By Dakshesh Thacker (MPA ’23)

India is projected to become the world’s most populous country by 2023. One of two things could happen: either India uses this opportunity to become the engine of the world’s economy by building a strong workforce, or it witnesses a large loss of human potential if not correctly developed.

In the current scenario, the latter seems likelier, reflected in the routine violent protests against unemployment, further intensified against the recent policy scheme that limits army service to four years for youth. Over the years, the Armed Forces has been one of the most desired career trajectories for India’s youth, and the new policy looks to curtail intake and reduce service years, which will very likely increase the number of young people seeking employment in an already competitive job market.

*A group of unemployed youth outside school on a Saturday afternoon in 2018. Photo courtesy of the author.*

From 2017 to 2018, unemployment in India reached a 45-year high of 6.1%, according to the government-run National Sample Survey Office, even before it surged to nearly 24% in April 2020 as the COVID-19 pandemic broke out. From a gender lens, India has reached its lowest rates of female participation in the workforce, reaching an all-time low of about 15% in April 2020 at the onset of the pandemic.

This will require action before the situation exacerbates. But clearly, the million-dollar question, then, is the following: how does the government fix the brewing unemployment crisis in India?

In an article earlier this year in The Morningside Post, the author analyzed the policies required from the supply side for human capital development, which the government has been moderately successful at by implementing numerous policies in skills development and an ambitious National Education Policy in 2020 that is still in the process of implementation.

The question, then, is why unemployment is still on the rise or fluctuating between seven to nine percent for the past ten months. Perhaps there are deeper fixes needed to stimulate the demand for jobs, which can absorb talent from the skills development programs.

There are three potential levers the Indian government can pull to enable job creation, keeping in mind long-term sustainable job growth.

1) Boosting micro, small, and medium enterprises (MSMEs)

81% of India’s workforce comprises the informal economy, which stems from millions of these enterprises. They contribute nearly 25% of services GDP and 6% of manufacturing GDP. MSMEs cumulatively employ a workforce of 120 million across industries, and the number of MSMEs are forecasted to double from 2021 to 2029 with a steady yearly growth rate. MSMEs are a clear channel to boost employment, and policy intervention to support their growth has the potential to increase their hiring power.

Some interventions to support MSMEs could be:

Providing early-stage investment, especially in the manufacturing sector, which has potential to recruit talent based on local resources and skills, such as beekeeping in Nagaland and footwear manufacturing in Karnataka and Maharashtra.

Providing market linkage and business development services, especially for firms looking to export goods, by creating government-funded marketing centres. These centres could identify potential buyers in overseas markets and support grants to sell in exhibitions at international trade shows.

Reducing administrative and legal hurdles, an intervention that India has already made significant progress on with a significant improvement in the World Bank’s last Ease of Doing Business Index.

2) Providing a stimulus package for green jobs

The COVID-19 pandemic has helped to reduce air pollution and improve the quality of some bodies of water, but this may be a one-off decline. The pandemic has also posed challenges to waste management due to the disposal of medical waste and human interference with biodiversity.

We need the private sector and government to identify and implement solutions to environmental problems, which can possibly generate 50 million jobs, at least 13% of which would be in rural areas. Some interventions to enable green jobs could be:

Developing a public-private partnership fund to invest in capital-intensive green economy projects on electric vehicles, solar energy panels, and wind generation units.

Creating state-sponsored low-to-medium skilled technical jobs in areas such as waste segregation, maintenance of water, and landscape resources.

3) Incentivizing women-led, low-risk small businesses

The Ministry of Women and Child Development has already implemented numerous policies over the years to support women to develop skills and obtain employment.

Additionally, instead of focusing on employment, an alternative would be providing livelihoods through entrepreneurship by supporting women-owned small businesses, an avenue previously unexplored by the Ministry. Research by the Organisation for Economic Co-operation and Development (OECD) lays the grounding for some policies we can implement:

Deploying new frontline workers in rural and peri-urban communities to grow awareness of existing schemes for women’s economic empowerment.

Investing in market linkage and business development services for enterprises in textile and agricultural products, especially those viable in the export market.

Create a hyper-local community of support for women entrepreneurs in their location as a support network to lower the death rate of organizations.

Like any wicked problem, unemployment too has deeper causes, as well as multiple solutions and approaches to the problem. In 2018, SIPA’s eminent Indian economist, Arvind Panagariya, dismissed India's job crisis and alternatively identified “underemployment” as the deeper problem, as he called for better jobs for youth.

Although fixing unemployment does seem like a mountain of a problem, these solutions can shift the needle in the right direction in the long run and achieve a future where India can realize the potential of all of its citizens.

Dakshesh Thacker (MPA ’23) is concentrating in Economic and Political Development at SIPA. Prior, he worked in India for five years as a development sector consultant and a Teach For India Fellow teaching high school mathematics to students in Dharavi, Mumbai.

OPINION: 3 things India’s government can do to solve rising unemployment