Why in the News
Recently, the Periodic Labour Force Survey (PLFS) conducted by the Labour Bureau for the July-September 2025 quarter revealed a decline in rural unemployment and a slight rise in urban joblessness. The findings highlight key trends in employment patterns and sectoral distribution across rural and urban India.
Background and Context
The Periodic Labour Force Survey (PLFS) is a government initiative to monitor employment and unemployment trends in India. The latest survey covers the period from July to September 2025 and provides detailed insights into workforce participation, sectoral employment, and gender-wise distribution.
Key Findings: Unemployment Trends
- Rural unemployment rate declined to 4.4% in July-September 2025, down from 4.8% in the previous quarter.
- Urban unemployment rate increased slightly, with rates rising from 6.1% to 6.2% for males and from 8.9% to 9.0% for females during the same period.
- Overall unemployment rate for persons aged 15 years and above dropped to 5.2% in July-September 2025 from 5.4% in the previous quarter.
Employment Patterns: Rural and Urban
- Self-employment dominated in rural areas, with the share of self-employed persons aged 15 years and above increasing to 62.8% in July-September 2025 from 60.7% in April-June 2025.
- In urban areas, jobs were primarily based on regular wages or salaried employment. The share of regular wage/salaried employment rose to 49.8% in July-September 2025 from 49.4% in April-June 2025.
Sectoral Distribution of Workforce
- Rural workforce continued to concentrate in the agriculture sector, with 57.7% of rural workers engaged in agriculture during July-September 2025, up from 53.5% in the previous quarter. This increase is attributed to seasonal agricultural operations.
- Urban workforce is primarily employed in the tertiary sector, which engaged 62.0% of urban workers in July-September 2025, slightly higher than 61.7% in April-June 2025.
Labour Force Participation Rate (LFPR)
- Overall LFPR among persons aged 15 years and above held steady at 55.1% in July-September 2025, compared to 55.0% in the previous quarter.
- Female LFPR increased to 33.7% in July-September 2025 from 33.4% in the previous quarter, driven by a rise in rural female LFPR from 37.0% to 37.5%.
- Rural LFPR inched up from 57.1% to 57.2%, while urban LFPR rose from 50.6% to 50.7%.
Worker Population Ratio (WPR)
- WPR for persons aged 15 years and above in the country was 52.2% during the quarter.
- Rural WPR was 54.7%, compared to 47.2% in urban areas for the same quarter.
Employment Numbers
- On average, 56.2 crore persons (aged 15 years and above) were employed in the country during July-September 2025.
- Of these, 39.6 crore were male and 16.6 crore were female.
Way Forward
- Seasonal agricultural operations play a significant role in rural employment, suggesting the need for policies to support year-round rural job creation.
- Urban joblessness remains a concern, highlighting the importance of diversifying urban employment opportunities beyond the tertiary sector.
- Improving female workforce participation requires targeted interventions, especially in urban areas.
- Enhancing skill development and promoting self-employment in rural areas can help sustain employment growth.
Conclusion
The latest PLFS findings reveal a decline in rural unemployment and a slight rise in urban joblessness, with sectoral and gender-wise disparities evident.
- The concentration of rural employment in agriculture and urban employment in the tertiary sector underscores the need for balanced and inclusive employment policies.
- Addressing seasonal fluctuations, improving urban job opportunities, and enhancing female workforce participation are crucial for sustainable economic growth.
Employment and Unemployment in India
Employment and unemployment represent fundamental issues at the heart of India’s development narrative, serving as critical barometers of socio-economic progress and the effectiveness of policy intervention. The transition of India’s large, youthful demographic from a liability to a productive asset hinges entirely upon its ability to generate sufficient, high-quality employment.
- Unemployment, defined as the state where individuals are willing and able to work at prevailing wage rates but cannot find suitable engagement, is a complex challenge rooted in both cyclical economic fluctuations and deep-seated structural rigidities in the labour market, particularly concerning skill deficits and the dominance of the informal sector.
