effect on the cottage and small industries. There has been a tremendous drop in the production of small scale industries as a result of which an increasing number of unskilled workforce have turned unemployed. These small scale industries help economic progress in rural areas. They play a major role in development of rural areas and entrepreneurship. Their failure as a whole have led to an increment in rural unemployment. And rural unemployment has indirectly forced rural populations to move to urban areas in search of better job opportunities which in turn has shoot up urban unemployment. 
 
The Government can do its bit to increase employment by promoting cottage industries. The Government can provide the much needed impetus to cottage industry by offering Credit Availability, Organisation of fairs and exhibitions at subsidized rates, easy access to raw material, purchasing from cottage industries, protection against industrial giants, availability of proper infrastructure, setting up of institutes to train unskilled rural population etc.

6) Slow Growth Rate of Industrialization

It is a proven fact that slower economic growth leads to a higher percentage of unemployment. Low GDP growth rate is a potential reason for causing unemployment. Ironically, the slower growth rate of Industrialization has led to industries failing to absorb the surplus labor streaming into urban centers. The Government has been emphasizing on Industrialization but its slower rate has been unable to produce substantial employment opportunities for the ever growing population. And the manufacturing industry which is capable of driving industrialization growth has also been growing relatively slower than usual. However, export industries have been seeing substantial growth but they employ just a small percentage of urban workforce. 
 
Some basic measures taken by the Government can help improve the overall situation. One of the most important steps is to reduce interest rates. On one hand it will reduce the cost of borrowing and on the other hand it will generate higher consumer spending and investment. Another good idea is to introduce tax cuts and rebates. This will put money back into the pockets of consumers who will then increase their overall spend, which increases the businesses’ revenues, thus helping the overall economic growth. The Government can also lend its support to industrialization by providing quality infrastructure like developing and repairing bridges, ports, stations, roads etc.

7) Lack of Physical Capital

In this modern world, a man needs at least some basic tools at his disposal to generate livelihood. And that’s called physical capital. It basically constitutes the set of machinery or equipment or any other physical things required to convert raw materials into finished goods. Deficient physical stock and ever growing workforce have coupled together to create urban unemployment. Hence, a huge chunk of urban workforce is unable to get engaged in productive employment due to the limited availability of physical capital.
 
The government needs to step in here by relaxing the regulatory laws. Easy lending of loans to companies will help them set up new production facilities, buy new physical capacities or even start a fresh line of business which is going to directly boost employment. Lower interest rates is also a big encouragement for the companies to invest in physical stock. Government can come forward and make a direct investment in physical capital by building roads and bridges; water supply and sewers; seaports and airports; schools and hospitals; hydroelectric plants to produce electricity using water from dams; telecommunications facilities etc.

8) Lack of Entrepreneurship

Entrepreneurship is all about self-employment. It is all about working for oneself and employing others to achieve business growth. Entrepreneurship is one of the greatest weapons that can help us fight against the ever growing demon of unemployment. It empowers the youth, makes them better individuals and creates leaders out of them. Besides, it may also act as a tool to bring money from foreign countries by way of export. For all those facing unemployment, entrepreneurship is one of the best options. It helps open new doors by generating wealth not just for the entrepreneur but also for related businesses. 
 
Way forward should be to set up Entrepreneurship friendly policies directly under the Government’s guidance. This should emphasize on establishing a risk-free environment for budding entrepreneurs so that they can be encouraged to come forward. The Government should promote easy bank financing for startups to encourage entrepreneurship. Some other steps which may drive the general population towards entrepreneurship are relaxed compliance, easy procurement, funding support, tax exemptions, environmental clearances, easy grant of land etc. 

9) Fall of Agriculture

There has been a major change in the way people conceive agriculture as a career. Owing to its unflattering image, today’s youth is rarely choosing agriculture as a desirable career option. We all know that agriculture involves a huge amount of labor and none of today’s generation wants to opt for a labor intensive job. Besides, continuous price changes, natural disasters, pest outbreak etc. have added up to the problems of the agriculture industry. As a result, a large amount of the rural population stays unemployed which results in a mass migration to the far and near urban areas.  While all the urban businesses like tourism, IT, ITes etc. will definitely help in bridging the urban unemployment gap, yet the biggest factor that can help solve the urban unemployment crisis lies where no economist or finance minister wants to look. And that’s where AGRICULTURE lies. The state sponsored policies have led more and more farmers to shift from rural places to urban areas and have forced them to convert into cheap labourers for factories, infrastructure, construction etc. in urban areas. 

 
It is time our government understands agriculture as one of the leading economic activities. A growth in agriculture can have multifaceted positive results on urban employment through reverse migration and increased industrial production. 

10) Stringent Labor Laws

Unruly labor has been one of the biggest challenges faced by the industries in India. Stringent and protective labor laws unduly favor the laborers. This labor law makes it challenging to sack a labor who has been functioning for more than 240 days. 50+ central sponsored and 100+ state sponsored labor laws are the most worrisome thing for an industrialist. These laws are so labor biased that at times it even gets difficult to close down a unit. As a result, most industries are forced to choose automation over manual labor to avoid unwanted hassles in the future. This indirectly leads to reduced levels of industrialization which in turn directly creates unemployment. 

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