India’s unemployment rate stands at 9.4%

by Manshu on November 10, 2010

in Economy

For the first time ever – the Labour Bureau of the Government of India has conducted a survey on employment – unemployment, and has come up with an unemployment rate based on that.

National Sample Survey Organization (NSSO) also calculates unemployment rates, but these surveys are done with a gap of 5 years, so there is a dire need to have unemployment numbers in between.

The Labour Bureau has started these employment – unemployment surveys, and I hope we will have more frequent numbers on a measure as important as employment. The report (pdf) itself is quite detailed, and I was really impressed with the content and personally, I think this is a great first step. The report contains a whole section on shortcomings of their survey methodology, and that tells you that the quality of the data is only going to improve going forward.

Now, let’s take a look at some of the numbers that were generated by the report.

40 Million Unemployed with an Unemployment Rate of 9.4%

The survey was conducted in 28 States/UTs spread across the country in which about 99 per cent of the country’s population reside.

It estimates that the population of the country is 1182 million with 63.5% in the working age of 15 – 59 years, however, not everyone who is in the working age is interested in joining the work force, so the worker population ratio is much lower. There are an estimated 238 million households, of which 172 million are rural and 66 million are urban. Out of the total population of the States/UTs covered, 872 million persons (73.8 per cent) live in rural areas and 310 million persons (26.2 per cent) live in urban areas.

Population Split: Rural and Urban

Population Split: Rural and Urban

The overall unemployment rate is 9.4%, and it is split out as 10.1% in rural areas, and 7.3% in urban areas. Now, a key thing to remember about unemployment rate is that it is calculated as a percentage of labor force, and not the total population. So, this means that 9.4% of that part of population which is interested in working is unemployed, and not 9.4% of the entire population is unemployed.

In the Indian context, – 359 persons per 1,000 are either working or interested to work, and this is called the Labor Force Participation Rate.

So, out of an estimated population of 1,182 million – 424 million persons are either employed or are interested in working.

The unemployment rate of 9.4% means that out of those 359 persons per thousand, or 424 million people – there are 9.4% or about 40 million who were unemployed. Here are the numbers in millions.

India Unemployment Numbers

India Unemployment Numbers

For males, the unemployment rate is 8%, whereas for females the unemployment rate is 14.6%. The rural unemployment rate is 10.1% and the urban unemployment rate stands at 7.3%.

One thing to be noted about this unemployment rate is that the report states that compared to the NSSO survey the unemployment rate is quite high probably due to under-estimation in the agriculture sector employment.

From the report:

Comparison of Labour Bureau’s present survey results for the year 2009-10 with NSSO’s Employment-Unemployment survey results for 2007-08, reveals that the unemployment rate derived on the basis of the Bureau’s survey is quite high. Higher unemployment rate may be parting attributed to as much as 10 per cent difference in the contribution of agriculture sector to total employment estimated in the present survey vis-à-vis the NSSO 2007-08 survey estimates. While the shift of workforce from agriculture to other sectors is a positive trend for a fast growing economy, the steep reduction in lower share of agriculture employment based on the Bureau’s survey could be attributed to lack of adequate probing skills of the Contract Investigators.
There could be some underestimation in the agriculture sector employment due to lesser-probing by the contract investigators especially in case of women workers who tend to be employed more casually in the agriculture and allied sectors such as forestry, livestock and fisheries.

Since this is the first time – it is understandable that there are some limitations, and personally I feel that this is a great start, and I hope that with time these reports become a monthly affair and India can get frequent unemployment numbers like the US too.

Getting unemployment numbers is really important to assess how various employment schemes work, impact of global recessions, and when we allow companies like Walmart to operate in India, we will need data to see if they are creating rural jobs or rendering people in urban retail unemployed. Surveys such as these could then become key to get the right information on policy formulation. I’m only surprised that these numbers haven’t gotten more press coverage in the main stream media.

Anyhow, before I end this post let me tell you the number that really really surprised me – the state with the highest unemployment rate.

According to this survey – Goa is the state with the highest unemployment rate, and having been in Goa for a couple of years, I know it’s quite a prosperous state, so I won’t be surprised if I am reading the number wrong, but I’m going to dig deeper in the numbers and see what the real cause of that is. Stay tuned for that post, and if you’re interested in a particular state leave a message, and I’ll look at that also. In the meantime, here is the table that shows the unemployment rate for different states (click for a bigger readable picture).

Unemployment in India by State

Unemployment in India by State

Also read Unemployment Numbers in US to get a perspective on how other countries calculate this number.

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