Data & Reports: Measuring Labour Market Dynamics
Accurate assessment relies on the PLFS (MoSPI) and supplementary reports from other agencies.
Key Labour Market Indicators
| Indicator (Age 15+) | Data (E.g., PLFS July-Sept 2025) | Significance/Inference for UPSC |
| Overall Unemployment Rate (UR) | 5.2% (CWS) | Decline suggests labour absorption, but the quality of employment (underemployment) remains a primary concern. |
| Rural UR vs. Urban UR | Rural: 4.4% vs. Urban: 6.9% | Rural rates are lower due to absorption into low-productivity self-employment, while urban areas show higher competition for formal jobs. |
| Female LFPR | 33.7% (overall) | Modest upward trend in women’s economic participation, crucial for gender parity and productivity. |
| Informality Share | 82%-90% of workforce | Indicates low social security coverage (e.g., EPF/ESI) and high vulnerability for the vast majority. |
Significance of Employment Growth
Employment growth is an indispensable factor for inclusive and sustained economic growth (SDG 8).
- Harnessing Demographic Dividend: Converts the large working-age population into productive assets, directly accelerating GDP growth. Example: If 10 million youth join the skilled workforce annually.
- Poverty and Inequality Reduction: Provides stable income, acting as the most effective tool against income poverty. Example: MGNREGA providing guaranteed income to vulnerable rural households.
- Boosting Aggregate Demand: Employed individuals drive consumption, which, in turn, stimulates investment, sustaining the virtuous cycle of economic expansion. Example: Growth in manufacturing jobs leading to increased sales of housing and consumer durables.
- Social Stability and Cohesion: Mitigates youth alienation and unemployment-related frustration. Example: Reduces potential for social unrest tied to economic hardship.
- Fiscal Health: Increases the tax base (via income taxes and GST collections) and reduces dependence on welfare subsidies.
Types of Unemployment in India
Unemployment manifests in diverse forms, requiring targeted policy responses.
| Type | Definition | Key Sector/Example |
| Disguised (Hidden) | Workers engaged more than technically required, resulting in zero marginal productivity. | Prevalent in the agricultural sector (e.g., small family farms) where the surplus worker’s removal does not affect output. |
| Structural | Mismatch between worker skills and the skills demanded by the market due to long-term economic changes. | Lack of Cloud Computing or AI skills among existing IT graduates, making them irrelevant for future jobs. |
| Seasonal | Occurs in industries with periodic demand fluctuations linked to weather or festivals. | Farm labourers jobless during the non-sowing season; workers in firecracker/handloom industries facing slack post-Diwali. |
| Educated | Individuals with formal education are unemployed or underemployed. | A B.Tech graduate applying for a clerical post due to the shortage of high-wage engineering jobs. |
| Technological | Jobs lost due to the direct replacement of human tasks by advanced machinery or software (Automation). | Automated data processing systems replacing back-office staff in the banking sector. |
Key Methodologies Used to Measure Unemployment in India
Several methodologies are employed to capture a comprehensive picture of employment and unemployment trends in India, covering both formal and informal sectors:
- Periodic Labour Force Survey (PLFS): Conducted annually by the Ministry of Statistics and Programme Implementation (MoSPI) since 2017-18, the PLFS provides detailed data on workforce participation, employment, and unemployment patterns.
- Census Data (Decennial): Undertaken every 10 years by the Registrar General and Census Commissioner, the Census provides insights into workforce distribution, unemployment levels, and classification of main and marginal workers.
- Economic Census (CSO): Carried out periodically by the Central Statistics Office (CSO), this census collects data on employment across agricultural and non-agricultural enterprises, offering a broad understanding of enterprise-based workforce dynamics.
- NSSO Employment-Unemployment Surveys: Conducted quinquennially and annually by the National Sample Survey Office (NSSO), these surveys provide detailed employment and unemployment statistics, analysing labour market trends through demographic, social, and economic parameters.
