Employment Generation in India: PLFS, Unemployment and Labour Policy for RBI Grade B ESI
Last updated: 2026-11-10 · MockMentor
Employment generation sits in the Growth and Development unit of the RBI Grade B Phase 2 Economic and Social Issues (ESI) syllabus, next to poverty alleviation, and it links to "Changes in Industrial and Labour Policy" in the Indian Economy unit. It is one of the most asked descriptive themes, because jobs are where growth meets people's lives. This page covers how India measures employment, what the latest data shows, the structural problems behind the numbers, and the policies meant to fix them.
In one line: India's unemployment rate is low, but most workers are in low-paid, informal self-employment, women's participation is still weak, and the real challenge is creating enough good jobs for a young, growing workforce.
Basic concepts
- Labour force: people who are working, plus those who are not working but are looking for or available for work.
- Labour Force Participation Rate (LFPR): the labour force as a percentage of the population of that age.
- Worker Population Ratio (WPR): employed persons as a percentage of the population.
- Unemployment Rate (UR): unemployed persons as a percentage of the labour force, not of the population.
- Usual status: a person's activity over the last 365 days. "Principal status" (ps) is the activity of most of the year; "subsidiary status" (ss) adds people who worked for at least 30 days in a side activity. Annual estimates use ps+ss.
- Current Weekly Status (CWS): a person's activity in the seven days before the survey. Monthly estimates use CWS. Because it is a short window, CWS unemployment is always higher than usual status unemployment.
- Current Daily Status (CDS): a person's activity on each day of the reference week, counted in half-days. It measures unemployment in person-days and gives the highest rate of the three, because it also captures people who worked only part of the week.
- Formal and informal employment: formal workers have a written contract, paid leave and social security. Informal workers have none of these, even if they work in a formal company.
- Demographic dividend: the growth boost a country gets when the share of working-age people is high and they are productively employed.
Why in News?
- On 27 March 2026, the Ministry of Statistics and Programme Implementation (MoSPI) released the Periodic Labour Force Survey (PLFS) Annual Report for calendar year 2025. The unemployment rate was 3.1% for people aged 15 and above, and 9.9% for youth aged 15 to 29.
- In the PLFS monthly bulletin for September 2026, the CWS unemployment rate was 5.0% (rural 4.2%, urban 6.9%) and the LFPR was 55.5%.
- On 1 July 2026, the Viksit Bharat Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G) replaced the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), raising the rural work guarantee from 100 to 125 days.
- By August 2026, over 72 lakh first-time workers had joined the formal workforce under the Pradhan Mantri Viksit Bharat Rozgar Yojana (PM-VBRY), the employment-linked incentive scheme launched on 1 August 2025.
How India measures employment
| Survey | Who runs it | What it gives |
|---|---|---|
| Periodic Labour Force Survey (PLFS) | National Statistics Office (NSO), MoSPI | LFPR, WPR and unemployment: monthly (CWS) since 2025, quarterly for urban and rural, annual by usual status |
| Annual Survey of Unincorporated Sector Enterprises (ASUSE) | NSO | Jobs in small informal businesses |
| Annual Survey of Industries (ASI) | NSO | Employment in registered factories |
| EPFO, ESIC and NPS payroll data | Retirement and insurance bodies | New subscribers, a rough guide to formal job creation |
| e-Shram portal | Ministry of Labour and Employment | A national database of unorganised workers |
The PLFS replaced the five-yearly employment surveys of the National Sample Survey in 2017-18. Since January 2025 it has a larger sample and produces monthly national estimates, so the 2025 figures are not strictly comparable with earlier years.
What the latest data shows
Participation and unemployment (PLFS 2025, age 15 and above, usual status)
| Indicator | Total | Rural | Urban | Male | Female |
|---|---|---|---|---|---|
| LFPR | 59.3% | 62.8% | 52.2% | 79.1% | 40.0% |
| WPR | 57.4% | 61.2% | 49.7% | 76.6% | 38.8% |
| Unemployment rate | 3.1% | 2.4% | 4.8% | 3.1% | 3.1% |
Youth unemployment (age 15 to 29) was 9.9% overall and 13.6% in urban areas. Urban women had the highest unemployment rate of any group, at 6.4%.
The kind of work people do
| Status of employment (2025) | Share of workers |
|---|---|
| Self-employed (own-account workers, employers and unpaid family helpers) | 56.2% |
| Regular wage or salaried | 23.6% |
| Casual labour | 20.2% |
Agriculture still employed 43.0% of workers in 2025, down from 44.8% in 2024, while producing less than a fifth of output. Among women, the share in self-employment was 64.2%, much of it as unpaid helpers in family farms and businesses.
