Behind the numbers: who are India’s jobless and why it matters

By Prof. Hemantkumar Shah* 

What is the true scale of unemployment in India? The standard unemployment rate is defined as the percentage of people in the labour force who want work but can’t find it. That means only those seeking jobs are counted as unemployed—those not looking for jobs, voluntarily or otherwise, don’t make it to the list. The latest official estimate pegs India's unemployment rate at 5.6%. That’s a drop from May’s 5.8%, according to the Ministry of Statistics and Programme Implementation. Considering India’s estimated population of 1.46 billion, the labour force makes up 46.9% or approximately 684.7 million people. Of these, a 5.6% unemployment rate implies around 38.3 million people actively seeking but unable to find work. That’s an enormous figure—and even if a million new jobs were created each year, it would take four years to absorb them all, assuming the population does not increase further. But population will rise, so even that scenario is optimistic.

This figure includes people aged over 65, many of whom still work, especially in the unorganised sector, because they have no other means of survival. So even by modest government estimates, at least 25 million people are unemployed at any given time. Independent estimates, such as those from the Centre for Monitoring Indian Economy (CMIE), often report higher unemployment rates. In the same month when the government reported 5.1%, CMIE pegged it at 7.73%. Currently, CMIE’s figure is around 6.9%. This raises the question: whose numbers do we trust? The methodologies differ, but the trend points in the same direction.

Unemployment varies widely between rural and urban areas. Last month, unemployment was 7.1% in urban areas and 4.9% in rural areas. Yet, because the rural population is much larger, the absolute number of rural unemployed people is significantly higher. Under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 153.7 million households hold job cards. Among them are 264.7 million workers, but only 120.8 million of them got work last year. That still leaves over 120 million people unemployed, though they’re willing to work for at least 100 days a year. In urban areas, there is no such guaranteed employment scheme. If the market doesn’t provide jobs, the unemployed simply stay unemployed.

The crisis deepens when you look at the youth. The unemployment rate among youth aged 15–29 is much higher than the national average—17.9% in May and rising to 18.8% in June. Among young women, it’s a shocking 25.8%, while among young men it’s 16.6%. And again, these figures only reflect those actively seeking jobs. The real challenge is figuring out how to create jobs for this growing group.

One alarming official position is that anyone aged 15 or older is considered part of the labour force. That would mean a student in Class 10 is a worker, even though they’ve never taken a public examination. The government assumes that a child joins Class 1 at age six and would be considered part of the labour force by Class 9. Is it fair to label a Class 10 student as employed or unemployed? Such classification risks distorting the real picture and treating school-going adolescents as part of the job market.

Over the years, India’s official unemployment rate has hovered between 5–6%. During certain years, like 2020 and 2023, it exceeded 6%, reaching 7.33% in 2022. Yet this consistency seems to suggest that unemployment at this level has become structural. American economist and Nobel laureate Milton Friedman once described such persistent unemployment as the “natural rate” of unemployment. But if market forces can’t provide adequate economic and social security to the unemployed, then the responsibility squarely falls on the government.

The Indian Constitution lays out clear directives on this. Article 39(a) urges the State to ensure that men and women equally have the right to an adequate means of livelihood. Article 41 mandates the State to make provisions for securing the right to work and, in cases of unemployment, to provide support. This means the government is constitutionally obligated to take proactive steps toward both employment generation and the welfare of the unemployed. Examining the central and state budgets reveals how seriously the governments treat this issue. Whether it’s budget allocations or policies, the question remains: is the State doing enough to address this growing crisis?

Unemployment is not just a statistic—it is a lived reality for millions. Any serious national development plan must start by acknowledging this human crisis and acting with the urgency it deserves.

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*Senior economist based in Ahmedabad