- Employment Exchange Data: Under the Employment Market Information Programme (EMIP), data is collected on job vacancies and registrations. While it reflects trends in the organized sector, its coverage is limited to formal employment.
- Centre for Monitoring Indian Economy (CMIE): CMIE conducts frequent surveys with short reference periods, offering real-time insights into unemployment trends, particularly in the informal and rapidly changing labour market.
Challenges to Employment Generation
The challenge is structural, encompassing economic, social, technological, and demographic factors.
I. Economic and Structural Barriers
- “Jobless Growth” Phenomenon: India’s high GDP growth remains concentrated in capital-intensive sectors (e.g., IT, Finance), leading to low employment elasticity of growth. Example: The formal manufacturing sector’s growth is often driven by automation, not mass hiring.
- Skills Mismatch and Low Quality of Education: The education system often produces graduates lacking vocational and practical skills, rendering a large proportion of the workforce unemployable. Example: Only a fraction of engineering graduates are certified as employable by industry surveys.
- Dominance of Informality: $\approx 90\%$ of the workforce lacks job security, social security benefits (EPF, ESI), and stable contracts, characterized by high turnover and low earnings.
- Labour Market Rigidities: Complex regulations, despite the new Labour Codes, still create uncertainties, often incentivizing firms to rely on contract labour rather than formal hires to avoid compliance issues.
II. Challenges of Automation and Technology
- Job Polarisation: Automation accelerates the displacement of middle-skill, routine jobs (e.g., assembly line work, BPO data entry). Example: Robotics replacing human labour in automobile manufacturing, shrinking the middle-wage sector.
- Knowledge Transmission Gap: Automation risks reducing the workforce’s exposure to hands-on techniques (prescriptive knowledge), potentially hindering future indigenous innovation and problem-solving capacity.
- Vulnerability of Informal Workforce: Workers in the unorganized sector lack access to retraining or social safety nets, making them highly vulnerable to sudden technological obsolescence.
III. Social, Gender, and Migration Challenges
- Rural-to-Urban Migration Pressure: Large-scale migration driven by rural distress (climate change, farm crisis) puts massive stress on the urban labour market, leading to overcrowding and growth of the urban informal sector.
- Gender Barriers: Social norms, safety concerns, and lack of affordable public infrastructure (like subsidized crèches) restrict women’s entry and retention in the formal workforce, keeping FLFPR low.
- Male Employment Challenge (Quality): While overall male UR is low, a large segment faces wage stagnation and precarious conditions in the urban informal sector, reflecting a decline in job quality and security. Example: A taxi driver working 12+ hours a day without benefits, despite being technically ’employed’.
Rural and Urban Employment Challenges
A. Challenges to Rural Employment
- Over-Dependence on Monoculture: Lack of crop diversification exposes employment to extreme risks from climatic shocks and market price volatility, leading to massive seasonal job losses.
- Low Rural Non-Farm Sector (RNFS) Growth: Failure to develop a vibrant RNFS (e.g., food processing, tourism, rural services) means workers released from agriculture have limited local non-farm options. Example: Lack of local processing units means farmers can’t add value to their crops.
- Poor Skill Base: Lack of advanced vocational training among rural youth hinders their absorption into technical, higher-wage urban jobs, forcing them into low-skill casual labour.
- Financial Exclusion: Limited access to institutional credit (beyond farm loans) hampers the creation of rural micro-enterprises and self-employment ventures.
B. Challenges to Urban Employment
- High Structural Unemployment: Urban youth, particularly graduates, face high unemployment rates due to the gap between their theoretical education and the highly specialized needs of the service economy.
- Informality and Gig Economy: The rapid growth of the Gig Economy in cities offers flexibility but largely bypasses traditional labour laws, leaving workers without social security, paid leave, or job tenure.
- Infrastructure Bottlenecks: Congestion, high housing costs, and inadequate urban transport increase the cost of living and commuting, effectively reducing the disposable income and real wages of urban workers.
- Competition from Migrants: High influx of migrants from rural areas creates intense competition for low-skilled and semi-skilled jobs, depressing urban informal sector wages.
