Who is unemployed?

An individual, who is ready and willing to work at the prevailing rate of wages but does not find the work, is considered to be unemployed. It is important here to mention that the persons, who voluntarily remain unemployed: living on alms or spending a parasitic life, cannot be treated as unemployed. It may be the case that a person may be willing to work but is not able to work due to his mental or physical constraints; in this case also that person cannot be termed as unemployed. The problem of unemployment among educated persons in India has touched an alarming point.

Take a note that when one talks of unemployed persons one is referring only to those who are in the age group of 15-60 years.

Classification of Unemployment in India

Unemployment in India can be classified broadly into two types:

Rural Unemployment

About 58.7 percent of labourers, in Indian villages, are engaged in primary sector. Most of them are engaged in non-farm sector. Those rural labourers work in cottage industries as iron-Smiths, carpenters, etc. and in different kinds of services.

It has been estimated that more than two-third of the rural workers are self-employed and just one third of them work for others. Problem of involuntary unemployment can further be divided into disguised and seasonal unemployment, which are of alarming proportions in rural areas.

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What is Disguised Unemployment

Disguised suggests a situation in which the number of workers engaged a job becomes much more than is actually required to complete it. Simply put, if some of the workers are removed from the job, the total production will not decrease. These disguised employees are not needed and thus superfluous.

Due to the joint family system that is still prevailing in the rural areas and lack of alternative avenues of employment, all members of the farmer’s family keep themselves engaged in the cultivation of family farm. Even if some members are withdrawn from the work, the total production of the family farm will remain unaffected.Thus those members will be considered as the victim of disguised has become a grave problem in rural India.

What is seasonal unemployment

Seasonal unemployment happens because agriculture, in India, is basically a seasonal occupation. The workers, during the off-season, often remain out of job. The volume of seasonal unemployment proportionally depends on the conditions and methods of cultivation in different parts of the country. It is a horrifying fact to know, as it has been estimated, that a farmer who cultivates one crop in a year usually goes without a job for almost 5 to 7 months.

Besides agriculture, in rural areas, there are various other activities such as sugarcane crushing, brick kilns, etc in which workers remain engaged for a few months and for the rest of the period (of the year) they remain unemployed.

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Urban employment

Unemployed persons, in urban areas, are quite often registered with employment exchanges. It is so the urban employment, unlike disguised unemployment of rural areas, is more like an open unemployment.

The number of registered unemployed, between 1961 and 2008, has soared up more than eight-fold. Unemployment in urban areas can further be separated into two broad categories:

Industrial Unemployment

This sort of unemployment envelops the persons, who are willing and able to work in industries, mining, transport, trade and construction activities but do not find the job. The problem of unemployment in industrial sector has increased many fold because of a rapid rise in population. Besides this, the trend of migrating to urban areas, mainly due to the expansion of industries in urban areas, in search of jobs has compounded the problem of unemployment in the industrial sector. So it can be claimed that industrial unemployment happens as a spillover of rural unemployment.

The second major cause for this problem is that industries in India are increasing rapidly and they are emulating the use of labour-saving western technology, thus, in the process, limiting the absorption capacity of the industrial sector.

Educated Unemployment

The problem among educated persons in India has touched an alarming point as it has spread across all parts of the country indicating a serious threat to social peace and harmony. Major factors contributing to educated unemployment are:

• It has been recorded that the number of educated persons has increased substantially due to the expansion of educational institutions such as universities, college and schools.
• It is important to take note of the fact that quite often degree holders fail to acquire a job, because the education system in India is not job-oriented; it is rather degree-oriented.
• Enhancement in employment opportunities has lagged behind in comparison with the enhancement in the volume of educated labour force. It is obvious from the fact that in recent years the number of educated unemployed registered with employment exchanges has shown the tendency of swelling up.

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The phrase Economic Growth is meaningless if a large segment of the society suffers bereavement. Growth is changed into development only when poverty is eradicated.

In independent India programmes of development were initiated with socialistic pattern of society as its core objective. Concentrating on the eradication of poverty the programmes sought to attain economic and social equality. However, there has been not much progress in the area of economic and social equality, even when GDP (Gross Domestic Product) has recorded a momentous growth. For the planners and politicians poverty continues to be a major challenge as it persists as a social menace. It is ipso facts, disgraceful for a nation that has emerged as the 10^th largest industrial economy in the world.

What is Poverty?

Poverty is the disability to meet the minimum requirements of life; these minimum and requirements consist of food, clothing, housing, education and health facilities. Human beings go through pain and suffering if these minimum needs are not accomplished. Due to loss of health and efficiency, sickness and disabilities make the poor helpless in all walks of life. The poor, generation after generation, live, grow and die in poverty. So it can be proverbed “Poverty breeds Poverty”.

