India’s unemployment rates have climbed by almost 4% in five years to reach 9.2% in June 2024

In a concerning development for India's economic landscape, the unemployment rate surged to an eight-month high of 9.2% in June 2024, up sharply from 7% in the previous month. This spike, detailed in the latest data from the Centre for Monitoring Indian Economy (CMIE), highlights the bleak conditions within the country's labour market.

What’s even more concerning is that the unemployment rate has been going up for the past 5 years, from 5.27% in 2019 to 9.2 in June 2024— near the highest it's ever been.

A breakdown of the CMIE report on India’s unemployment rates

Rural areas that are already grappling with higher unemployment rates, witnessed a notable increase to 9.3% in June 2024 from 6.3% just a month earlier. This trend is mirrored in urban centres, albeit to a lesser extent, where the rate climbed to 8.9% from 8.6% over the same period.

The CMIE report found stark disparities between genders, with the female unemployment rate having soared to 18.5% in June 2024, a marked increase from 15.1% a year ago. In comparison, male unemployment has seen a slight uptick to 7.8%, compared to 7.7% in June 2023, as per the CMIE report.

Also Read: Job creation remains India’s top economic challenge, per experts polled by Reuters. How can the government resolve this?

Labour participation increases

This rise in unemployment rates highlighted by the CMIE is especially troubling given that the Labour Participation Rate (LPR) has, in fact, increased. LPR basically refers to those who are already working or are willing to work and are actively seeking job opportunities.

This LPR has increased from 40.8% in May to 41.4% in June 2024. Further, male and female LPRs touched 68.1% and 11.3%, respectively, last month.

Reasons for unemployment in India

Experts have pointed out that India is stuck with “jobless growth”, where the country’s GDP continues to rise even as the workforce struggles to find employment. Young people are especially struggling to find work — with reports suggesting that a staggering 44.49% of youth ages 20-24 were unemployed in the quarter between October to December 2023.

Here are some factors that are driving India’s unemployment crisis:

Disappearing IT jobs: The IT sector, once a major employer, is experiencing a slowdown due to automation and AI. Foundit, a recruitment firm, reported an 18% drop in online IT hiring last year.

Skills mismatch: Universities are churning out graduates equipped for IT roles, while job growth is happening in areas like manufacturing, which require different skill sets like AI and data analysis.

Educated yet unemployed: The situation is particularly dire for college graduates outside major cities. They lack the technical skills needed for high-paying jobs but are overqualified for manual labour.

Related: India must create 11.5 crore jobs in next six years as millions of youngsters enter workforce

A vicious cycle

The government, traditionally the largest employer, is also struggling to absorb the massive pool of educated youth. Millions compete for a handful of positions, with a success rate of a mere 0.2%. This discourages many from pursuing private sector jobs, further exacerbating the mismatch.

India needs a multi-pronged approach to tackle this unemployment crisis. Universities need to revamp curriculums to focus on industry-relevant skills. The government must incentivise manufacturing and invest in reskilling programs. Finally, there's a need to bridge the perception gap and make careers in manufacturing appear as attractive as those in IT.

Can India weather this storm and harness its young population as an asset, or will it continue to grapple with jobless growth?

Also Read: In India, being educated might increase your chances of unemployment: ILO report