The latest unemployment figures from the NSSO — preliminary estimates of the NSS draft were reported by this newspaper on Friday — are not surprising to those who have been following the numbers. Urban unemployment is up marginally to 7.4 per cent in 2004-5 from 7.3 per cent in 1999-2000 and 6.8 per cent in 1993-94. Smaller cities have a much larger unemployment rate, and women suffer higher unemployment rates than men. The difference between larger and smaller cities is quite significant — 6.1 per cent in the larger (Class 1) cities to 8.7 per cent in Class 3 cities. What is more pertinent is that unemployment rates are rising in smaller cities and falling somewhat in the larger cities.

Will this trend continue? With high economic growth, unemployment will increase but at a lower rate. However, with sustained high growth and with better education and training, unemployment rates will fall. On the one hand the demographic dividend is yielding fruit and large numbers are entering the labour force. On the other, greater economic growth is generating a greater demand for human resources. One would therefore expect that this greater demand for human capital will be met in a country such as India. But that is not necessarily the case.

On the one hand a large number of youth are not finding the jobs that they would like — and employers are complaining everywhere about a dearth of adequately trained manpower.

The problem, of course, is a mismatch in the quality of the human capital. A large number of India’s youth are under-educated, under-trained and under-prepared for the skills required in today’s economy. They look for jobs, but do not have the human capital or the skills required for the jobs that are available. As a consequence, the few who have the required skill set are being offered stratospheric salaries.

... contd.