Why low unemployment does not mean a healthy job market
A 3% unemployment rate looks like a rich country's number. It is not, for three reasons. First, poor people cannot afford to stay unemployed; they take whatever work exists, often for a few hours or at very low pay. Second, much of the gap is hidden in low participation, especially of women, who are not counted as unemployed if they are not looking for work. Third, the real problem is underemployment and low productivity: too many people sharing too little work.
Types of unemployment
| Type | What it means | Where it shows in India |
|---|---|---|
| Disguised unemployment | More people working than needed; removing some would not reduce output | Small family farms with several members working on the same plot |
| Seasonal unemployment | No work in some months of the year | Agricultural labour between sowing and harvest |
| Structural unemployment | A mismatch between the skills workers have and the skills jobs need, or too few jobs for the labour force | Graduates without job-ready skills; workers displaced by technology |
| Frictional unemployment | Short gaps while moving between jobs | Urban workers changing employers |
| Cyclical unemployment | Job losses during a downturn | Layoffs in exports or construction during a slowdown |
| Educated unemployment | Unemployment among people with secondary education or more | High urban youth unemployment among graduates |
| Underemployment | Working, but fewer hours or at lower productivity than one could | Casual labour getting work only a few days a week |
| Casual unemployment | Workers hired by the day lose work when a job ends or demand falls | Daily-wage workers at construction sites and markets |
| Chronic unemployment | Long-term unemployment caused by slow growth, a rising population and low skills | Persistent lack of work in backward regions |
| Open unemployment | People willing and able to work who find no work at all | Educated youth waiting for jobs in cities |
The structural problems behind the numbers
1. Structural transformation has been slow
In most countries that grew rich, workers moved from farms to factories, where productivity and wages are much higher. In India, services grew first and manufacturing never became the big employer. Manufacturing's share of employment has stayed around one-eighth of the workforce for years. Workers leaving agriculture went mostly into construction and informal trade, which pay little more than farming.
2. Informality
Around nine out of ten workers are informal. Even in the formal sector, many workers are hired on contracts without social security. Informality keeps productivity low and leaves workers exposed to shocks.
3. Jobless or job-poor growth
Fast GDP growth has not created jobs at the same pace, because the fastest-growing sectors, such as finance, IT and telecom, need capital and skilled people, not large numbers of workers. Economists measure this with the employment elasticity of growth: the percentage rise in jobs for each 1% rise in output. In India it has been low.
4. Low female participation
Women's LFPR has risen from about 23% in 2017-18 to around 40% by usual status in 2025, but much of the rise is in self-employment and unpaid family work in rural areas. In cities, women's participation is still under 30%. The reasons include the burden of unpaid care work, safety concerns, social norms, and too few jobs near home with flexible hours.
5. The skills gap
Only a small share of the workforce has formal vocational training. Employers report shortages of job-ready skills even as educated youth remain unemployed. Learning outcomes at school are weak, which carries into the labour market.
6. The demographic window
India has one of the youngest workforces in the world, and about 1 crore people join the working-age population every year. The window during which the working-age share is rising will close in the next two decades. If jobs are not created in time, the dividend can become a burden.
7. New forms of work
Gig and platform work (delivery, ride-hailing, freelance services) is growing fast. It offers flexibility and easy entry, but little security. Automation and Artificial Intelligence (AI) may also reduce routine jobs in services, such as data entry and customer support, that absorbed many educated young people.
Labour policy and the four labour codes
India's labour laws were long criticised as too many, too complex and too rigid, protecting a small group of formal workers while most remained outside their reach. In 2019 and 2020, Parliament merged 29 central labour laws into four codes, which came into force on 21 November 2025.
| Code | What it covers |
|---|---|
| Code on Wages, 2019 | Minimum wages for all workers, a national floor wage below which states cannot fix wages, timely payment and equal pay |
| Industrial Relations Code, 2020 | Trade unions, standing orders, strikes and lay-offs; firms with up to 300 workers can lay off or close without prior government approval (earlier 100) |
| Code on Social Security, 2020 | Provident fund, insurance, maternity benefit and gratuity; covers gig and platform workers for the first time, with aggregators contributing a share of turnover |
| Occupational Safety, Health and Working Conditions Code, 2020 | Safety, working hours and conditions; women can work night shifts with consent and safeguards; free annual health checks for workers aged 40 and above |
Other changes include gratuity after one year of service for fixed-term employees (instead of five), appointment letters for all workers, and a rule that basic pay must be at least half of total pay.
Supporters argue that the codes simplify compliance, make it easier for firms to grow beyond small sizes, and extend protection to gig and unorganised workers. Trade unions argue that easier lay-offs and stricter conditions for strikes weaken workers' bargaining power. Since labour is in the Concurrent List, how states frame their rules will decide much of the real effect.
