Precarity is an essential element of unemployment or severe underemployment, and evidence on India’s economic trajectory points to a growing precariat—a social class marked by the absence of material or psychological security due to joblessness. It is hard to ignore the sharp rise in the number of young people searching for jobs. Especially in rural areas, gainful employment is scarce, and opportunities for systematic job searches are even rarer.
Yet, official recognition of the seriousness of the problem appears woefully inadequate. The Economic Survey 2023-24 has less to say on employment than any previous survey. The chapter on ‘Employment and Skill Development’ evades the issue of jobless growth so systematically that platitudes can be mistaken for an attempt at dark humour. Sample this: ‘Indian labour market indicators have improved in the last six years, with the unemployment rate declining to 3.2 per cent in 2022–23’ or ‘Rising youth and female participation in the workforce presents an opportunity to tap the demographic and gender dividend.’ Which economy are they really talking about? The report also goes on to inform us that ‘the government has implemented measures to boost employment, foster self-employment, and promote worker welfare.’
In sharp contrast, independent estimates of unemployment and, worse still, severe underemployment point to a serious situation on the ground. The India Employment Report 2024, produced jointly by the Institute for Human Development and the International Labour Organisation, shows India’s working population increased from 61 per cent in 2011 to 64 per cent in 2021, and it is projected to reach 65 per cent in 2036. However, the percentage of youth engaged in work declined to 37 per cent in 2022. Recent data from the Centre for Monitoring Indian Economy, an independent think tank, shows the unemployment rate in India stood at 9.2 per cent in June 2024, a sharp increase from 7 per cent in May 2024. Desperate workers queuing up in the recruitment drive earlier this year for construction workers and caregivers in war-hit Israel, and even more desperate youth joining as fighters in the Russia-Ukraine war, signal a deepening crisis.
In India, joblessness is compounded by a large informal sector and the growing dilution of contractual obligations in the formal sector. Youth are increasingly pushed into precarious, low-paying jobs with no social protection. Unemployment is often discussed in terms of its economic impacts—reduced household income, decreased consumption, and an overall drag on the economy. However, its precarity extends far beyond financial distress. The psychological toll of joblessness includes insecurity, identity loss, and mental health struggles such as depression and anxiety. Socially, unemployment creates fractures in community cohesion, increases crime rates, and leads to inequitable social outcomes. Though it is politically incorrect and is a sensitive matter, it is now clear that the much-awaited demographic dividend is nowhere in sight; instead, a demographic disaster is in the making.
Among various strategies to tackle unemployment, one that has received little policy attention is the Micro and Small Enterprises (MSE) sector, which holds significant potential to provide sectorally diverse, decentralised, and geographically distributed livelihoods, besides driving local economies. It appears counter-intuitive but makes eminent sense for a country that remains predominantly rural and quite clearly has missed the ‘big manufacturing’ bus to invest more in the MSE sector. Unlike medium- and large-scale industries that may automate and rely excessively on capital, MSEs are more likely to generate employment opportunities, especially in labour-intensive sectors such as textiles and food processing, particularly for low- and semi-skilled workers.
The MSE sector, however, is crippled and needs intensive care, and that should be the starting point for a strategic intervention to create a more sustainable employment pathway. Historically, the sector has been characterised by a high degree of vulnerability, reflected in its closure rates, with estimates suggesting that around 25 per cent to 30 per cent of newly established small enterprises do not survive beyond the initial five years. Some sectors within MSEs are more prone to closures than others. For instance, the garments sector, though labour-intensive, faces stiff competition from cheaper imports and struggles with modernisation. Small manufacturing units are hit by rising costs of raw materials and energy, leading to unsustainable margins.
Various factors play a role in driving enterprise growth and employment: human capital, sector or industry focus, research and development and market research, supportive networks, and incentives. As the majority of MSEs lack access to these enabling growth factors, few manage to overcome growth constraints, expand employment, and improve working conditions. Thus far, few targeted MSE policy interventions have aimed at employment creation or the job quality of workers; the focus has been more on increasing incomes of MSE owners. Therefore, in building an inclusive strategy for MSE promotion, policymakers must address several structural and enterprise-specific growth constraints. This, above all, involves the provision of quality education and training, access to adequate finance, access to market information for all, the design of MSE-sensitive industrial policies, access to quality infrastructure, as well as reforms in the design and enforcement of business and labour regulations.
Regardless of the policy prescriptions, the elephant in the room, however, is our attitude towards work: our obsession with being white-collared quill pushers. The result has been a grave misalignment between the skills acquired during education and the demands of the job market, exacerbated by rapid technological advancements and shifting industry needs. Instead of all youth, regardless of their learning ability, going to university, obtaining a master’s degree, and then taking up work as cab drivers or lift operators, we would do well to implement a key recommendation of the National Education Policy 2020—to embed vocational education in school education. We might still produce the best plumbers, electricians, and mechanics, who after Class 12 learn to excel working with their hands. But then, we need to shed the colonial mindset to don a white collar. For that, we must bring back the dignity of labour and wear a blue or brown collar with pride!
(The writer is director of School of Social Sciences, Ramaiah University of Applied Sciences, Bengaluru)