Current Challenges Facing the Indian Economy
2. Unemployment and Underemployment
Multiple Choice Questions (MCQs)
1.When a person is willing and able to work but cannot find a job, it is called:
a) Underemployment
b) Disguised unemployment
c) Open unemployment
d) Seasonal unemployment
Correct Answer: c) Open unemployment
2.Which type of unemployment is characterized by more people working in a sector than are actually needed, such that removing some would not reduce output?
a) Cyclical unemployment
b) Structural unemployment
c) Disguised unemployment
d) Frictional unemployment
Correct Answer: c) Disguised unemployment
3.Underemployment is a situation where:
a) Workers are engaged in illegal activities.
b) Workers are fully utilized in their current jobs.
c) Workers are employed in jobs that do not fully utilize their skills or where they work fewer hours than they desire.
d) There is a labor shortage in the economy.
Correct Answer: c) Workers are employed in jobs that do not fully utilize their skills or where they work fewer hours than they desire.
4.Which of the following is a major cause of structural unemployment in India?
a) Short-term fluctuations in demand
b) Mismatch between skills of workers and job requirements
c) People voluntarily leaving jobs to find better ones
d) Seasonal nature of agricultural work
Correct Answer: b) Mismatch between skills of workers and job requirements
5.The 'skill gap' in the Indian labor market primarily contributes to:
a) Frictional unemployment
b) Cyclical unemployment
c) Seasonal unemployment
d) Structural unemployment
Correct Answer: d) Structural unemployment
6.The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is a government program primarily aimed at addressing:
a) Rural unemployment
b) Inflation
c) Skill development and youth unemployment
d) Urban housing for the poor
Correct Answer: c) Skill development and youth unemployment
7.Unemployment that arises due to the seasonal nature of certain industries (e.g., agriculture, tourism) is known as:
a) Frictional unemployment
b) Seasonal unemployment
c) Disguised unemployment
d) Cyclical unemployment
Correct Answer: b) Seasonal unemployment
8.Which of these is a dimension of unemployment related to the quality of employment rather than just its availability?
a) Open unemployment
b) Disguised unemployment
c) Underemployment
d) All of the above
Correct Answer: c) Underemployment
9.The government's 'Make in India' initiative is expected to reduce unemployment by:
a) Encouraging migration to foreign countries.
b) Promoting manufacturing and job creation within the country.
c) Providing unemployment benefits.
d) Investing heavily in the agricultural sector.
Correct Answer: b) Promoting manufacturing and job creation within the country.
10.Which sector in India is most commonly associated with disguised unemployment?
a) Information Technology
b) Manufacturing
c) Agriculture
d) Financial Services
Correct Answer: c) Agriculture
Short Questions
1.Define open unemployment.
Answer: Open unemployment refers to a situation where individuals who are willing to work, actively seeking employment, and able to work, cannot find a job.
2.What is underemployment?
Answer: Underemployment occurs when a person is employed but their work does not fully utilize their skills, education, or experience, or when they work fewer hours than they are willing or able to work.
3.Explain disguised unemployment with an example from the Indian context.
Answer: Disguised unemployment is a situation where more people are engaged in an activity than are actually required, such that the removal of some individuals would not lead to a decrease in output. In India, it is commonly seen in the agricultural sector, where several family members may work on a small farm even if only a few are truly necessary.
4.Name two causes of structural unemployment in India.
Answer: Two causes of structural unemployment in India are: the mismatch between the skills possessed by the workforce and the skills demanded by industries (skill gap), and the slow pace of industrialization unable to absorb the growing labor force.
5.What is the objective of the Pradhan Mantri Kaushal Vikas Yojana (PMKVY)?
Answer: The objective of PMKVY is to provide skill training to Indian youth to make them employable and to increase productivity of the existing workforce, thereby linking skills with industry needs and improving their livelihoods.
6.How does the seasonal nature of agriculture contribute to unemployment in India?
Answer: Agriculture in India is largely dependent on monsoons and specific crop cycles. During off-seasons (e.g., between harvesting and sowing), agricultural laborers find themselves without work, leading to seasonal unemployment.
7.Briefly explain how promoting MSMEs (Micro, Small, and Medium Enterprises) can help in reducing unemployment.
Answer: MSMEs are highly labor-intensive and have a significant potential for job creation with relatively lower capital investment compared to large industries. Promoting them through policies, credit access, and infrastructure can generate a large number of employment opportunities, especially in semi-urban and rural areas.
8.What is the 'demographic dividend' and how does it relate to unemployment?
Answer: The 'demographic dividend' refers to the potential for economic growth that arises when a country has a larger proportion of its population in the working age group (15-64 years). If these young people are not adequately educated, skilled, and provided with employment opportunities, the dividend can turn into a demographic burden, contributing to high unemployment rates.
9.Mention two government initiatives aimed at fostering entrepreneurship to address unemployment.
Answer: Two government initiatives are: Startup India (which promotes entrepreneurship and innovation by providing support to startups) and Mudra Yojana (which provides collateral-free loans to micro and small enterprises, encouraging self-employment).
10.Why is it challenging to accurately measure unemployment in a country like India?
Answer: It is challenging due to the large informal sector, prevalence of disguised and underemployment, seasonal nature of work, and difficulties in collecting comprehensive and reliable data from a diverse and vast population, especially in rural areas.
Long Questions (5 Marks each)
1.Discuss the various dimensions and major causes of unemployment and underemployment in India. Provide examples for each type of unemployment.
Answer:
Unemployment and underemployment are critical challenges for the Indian economy, reflecting both a lack of sufficient job creation and a mismatch between skills and available work.
Dimensions of Unemployment and Underemployment:
Open Unemployment: This refers to individuals who are actively seeking work but cannot find a job. They are identifiable and recorded in unemployment statistics.
