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UPSC MainsGeneral Studies Paper IIIIndian EconomyPractice question

Causes and Solutions for Poverty and Unemployment in India

Highlighting the causes of unemployment in India, mention the actions taken by the government to resolve the same. Suggest a few measures necessary to resolve this ongoing problem of unemployment in India. Furthermore, discuss the causes of poverty and its impact on India, and outline the steps taken by the government to reduce poverty.

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How to approach

Begin by delineating the twin challenges of unemployment and poverty in India using contemporary indicators. Structure the body into two clear segments: first, examine the structural and economic drivers of unemployment along with ongoing interventions and actionable policy suggestions; second, analyse the multidimensional drivers and socioeconomic impacts of poverty along with government interventions across the MPI framework. Conclude by synthesizing the need for human capability development aligned with Sustainable Development Goals.

Model answer

424 words

Introduction

Unemployment and poverty represent mutually reinforcing socio-economic challenges that impede India from fully realizing its demographic dividend. While the Periodic Labour Force Survey (PLFS 2023-24) reports an open unemployment rate of 3.2%, underemployment and informality remain widespread. Concurrently, NITI Aayog reports a drop in Multidimensional Poverty Index (MPI) headcount to 11.28%, underscoring significant progress alongside lingering structural gaps in job quality and living standards.

Dimensions and Drivers of Unemployment in India

Unemployment in India is characterised less by open joblessness and more by structural, disguised, and informal underemployment:

  • Structural Mismatch: A persistent disconnect between tertiary education curricula and market-demanded industry skills produces high graduate underemployment.
  • Disguised Unemployment in Agriculture: Approximately 45% of India's workforce remains engaged in agriculture and allied activities, contributing less than a fifth of national gross value added.
  • Low Female Labour Force Participation (FLFPR): FLFPR stands around 41.7%, depressed by social norms, disproportionate care-work burdens, and safety concerns.
  • Capital-Intensive Growth: Industrial expansion has increasingly favoured automated, capital-intensive manufacturing over employment-intensive sectors.

Government Initiatives and Measures Needed for Employment

Government initiatives have targeted skilling and manufacturing output through diverse interventions:

  • Government Initiatives: The Production Linked Incentive (PLI) scheme stimulates high-tech domestic manufacturing, Pradhan Mantri Kaushal Vikas Yojana (PMKVY 4.0) modernises skilling, Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA) provides a rural employment baseline, and PM Vishwakarma supports traditional artisans with credit and modern tools.
  • Measures Needed: Introduce an Urban Employment Guarantee on the lines of state models like Rajasthan's IRGY-Urban, deliberately incentivise labour-intensive export sectors (such as textiles, apparel, and footwear), and formalise social security protections for platform and gig-economy workers.

Causes, Impact, and Alleviation of Poverty

Poverty stems from overlapping historical, economic, and institutional deficiencies, affecting overall human development:

  • Underlying Causes: Historical de-industrialisation, low rural productivity, credit access barriers, and caste-gender stratification collectively restrict upward social mobility.
  • Socioeconomic Impact: Deprivation perpetuates severe human capital deficits, as reflected in child stunting and wasting (NFHS-5), fuels intergenerational poverty cycles, and widens economic disparity, with top wealth percentiles consolidating an expanding share of national assets.
  • Targeted Government Interventions: Under the Multidimensional Poverty Index framework, interventions address standard of living via PM Awas Yojana and Jal Jeevan Mission; nutrition and healthcare through Ayushman Bharat and PM POSHAN; and targeted delivery through the Jan Dhan-Aadhaar-Mobile (JAM) trinity.

Conclusion

Transitioning out of poverty and precarious employment requires shifting from mere welfare assistance to Amartya Sen's capability-building approach. Prioritising labour-absorbing manufacturing, quality education, universal healthcare, and climate-resilient agriculture will ensure equitable growth and accelerate India's path toward achieving SDG-1 (No Poverty) and SDG-8 (Decent Work and Economic Growth).

Key facts to remember

statistic

According to a 2024 NITI Aayog discussion paper, 24.82 crore people moved out of multidimensional poverty between 2013-14 and 2022-23, with the MPI headcount ratio declining from 29.17% to 11.28%.

— NITI Aayog (2024)
statistic

According to the Periodic Labour Force Survey (PLFS 2023-24), agriculture continues to employ approximately 45% of India's total workforce despite contributing less than 20% of GDP.

— Ministry of Statistics and Programme Implementation
scheme
PM Vishwakarma Scheme

A Central Sector Scheme providing end-to-end holistic support including financial assistance, skill training, toolkits, and market linkage to traditional artisans and craftspeople across 18 trades.

Frequently asked questions

Why does low headline unemployment coexist with high underemployment in India?

Open unemployment captures only those actively seeking work without finding any. In developing economies with weak social security nets, most workers cannot afford prolonged joblessness and instead absorb into low-productivity, informal, or disguised agricultural employment.

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