The topic of unemployment is becoming more and more prominent in India as the nation prepares for the third round of its general elections. Rahul Gandhi, the leader of the opposition, has accused Prime Minister Narendra Modi and his ruling BJP of turning the nation into “a center of unemployment.” India’s youth unemployment rate is especially high: of the country’s unemployed, 83% are between the ages of 15 and 29, according to the “India Employment Report 2024,” released last month by the Institute of Human Development (IHD) and the International Labour Organization (ILO).
“Modi has made the nation’s unemployment rate worse. Demonetization and the incorrect Goods and Services Tax system have destroyed those who can create jobs,” Gandhi declared on Saturday during a rally in the Indian state of Bihar, which is in the east. During his first term, in 2016, Modi made the highly condemned announcement that the 500 and 1,000 rupee notes would be demonetized, or that they would no longer be accepted as legal cash.
Manmohan Singh, the predecessor of Modi, referred to the demonetization policy, which aims to reduce black money—that is, money obtained via unlawful activity that escapes taxation—as “monumental mismanagement.” It did not, however, prevent Modi from winning an even more robust mandate for a second term in 2019. The unorganized sector in India, which is composed of millions of privately held small companies, employs roughly 93% of the labor force.
The shift toward the organized sector from the unorganized sector, and the labor-intensive industries (such as leather goods and textiles) to capital-intensive sectors (such as e-commerce) has led to the deterioration in India’s jobs generation capacity. Former Reserve Bank of India governor, Raghuram Rajan, echoed similar concerns last week, pointing to the fall in employment in labor-intensive sectors such as leather goods. Rajan, who was speaking about how to make India an advanced economy at the George Washington University, said: “Unemployment numbers are high, disguised unemployment is even higher. Labor force participation is low, female labor force participation is alarmingly low.” A slowdown in hiring in India’s huge information technology sector is also to blame for the lack of well-paying, white-collar jobs.
While the ILO-IHD headline numbers on youth unemployment have become a major talking point this election season, some of the key metrics that point to improving the jobs scenario have been lost in the debate. Youth unemployment, which was at 17.5% in 2019, fell to 12.1% in 2022 and to 10% in 2023, the ILO-IHD report stated. Overall, unemployment fell to 3.1% in 2023 from 3.6% in 2022 and 4.2% in 2021, according to government data.
Former IMF executive director, Surjit Bhalla, also a former member of the prime minister’s economic advisory council, told that a lot of the noise around unemployment is just a “political narrative.” Even though unemployment is at the front and center of voters’ minds and has been the key issue raised by the opposition parties to put the ruling BJP on the back foot, a whole host of surveys have shown that Modi will likely win this election with another strong mandate.
