Unemployment and India’s growing population: A demographic dilemma

Chandan Kumar Nath

(chandankumarnath7236@gmail.com)

India, a nation of over 1.4 billion people, stands at a critical juncture where its demographic dividend, often heralded as a golden opportunity for economic growth, faces the daunting challenge of unemployment. With a population that continues to grow at an estimated rate of approximately 0.9% annually, India has surpassed China to become the world's most populous country. Projections suggest that by 2030, the population could reach 1.5 billion, and by 2060, it may climb to 1.7 billion. This burgeoning population, characterised by a youthful workforce with a median age of 29, holds immense potential to drive economic progress. However, the persistent issue of unemployment, compounded by structural economic challenges, skill mismatches, and regional disparities, threatens to transform this demographic advantage into a liability. The interplay between India's growing population and its unemployment rate is a complex issue that demands a nuanced understanding of labour market dynamics, economic policies, and societal factors.

The unemployment rate in India, as reported by various sources, presents a mixed picture. According to the Periodic Labour Force Survey (PLFS) conducted by the National Statistical Office (NSO), the unemployment rate for individuals aged 15 and above stood at 5.1% in April 2025, a figure that reflects a slight improvement from previous years. The Economic Survey 2024-25 indicates a significant decline in the unemployment rate, dropping from 6% in 2017-18 to 3.2% in 2023-24. However, data from the Centre for Monitoring Indian Economy (CMIE) paints a less optimistic picture, reporting a sharp rise to 9.2% in June 2024, up from 7% in May 2024, placing India among the highest unemployment rates within the G20 economies. These discrepancies highlight the challenges in measuring unemployment in a country with a vast informal sector, seasonal employment patterns, and varying methodologies for data collection. The reality, however, is that millions of Indians, particularly the youth, struggle to find stable, meaningful employment. India's working-age population, which constitutes nearly 70% of its total population, is both a strength and a challenge. The India Employment Report 2024, a collaborative effort by the Institute for Human Development (IHD) and the International Labour Organisation (ILO), notes that the working population increased from 61% in 2011 to 64% in 2021, with projections estimating a rise to 65% by 2036. Yet, the participation of youth in economic activities has declined, with only 37% engaged in 2022. This decline is particularly stark among urban youth, where unemployment rates remain elevated at 16.8% in FY24/25, according to World Bank data. The inability to absorb this growing workforce into productive employment underscores a critical mismatch between population growth and job creation.

One of the primary drivers of unemployment in India is the rapid population growth that outpaces job creation. With approximately 12 million young people entering the workforce annually, the economy struggles to generate sufficient opportunities to accommodate this influx. The informal sector, which employs over 80% of India's workforce, is characterised by low wages, lack of job security, and minimal benefits. Agriculture, which still accounts for 45.5% of employment despite contributing only 15% to GDP, is plagued by seasonal employment and disguised unemployment, where more workers are engaged than necessary, leading to low productivity. The shift from agriculture to industry and services, a hallmark of structural transformation, has been slow and uneven. Many rural workers transitioning to urban areas find themselves in low-paying, informal jobs, exacerbating underemployment. The services sector, which contributes over 50% to India's GDP, has been a significant driver of economic growth but is not sufficiently employment-intensive. While it has absorbed a growing number of skilled workers, particularly in technology and finance, the sector's capital-intensive nature limits its ability to create jobs on a scale commensurate with India's population growth. Similarly, the manufacturing sector, despite government initiatives like "Make in India" to boost industrial output, has not generated the anticipated employment opportunities. Capital-intensive investments and automation have prioritised productivity over labour absorption, leaving many young job seekers, including highly educated graduates, competing for low-skill positions. Skill mismatch is another critical factor contributing to unemployment. India's education system, while producing millions of graduates annually, often fails to equip them with the skills demanded by modern industries. The predominance of a low-skilled workforce makes India less attractive for high-skill jobs, even as global companies increasingly look to the country as a manufacturing hub. The World Bank's support for initiatives like the Skill India Mission has trained over 7 million young people, yet the gap between education and industry requirements persists. This mismatch is particularly acute in rural areas, where access to quality education and vocational training is limited, leaving many young people unprepared for the demands of a rapidly evolving job market. Regional disparities further complicate India's unemployment challenge. The northern state of Jammu and Kashmir, for instance, has one of the highest unemployment rates in the country, with competition for government jobs reaching staggering levels, with 560,000 candidates vying for just 4,001 constable positions in 2024. Urban areas, while showing marginal improvements in unemployment rates (from 6.8% in January-March 2023 to 6.7% in the same period in 2024), still face challenges in creating quality jobs. Rural areas, heavily dependent on agriculture, experience seasonal unemployment, with workers often moving to urban centres in search of livelihoods, only to encounter overcrowding and inadequate infrastructure.

The gender dimension of unemployment adds another layer of complexity. The labour force participation rate (LFPR) for women in urban areas increased slightly from 25.5% to 25.8% between 2023 and 2024, but female unemployment remains high, dropping from 9.2% to 8.5% in the same period. Social norms, lack of access to education, and workplace discrimination continue to hinder women's participation in the labour force. The informal sector, where women are disproportionately employed, offers little job security or growth potential. Government initiatives, such as mandating female representation on corporate boards, have been circumvented in some cases, illustrating the need for more robust policies to promote gender equity in employment. Economic growth, while robust at 8.2% in FY23/24, has not translated into proportional job creation, leading to accusations of "jobless growth." The government's increased capital expenditure and focus on infrastructure have spurred economic activity, but the benefits have not been evenly distributed. The informal sector's dominance, coupled with global economic challenges like the Russia-Ukraine war and inflationary pressures, has further strained the job market. The COVID-19 pandemic exacerbated these issues, with an estimated 400 million individuals losing jobs during the crisis, highlighting the fragility of India's labour market.

To address unemployment, the government has implemented several measures. The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) guarantees 100 days of employment annually to rural households, providing a safety net for the unemployed. The Prime Minister's package of five schemes in the 2024-25 Union Budget aims to facilitate employment through incentives and policy reforms. Initiatives like the Skill India Mission and investments in education seek to bridge the skill gap, while programs to boost manufacturing aim to create jobs in industry. However, these measures face challenges in scale and implementation, particularly in addressing the informal sector's dominance and regional disparities. The growing population also exerts pressure on infrastructure, healthcare, and education, complicating efforts to reduce unemployment. Rapid urbanization has led to overcrowded cities, slums, and strained resources, making it difficult to provide quality jobs and services. Environmental degradation, driven by population growth, further limits the sustainability of economic development. Addressing these challenges requires a holistic approach, including investments in human capital, equitable growth policies, and sustainable practices. India's demographic dividend, with its large and youthful labour force, remains a double-edged sword. Without urgent reforms in education, skill development, and job creation, the country risks a demographic disaster characterised by widespread unemployment and social unrest. The government's focus on inclusive growth, entrepreneurship, and formalising the informal sector is a step in the right direction, but the scale of the challenge demands coordinated efforts from the private sector, civil society, and international partners. As India navigates its path toward becoming a global economic powerhouse, the ability to harness its human capital will determine whether its growing population becomes a catalyst for prosperity or a source of strain.

In conclusion, India's unemployment crisis, set against the backdrop of its rapidly growing population, is a multifaceted challenge that requires sustained and innovative solutions. The nation's economic growth, while impressive, must be accompanied by policies that prioritise job creation, skill development, and equitable opportunities. Only through a comprehensive and inclusive approach can India transform its demographic dividend into a sustainable engine of progress, ensuring that its youth are not left on the margins but are empowered to shape the country's future.