Government Initiatives for Employment
| Focus Area | Scheme Name | Key Features and Examples (8-9 Points) |
| I. Wage Employment | MGNREGA | Guarantees 100 days of unskilled manual work to rural households, creating rural assets (e.g., water conservation structures). |
| II. Self-Employment | PMMY and PMEGP | Provide collateral-free loans (Mudra, up to ₹10L) and credit-linked subsidies (PMEGP) for setting up micro-enterprises. |
| III. Skill Development | PMKVY and DDU-GKY | Focus on short-term training (STT), RPL, and placement-linked skilling (DDU-GKY) for rural youth. |
| IV. Formalization & Incentives | PLI Scheme and ABRY | PLI offers incentives for incremental production, driving job creation in labour-intensive sectors (e.g., electronics). ABRY subsidizes EPF contributions for new hires. |
| V. Livelihoods | NRLM / DAY-NULM | Mobilize rural and urban poor into Self Help Groups (SHGs) to promote sustainable livelihoods. Example: SHG women engaged in food processing. |
| VI. Infrastructure | PM GatiShakti | Focuses on multi-modal connectivity and infrastructure projects that have a high employment multiplier effect (e.g., construction and logistics jobs). |
| VII. Entrepreneurship | Startup India and Stand Up India | Promote innovation and entrepreneurship, supporting the creation of high-value, formal jobs. |
| VIII. Social Security | e-Shram Portal | Creates a national database of unorganized workers to extend social security benefits (e.g., accidental insurance). |
Way Forward: Policy Reforms for Quality Employment
- Structural Shift to Manufacturing: Strategically leverage the PLI Scheme to prioritize labour-intensive manufacturing (e.g., Textiles, Apparel, Leather) to absorb workers transitioning from agriculture.
- Industry-Integrated Skilling: Overhaul vocational training (ITIs) to focus on digital, technical, and future skills (e.g., IoT, robotics maintenance) and promote mandatory apprenticeships (NAPS).
- Deepening Formalization: Ensure effective implementation of the Four Labour Codes to extend social security benefits and protection to informal and gig workers (e.g., portability of benefits).
- Rural Economic Diversification (RNFS): Invest heavily in Rural Non-Farm Sectors like agro-processing units, rural tourism, and decentralized renewable energy to create stable local jobs and check migration.
- Addressing Automation: Launch large-scale, state-sponsored reskilling programs focused on the displaced middle-skilled workforce, prioritizing training in AI supervision and data management.
- Gender-Sensitive Infrastructure: Mandate and subsidize creche/childcare facilities and invest in urban safety and safe transport to boost female participation and retention in formal jobs.
- Entrepreneurship Promotion: Simplify regulations and improve access to finance for MSMEs (the largest job creators) beyond just credit, focusing on technology adoption. Example: Single-window clearance for MSME setup.
- Targeted Urban Planning: Develop satellite cities and improve urban infrastructure to reduce commuting time and housing costs, making urban jobs more attractive and sustainable for workers.
- Real Wage Growth Policy: Focus on boosting worker productivity through skill enhancement to ensure that wage growth keeps pace with inflation, thus improving the quality of employment.
Conclusion
- Employment and unemployment remain India’s critical challenge and opportunity. Recent data shows rural unemployment declining and overall improvement, but urban joblessness, gender disparities, and skill mismatches persist. The informal sector dominance exposes 90%+ workforce to vulnerability; automation threatens middle-skill jobs; migration creates both opportunity and hardship.
- Government initiatives—MGNREGA, skill schemes, PLI, microfinance—provide foundational support but require accelerated, scaled implementation. Formalization, female workforce inclusion, rural diversification, and automation management demand urgent attention.
- A comprehensive approach addressing skill alignment, sector diversification, social security portability, women empowerment, and managed technological transition will convert India’s demographic dividend into inclusive, sustainable employment and prosperity.
UPSC MAINS PYQs
- Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (2023)
