The curse of joblessness won’t leave us. And it is getting worse. Unemployment, from a peak of 8% in the worst Covid financial year 2020-21, came down substantially to 3.2% for FY2024. But now, it has crept up again. The government’s monthly Periodic Labour Force Survey (PLFS) for June 2025 shows India's unemployment rate rose to 5.6%, up from 5.1% for the previous month of May.
This may be a conservative figure as the independent think tank Centre for Monitoring Indian Economy (CMIE) puts the unemployment rate at 7.0%.
In simple terms, an unemployed person is one who actively seeks work, but is unable to find a job.
Government headline figures seem quite quixotic as real joblessness seems much higher. In Maharashtra, about a year ago, a recruitment drive for police jobs saw over 17.76 lakh applications for just 17,471 posts spread over constables, drivers, police band members and jail staff. Such anecdotal evidence tells a different story.
The problem is the headline unemployment figures hide more than they reveal. For example, the unemployment survey carried out by business daily ‘mint’ shows that if you peel away at the unemployment figure of 3.2% for 2024, the unemployment rate for graduates is as high as 13%, and for youth between 15 and 29 years, it is 10.2%.
According to the International Labour Organization (ILO), for calendar 2024, the estimated youth unemployment -- those between 15 and 24 years -- was at 16.03 %. Over the last decade, the unemployment rate has averaging around 22%.
Recent data from CMIE shows a much higher state of joblessness. As many as 44.5% of Indians aged in the 20–24 bracket are unemployed, despite many of them holding graduate or even postgraduate degrees. According to the ‘India Skills’ Report 2025, only 54.8% of Indian graduates are considered employable.
In reverse gear
There are some interesting trends pointed out by Santosh Mehrotra and Jajati Parida, who have published in some extracts from their coming book ‘India Out of Work’.
They show how there was a positive structural change over 2004-2024, that reflected a dynamic employment growth. It involved a ‘dramatic fall’ in the absolute numbers employed in agriculture, along with a rise in those employed in manufacturing and construction. This has now begun to reverse.
The share of employment in manufacturing, after initially rising from 10.5% to 12.8% between 2004 and 2012, fell to 11.5% in 2024. This was accompanied by an absolute fall in manufacturing jobs till 2021 -- for the first time in post Independence history.
Simultaneously, the positive change of falling numbers in agriculture, began to reverse. After falling for the last half century, the share of agriculture in total employment rose from 42% in 2018-19 to 45.8% in 2022-23, and moved up further to 46.1 percent in 2023-24.
This probably includes those who had lost their jobs in the Covid years, and who went back to farm jobs, most of which were unremunerative family or ‘unpaid work’.
“That means the Lewisian transition -- the surplus of rural labour getting fully absorbed into the manufacturing sector, leading to a rise in both agricultural wages and that of unskilled industrial workers -- that had gathered momentum post-2004 was reversed again,” conclude the authors, Mehrotra and Parida.
Labour force declines
CMIE’s work has contributed significantly to the understanding of ‘unemployment’ especially its research on the concept of labour force participation. In recent years, it detected that a significant portion of India's working-age population, having failed to find work, voluntarily stepped out of the labour market. Therefore a declining Labour Force Participation Rate (LFPR) indicates a worsening ‘unemployment’ situation. CMIE’s data suggests that the LFPR or the percentage of working-age population either employed or seeking employment, has dropped from 47% in 2016 to just 40% as of December 2021.
It is the lack of jobs that is contributing to the vanishing ‘demographic dividend’. This concept refers to economic growth being driven by a higher proportion of younger, working-age individuals (15-64 years) relative to the dependent population (under 15 and over 64).
The truth is India’s working-age population will increase by at least 12 million per year until 2030. This means we need to create 9 million jobs every year to deploy the working-age labour surplus. The math is: India would need to grow at 12% per annum to create adequate work to realise its demographic dividend—a tall order for an economy which has now slowed to a growth rate of 6.0-6.5% .
In this scenario, Donald Trump’s tariff war could not have come at a worse time. Most of the exporting units targeting US markets are labour-intensive MSMEs. One of the largest sectors is apparels and textiles, which is now facing tariff rates between 59 and 61%. The Apparel Export Promotion Council (AEPC) has warned that a shutdown of most units was on the horizon unless the government steps in with a relief package. Polished diamond and jewelry, leather and electronic products are also in line for a similar hit.
The problem is these high-employment sectors close down, they will add big time to joblessness. It is indeed difficult times for both the unemployed and the country’s policy makers.