LABOUR FORCE PARTICIPATION RATE IN INDIA

Recently, data from the Centre for Monitoring Indian Economy (CMIE) shows that India’s Labour Force Participation Rate (LFPR) has fallen to just 40% from an already low 47% in 2016.
This suggests not only that more than half of India’s population in the working-age group (15 years and older) is deciding to sit out of the job market, but also that this proportion of people is increasing.

LFPR

According to the CMIE, the labor force consists of people who are 15 years or older, and belong to either of the following two categories:
Are Employed
Are unemployed and are willing to work and are actively looking for a job.
These two categories have people “demanding” jobs. This demand is what LFPR refers to.
Thus, the LFPR essentially is the percentage of the working-age (15 years or older) population that is asking for a job.
It represents the “demand” for jobs in an economy.
It includes those who are employed and those who are unemployed.
The Unemployment Rate (UER), which is routinely quoted in the news, is nothing but the number of unemployed (category 2) as a proportion of the labor force.
In India, the LFPR is not only lower than in the rest of the world but also falling.
In India, it has been sliding over the last 10 years and has shrunk from 47% in 2016 to just 40% as of December 2021.

India’s LFPR

The main reason for India’s LFPR being low is the abysmally low level of female LFPR.
According to CMIE data, as of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%.
In other words, less than one in 10 working-age women in India are even demanding work.
Even if one sources data from the World Bank, India’s female labor force participation rate is around 25% when the global average is 47%.
The reasons or low women LFPR is essentially about the working conditions — such as law and order, efficient public transportation, violence against women, societal norms etc. — being far from conducive for women to seek work.
Further, lot of women in India are exclusively involved within their own homes (caring for their family)

Issue with LFPR calculation

Unemployment Rate only measures person who are unemployed, but it didn’t calculate the total people have stopped demanding work.
Typically, this happens when people of the working-age get disheartened from not finding work.
Thus, it is better to track another variable: the Employment Rate (ER).
The ER refers to the total number of employed people as a percentage of the working-age population.

Way Forward

Promoting Labour Intensive Industries: There are several labor-intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
Special packages, individually designed for each industry, are needed to create jobs.
Decentralization of Industries: Decentralization of Industrial activities is necessary so that people of every region get employment.

SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT

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