The Causes of Unemployment and Inflation in India |MBA College under pgcet in Bangalore

Posted by Dr. Samiya Mubeen On 23/11/2021 08:43:54

Unemployment in India: Types, Measurement and Causes

Unemployment may be defined as “a situation in which the person is capable of working both physically and mentally at the existing wage rate, but does not get a job to work”.

In other words, unemployment means only involuntary unemployment wherein a person who is willing to work at the existing wage rate does not get a job. MBA College under PGCET in Bangalore

Types of Unemployment in India:

1. Open Unemployment:

Open unemployment is a situation where a large section of the labour force does not get a job that may yield them a regular income. This type of unemployment can be seen and counted in terms of the number of unemployed persons. The labour force expands at a faster rate than the growth rate of the economy. Therefore, all people do not get jobs.

2. Disguised Unemployment:

It is a situation in which more people are doing work than actually required. Even if some are withdrawn, production does not suffer. In other words, it refers to a situation of employment with surplus manpower in which some workers have zero marginal productivity.

So, their removal will not affect the volume of total production. Overcrowding in agriculture due to the rapid growth of population and lack of alternative job opportunities may be cited as the main reasons for disguised unemployment in India.

Measurement of Unemployment:

There are three measures or estimates of unemployment. These are developed by the National Sample Survey Organisation (NSSO). They are:

1. Usual Status Unemployment:

Also known as open unemployment or chronic unemployment. This measure estimates the number of persons who remained unemployed for a major part of the year. This measure gives the lowest estimates of unemployment.

This concept is used to determine the usual activity status of a person as employed or unemployed or outside the labour force. The persons covered may be classified into those working or available for work in their principal activity sector and subsidiary sector.

2. Weekly Status Unemployment:

The estimate measures unemployment with respect to one week. A person is said to be unemployed if he is not able to work even for an hour during the survey period. In other words, according to this estimate, a person is said to be employed for the week even if he/she is employed only for a day during that week.

3. Current Daily Status Unemployment:

It considers the activity status of a person for each day of the preceding seven days. The reference period here is a day. If a person did not find work on a day or some days during the survey week, he/she is regarded as unemployed.

Normally if a person works for four hours or more during a day, he or she is considered as employed for the whole day. The daily status of unemployment is considered to be a comprehensive measure of unemployment.

Causes of Unemployment in India

The following are the main causes of unemployment:

(i) Caste System:

In India the caste system is prevalent. The work is prohibited for specific castes in some areas.

In many cases, the work is not given to the deserving candidates but given to the person belonging to a particular community. So, this gives rise to unemployment.

(ii) Slow Economic Growth:

The Indian economy is underdeveloped and the role of economic growth is very slow. This slow growth fails to provide enough unemployment opportunities to the increasing population.

Inflation in India: Causes and Effects

Meaning of Inflation:

By inflation, we mean a general rise in prices. To be more correct, inflation is a persistent rise in the general price level rather than a once-for-all rise in it.

On the other hand, deflation represents persistently falling prices. Inflation or persistently rising prices is a major problem in India today. When the price level rises due to inflation the value of money falls. When there is a persistent rise in the price level, the people need more and more money to buy goods and services.

To enable the people to meet their daily needs of consumption of goods and services when their prices are rising, their incomes must rise if they have to maintain their standard of living. For government employees, their dearness allowance is increased. Wages and salaries employed in the organised private sector are also raised, though after some time- lag.

Causes of Inflation:

Let us understand how inflation originates or what causes it.

1. Increase in money supply:

Over the last few years, the rate of increase in money supply has varied between 15 and 18 per cent, whereas the national output has increased at an annual average rate of only 4 per cent.

Hence the rate of increase in output has not been sufficient to absorb the rising quantity of money in the economy. Inflation is the obvious result.

2. Deficit financing:

When the government is unable to raise adequate revenue for its expenditure, it resorts to deficit financing. During the sixth and seventh Plans, massive doses of deficit financing had been resorted to. It was Rs. 15,684 crores in the sixth Plan and Rs. 36,000 crores in the seventh Plan.

Effect of Inflation on Indian Economy:

 One of the major results of inflation in an economy is the general slowdown of the economy. When this happens unemployment rates rise, the purchasing power of the consumer decreases, credit becomes expensive. All these cause a strain on the entire financial system of the country. It discourages heavy investment in the economy by both domestic and international players.


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