Example: A fresh engineering graduate actively applying for jobs but unable to secure one.
Disguised Unemployment: Also known as hidden unemployment, this occurs when more people are employed in an activity than are actually required, such that the marginal productivity of the extra workers is zero or near zero. Removing these extra workers would not decrease the total output.
Example: In an Indian agricultural family, five members work on a small farm that could be efficiently managed by two. The extra three members are disguisedly unemployed.
Underemployment: This arises when individuals are working below their skill level or education (e.g., a postgraduate working as a clerk) or working fewer hours than they are willing or able to (e.g., a full-time worker only getting part-time hours). It signifies inefficient utilization of human resources.
Example: A highly skilled software engineer working in a call center, or a daily wage laborer getting work only for 10-15 days a month.
Seasonal Unemployment: This type of unemployment occurs in industries that have seasonal demand for labor, such as agriculture, tourism, and construction. Workers are employed during peak seasons but are jobless during off-seasons.
Example: Agricultural laborers in Punjab are employed during sowing and harvesting seasons but face unemployment during the lean period.
Structural Unemployment: This arises from a mismatch between the skills possessed by the workforce and the skills required by the available jobs, often due to technological advancements, changes in industry structure, or inadequate education/training systems.
Example: Automation in manufacturing reduces the demand for manual labor, while there's a shortage of workers skilled in robotics or AI.
Frictional Unemployment: This is short-term unemployment that occurs when people are voluntarily between jobs, moving from one job to another, or entering the workforce for the first time and searching for employment.
Example: A software developer who quits their current job to find a better opportunity and is unemployed for a few weeks during the search.
Major Causes:
Slow Growth of the Industrial Sector: India's industrial sector, especially manufacturing, has not grown fast enough to absorb the large labor force migrating from agriculture, leading to pressure on the service sector and informal employment.
High Population Growth: Historically, a large increase in the working-age population without a corresponding increase in job opportunities has contributed to high unemployment rates.
Skill Mismatch and Inadequate Education: The Indian education system often fails to equip graduates with the practical skills demanded by modern industries, leading to structural unemployment among educated youth.
Dominance of the Informal Sector: A large portion of India's workforce is in the informal sector, characterized by low wages, no social security, and precarious employment, leading to widespread underemployment.
Lack of Entrepreneurship: Despite government efforts, a culture of entrepreneurship and small business creation is still developing, limiting self-employment opportunities.
Seasonal Nature of Agriculture: As highlighted, agriculture's seasonal demands lead to cyclical unemployment for millions of rural workers.
Low Capital Formation: Insufficient investment in productive assets and industries limits the capacity for job creation.
Labor Laws and Regulations: Some argue that rigid labor laws may discourage formal sector hiring, leading to more informal or contractual employment.
2. Elaborate on the key government programs and initiatives currently in place to address unemployment and underemployment in India, categorizing them by their primary approach.
Answer:
The Indian government has launched several programs and initiatives to tackle the multifaceted challenges of unemployment and underemployment, employing various approaches:
1. Skill Development and Training Initiatives:
These programs aim to bridge the skill gap and enhance employability, particularly for the youth.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY): This flagship scheme provides short-term skill training to youth based on industry-relevant skills. It focuses on fresh entrants to the job market and also aims to certify prior learning of informally skilled workers. Its objective is to make them employable and increase their productivity.
National Skill Development Mission: This mission aims to provide an overarching institutional framework to rapidly scale up skill development efforts across the country, covering various sectors and promoting both vocational and soft skills.
Industrial Training Institutes (ITIs): These institutions provide vocational training in various trades, equipping individuals with technical skills required by industries.
2. Employment Generation and Livelihood Support Programs:
These initiatives directly aim at creating jobs or providing a safety net for the unemployed.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): This landmark act guarantees 100 days of wage employment in a financial year to every rural household whose adult members volunteer to do unskilled manual work. It provides a crucial safety net against rural unemployment and distress migration, and also creates durable assets.
Deendayal Antyodaya Yojana - National Rural Livelihoods Mission (DAY-NRLM): While primarily a poverty alleviation program, it significantly addresses underemployment and unemployment by mobilizing rural poor into Self-Help Groups (SHGs) and enabling them to access micro-finance, skill training, and livelihood opportunities (both self-employment and skilled wage employment).
Pradhan Mantri Mudra Yojana (PMMY): This scheme provides collateral-free loans up to ₹10 lakhs to micro and small enterprises, encouraging self-employment and entrepreneurship, thereby creating jobs for the borrower and potentially others.
3. Promoting Manufacturing and Enterprise (Job Creation):
These initiatives focus on boosting sectors that have high job creation potential.
Make in India: This initiative aims to transform India into a global manufacturing hub, encouraging both domestic and foreign investment in manufacturing. By boosting industrial growth, it intends to create millions of new jobs across various skill levels.
Production Linked Incentive (PLI) Schemes: These schemes offer incentives to companies for incremental sales from products manufactured in India across various sectors. The goal is to boost domestic manufacturing, attract foreign investment, reduce import dependence, and significantly create employment opportunities.
Startup India: This initiative aims to foster a culture of entrepreneurship and innovation by providing financial support, tax exemptions, and regulatory ease to startups. Successful startups can become significant job creators.
4. Social Security and Welfare Measures:
While not directly employment generation, these provide a safety net that indirectly supports livelihoods.
Employees' Provident Fund Organisation (EPFO) and Employees' State Insurance Corporation (ESIC): These provide social security benefits like provident fund, pension, and health insurance, which can attract workers to the formal sector and provide financial stability.
The government's multi-pronged approach acknowledges that addressing unemployment and underemployment requires not just creating jobs, but also equipping the workforce with the right skills, fostering an environment for business growth, and providing social safety nets.