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Variants of Poverty

There are two variants of poverty – Relative Poverty and Absolute Poverty.

Relative Poverty

It treats poverty in relation to different classes, regions or countries. The country or class of people, with a low level of living is considered as poor or relatively poor in comparison to the country or class of people, who has high level of living. A recent report of published by UNO stats:

‘those countries are considered relatively poor where per capita income is less than $ 1.25 per day or about US $455 per annum. India ranks, according to this benchmark, very low in terms of quality of life with per capita income of only US $ 1,180 per annum. Per capita income of even countries like Sri Lanka, Egypt and Pakistan is higher than that of India.

In the US per capita per annum is $ 3,590; this data is enough to show that India is one of the poorest countries of the World.

Relative poverty is also measured in terms of inequality of income within the country. To put an example – in India the share of 20% of low income group of people in national income is barely 8.1% while that of 20% of high income group is 45.3%.

In the context of unequal distribution of income of the people of an area, poverty is usually measured by using the concept of Lorenz Curve and Ginni coefficient.

Absolute Poverty

In order to measure absolute poverty in India a concept of poverty line is used. This Poverty line indicates the cutoff point, defined in terms of per capita expenditure, that separates people of a region as poor or non-poor.

Recently the Indian Planning Commission recommended the country’s poverty line at Rs. 28.35 a day for urban areas and Rs. 22.42 in rural areas. The person whose monthly consumption expenditure falls below this line is treated as absolutely poor. Based on the official poverty line of 2009-2010, rate of poverty in India is estimated to be 29.8 per cent. In terms of number of absolutely poor, 29.8 per cent in India is equal to 50 per cent of the absolutely poor in the world.

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Fixing Poverty Line in India

In the estimation of consumption cut-off, in the process of fixing poverty line, only private consumption expenditure is taken into consideration. In private consumption expenditure, not only food items but also non-food items are taken into consideration. Consumption of food items is based on per capita consumption of calories. Non-food items connect basically to education and health.

Frequencies are registered against each class interval showing a particular level of consumption. Each frequency computes the number of heads belonging to a particular consumption class.

Lastly, head count ratio is worked out that show poor and non-poor (according to the poverty line cut-off), separately for the rural and urban areas. The ratio displays the percentage of population below poverty line.

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In India, during 2001-2011, the State-wise Child Sex Ratio (CSR), has fallen further except in Himachal Pradesh, Punjab, Haryana, Mizoram, Gujarat and Tamil Nadu. It would be an interesting fact to mention here that these (above mentioned) same states had recorded significant fall in CSR during 1991-2001. The adverse sex ratio (child) manifests that female infanticide is probably still being practiced across the country.

However, overall sex ratio has registered an improvement over the years but has deteriorated in some states like Gujarat and Bihar. At the International level the figure does not appear promising when compared with US (1025 females per 1000 males); Brazil (1042); Russia (1167); Japan (1055); and Sri Lanka (1034). The Child Sex Ratio is the number of females per 1000 males in 0-6 years age group.

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Cause of Adverse Sex Ratio (ASR)

In India the consistency of adverse sex ratio is primarily because of high preference for sons in our society. There are various reasons, sociological, cultural and religious, for persistence of a male child preference. These reasons are being extensively documented in various academic studies and Government reports.

The reasons for inimical sex ratio has been empirically examined by many researchers. One of them after discussing the origin of dowry came to the conclusion that rapid fertility decline, without having changes in cultural values, has resulted in a deliberate attempt to get ‘rid of girls’.

Gender discrimination stands firmly on the ground simply because of a myth that girl constitutes impoverishment and boy constitutes enrichment. It is with reference to costs and benefits, including the institution of marriage and dowry that daughters appear so expensive.

In addition to the traditional factors, social mobility could be a pressing force behind the skewed sex ratio in India. However, apart from above mentioned factors, there could be a few key economic factors that has neither been examined in detail nor concentrated upon by policy makers in relationship to the consistency in psychology of seeking a male child.

Implications of ASR

There can be many implications of an Adverse Sex Ratio. The connection between sex ratio and crime has been a long standing issue. An elaborate study in Asia, particularly in India and China, undertaken by Hudson and Boer (2005), Dreze and Khera (2000), came to the conclusion that murder rates in India are interconnected with the female-male ratio in population. This summation has been backed by the data showing that districts with higher female – male ratio have lower murder rates.