Employment programmes
Rural wage employment: from MGNREGA to VB-G RAM G
MGNREGA, in force from 2006, gave every rural household a legal right to 100 days of unskilled work a year, with the Centre paying the full wage bill. It worked as a safety net during droughts and the COVID-19 pandemic, but faced criticism over delayed wages, leakages and the quality of assets created.
The VB-G RAM G Act, 2025, replaced it from 1 July 2026:
| Feature | MGNREGA | VB-G RAM G |
|---|---|---|
| Days guaranteed | 100 | 125 |
| Wage | Notified by state | National floor of ₹300 a day; payment weekly or within 14 days |
| Funding | Centre paid all wages | 60:40 between Centre and most states; 90:10 for north-eastern and Himalayan states |
| Allocation | Demand-driven | State-wise ceilings set in advance; extra spending borne by the state |
| Farm season | Work open all year | A total of 60 days of no work in peak sowing and harvest seasons |
| Planning | Gram Panchayat works | Viksit Gram Panchayat Plans linked with PM Gati Shakti; focus on water security, rural infrastructure, livelihood assets and climate resilience |
The government argues that the new law creates better assets, gives more days of work and protects farm labour supply in peak seasons. Critics argue that capping allocations ends the demand-driven nature of the guarantee, and that a larger state share may lead poorer states to offer less work.
Formal job creation: PM Viksit Bharat Rozgar Yojana
| Feature | Detail |
|---|---|
| Period | 1 August 2025 to 31 July 2027 |
| Outlay | ₹99,446 crore |
| Target | Over 3.5 crore jobs, including 1.92 crore first-time employees |
| For employees | First-time workers earning up to ₹1 lakh a month get one month's wage, up to ₹15,000, in two instalments, the second after 12 months and a financial literacy course |
| For employers | Up to ₹3,000 a month for two years for each additional worker kept for at least six months; four years for manufacturing |
| Progress | Over 72 lakh first-time workers joined in the first year, about 30% of them women |
The scheme rewards formal hiring through the Employees' Provident Fund Organisation (EPFO), so it encourages employers to move existing informal workers onto the books as well as to hire new ones.
Self-employment, skills and enterprise
- Prime Minister's Employment Generation Programme (PMEGP): subsidy-linked loans for new micro enterprises.
- Pradhan Mantri Mudra Yojana: collateral-free loans to small and micro businesses.
- Stand-Up India and Startup India: credit and support for entrepreneurs, especially women and Scheduled Caste and Scheduled Tribe founders.
- Skill India Mission, with Pradhan Mantri Kaushal Vikas Yojana (PMKVY): short-term skill training and certification.
- Deendayal Antyodaya Yojana, National Rural Livelihoods Mission (DAY-NRLM): rural women's self-help groups and the Lakhpati Didi initiative.
- Production Linked Incentive (PLI) schemes: incentives for manufacturing in sectors such as electronics, textiles and food processing, with employment as one aim.
- e-Shram: registration of unorganised workers, to link them with social security schemes.
The policy debate
One view holds that jobs follow growth: if India keeps growing at 7% to 8%, invests in infrastructure and makes it easier to do business, private firms will create the jobs. The other holds that the type of growth matters more than its speed: India needs labour-intensive manufacturing (textiles, footwear, food processing, toys, electronics assembly), a push for small and medium firms, and investment in skills and women's participation, or growth will stay job-poor.
The evidence suggests both are needed. Growth is a precondition, but the sectors that grow, the size of firms and the skills of workers decide how many good jobs that growth creates.
Challenges
- Creating enough jobs for about 1 crore new entrants to the working-age population each year.
- Moving workers out of agriculture into better-paid, more productive work.
- Raising women's participation in paid work, especially in cities.
- Bridging the gap between education and the skills employers need.
- Protecting gig, platform and informal workers without killing flexibility.
- Preparing the workforce for automation and AI.
Way forward
- Make labour-intensive manufacturing a priority through trade agreements, cluster development and easier credit for small firms.
- Link skills to industry: apprenticeships, industry-designed courses and recognition of prior learning.
- Invest in the care economy (creches, elder care, safe transport) to free women's time and create jobs in itself.
- Build social security for gig and unorganised workers on the e-Shram and platform contribution framework.
- Improve urban employment, through city infrastructure and a possible urban employment programme for the poor.
- Keep labour data regular and detailed, including wages and hours, so that the quality of jobs can be tracked along with their number.
Possible exam and interview questions
- India's unemployment rate is low, but its employment problem is serious. Explain this paradox using recent PLFS data. (420 words)
- Critically examine the four labour codes. Will they help create more formal jobs in India? (620 words)
- Compare MGNREGA and the VB-G RAM G Act, 2025. What are the strengths and risks of the new design?
- Why is female labour force participation low in India, and what can policy do about it?
- Interview: Should India focus on manufacturing jobs or on services-led growth to employ its youth?
Related reading: poverty in India, national income and per capita income, and the descriptive writing guide.
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