The scarcity of females could result in a prolonged bachelorhood in the society. The scarcity of bride would generate new waves of migration from neighboring countries that could ultimately result in social tension for these brides with them bring different culture and customs.

In the absence of sufficient migration, keeping in view of the size of India, incidents of human trafficking, forced marriages, kidnapping and other related crime can accrue.

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Conclusion and Recommendation

The Adverse Sex Ratio would certainly be difficult to change without fundamental economic social change that will require a multi-pronged effort. This can only be obtained through the active involvement of Panchayati Raj institutions, local level of social, religious and political leaders, media and entertainment industry, medical professionals and medical associations.

An adverse child sex ratio can negatively influence the growing economy in future because girls are like capital goods; girls directly provide labour force and bear children, who are future labourforce. Keeping in view the cost benefit analysis, it can be emphasized that protection catered to a girl child for first two decades could yield an income stream for the next five decades.

The employment opportunity is the core factor. Only about 30% of women in India are in workforce. Contrary to this data, in Nepal nearly 80% of women constitute the workforce, followed by China (71%), Bhutan (67%), and Russia (57%). The women in workforce are relatively financially independent than those dependent on income of a male member in the family.

The Government should, or rather must, also consider more recruitment of women in police and armed force. According to a survey, women constitute only 3 per cent of police force in India and even a smaller number in Indian army.

The Government may consider, to put an out-of-the-box view, offering complete exemption from income tax for women working in a public or private sectors. As the income earned by women would be spent fully on family expenditure, it will encourage and motivate more women to enter the workforce.

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A government budget is a government document presenting the government’s proposed revenues and spending for a financial year. The government budget balance, also alternatively referred to as general government balance, public budget balance, or public fiscal balance, is the overall difference between government revenues and spending.

A positive balance is called a government budget surplus, and a negative balance is a government budget deficit. A budget is prepared for each level of government (from national to local) and takes into account public social security obligations.

The meaning of “deficit” differs from that of “debt”, which is an accumulation of yearly deficits. Deficits occur when a government’s expenditures exceed the revenue that it generates. The deficit can be measured with or without including the interest payments on the debt as expenditures.

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The primary deficit is defined as the difference between current government spending on goods and services and total current revenue from all types of taxes net of transfer payments.

Before the invention of bonds, the deficit could only be financed with loans from private investors or other countries. Changes in tax rates, tax enforcement policies, levels of social benefits, and other government policy decisions can also have major effects on public debt. For some countries, such as Norway, Russia, and members of the Organization of Petroleum Exporting Countries (OPEC), oil and gas receipts play a major role in public finances.

Large, long-term loans had a high element of risk for the lender and consequently gave high-interest rates. Governments later began to issue bonds that were payable to the bearer, rather than the original purchaser. This meant that someone who lent the state money could sell on the debt to someone else, reducing the risks involved and reducing the overall interest rates.

A fiscal deficit is often funded by issuing bonds, like treasury bills or consols and gilt-edged securities. These pay interest, either for a fixed period or indefinitely. If the interest and capital requirements are too large, a nation may default on its debts, usually to foreign creditors. Public debt or borrowing refers to the government borrowing from the public.

Government spending, inflation and lower revenue are among some of the main factors that point to fiscal deficit. The cynical nature of fiscal deficit does not only jeopardize the growth of the country but also the government’s economic management abilities.Another major reason for a growing fiscal deficit can be slow economic growth or sluggish economic activities.

Fiscal deficit has been a key concern for credit rating agencies and RBI is likely to be on alert when it pays its debt because paying high interests with cautious investors amid rising deficits might not be considered a smart move.

Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy, or else it involves the government changing the levels of taxation and government spending in order to influence aggregate demand and the level of economic activity. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors. These changes can affect the following macroeconomic variables, amongst others, in an economy:

• Aggregate demand and the level of economic activity;
• The distribution of income;
• The pattern of resource allocation within the government sector and relative to the private sector.

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The three main stances of fiscal policy are:

• Neutral fiscal policy is usually undertaken when an economy is in equilibrium. Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity.
• Expansionary fiscal policy involves government spending exceeding tax revenue and is usually undertaken during recessions.
• Contractionary fiscal policy occurs when government spending is lower than tax revenue and is usually undertaken to pay down government debt.

Fiscal policy refers to the use of taxation and government spending to influence economic activity.  This is distinguished from monetary policy in that fiscal policy only deals with taxation and spending and is often administered by an executive under laws of a legislature, whereas monetary policy deals with the money supply, lending rates, and interest rates and is often administered by a central bank.

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Monetary Policy

Foreign Trade Policy (FTP)

Government budget