(a) What schemes are launched by the Government to deal with the problem of unemployment in India ? Why the problem still…

(a) Employment Schemes and Persistent Unemployment

To tackle unemployment, the Government has deployed multifaceted interventions. For rural wage-security, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provided a statutory guarantee of 100 days of unskilled manual work to rural households. It has now been succeeded by the Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025 (VB-G RAM G Act), in force from 1 July 2026, which raises the guarantee to 125 days a year, with Centre–State funding of 60:40 (90:10 for North-Eastern and Himalayan States). For skill formation, the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) under Skill India imparts industry-aligned technical training to youth. Enterprise creation and self-employment are promoted through the Prime Minister’s Employment Generation Programme (PMEGP), which provides credit-linked subsidies for micro-enterprises; the Micro Units Development and Refinance Agency (MUDRA) Yojana, which extends collateral-free institutional credit to non-corporate micro-units; and Start-up India, which fosters innovation-driven entrepreneurship. Concurrently, the National Career Service acts as an integrated digital portal bridging jobseekers and employers. For formal jobs, the Employment Linked Incentive scheme (Pradhan Mantri Viksit Bharat Rozgar Yojana, 2025) subsidises first-time employees and employers who add EPFO-registered jobs, the PM Internship Scheme places youth in large companies, and Production Linked Incentive schemes aim at manufacturing jobs. Livelihood missions such as DAY-NRLM, DDU-GKY and PM SVANidhi support self-employment of the poor.

Despite these interventions, unemployment and underemployment persist due to structural rigidities. First, India experienced "jobless growth", where output expansion occurred largely via productivity gains rather than employment elasticity. Second, industrial policy favored capital-intensive technologies rather than labor-intensive manufacturing, limiting factory-floor absorption. Third, a deep skill mismatch exists where educational curricula fail to match modern industry requirements. Fourth, the economy is dominated by the informal sector—accounting for over 85% of total employment—characterized by disguised unemployment and lack of social security. Fifth, acute demographic pressure continuously adds millions of young entrants to the labor force annually, outstripping the slow pace of formal manufacturing expansion, which prematurely ceded ground to capital-intensive services.

(b) Abandonment and Inadequacies of the Mahalanobis Strategy

The Mahalanobis strategy, introduced in the Second Five-Year Plan, prioritized the heavy-industry and capital-goods sectors, established public sector dominance over the "commanding heights" of the economy, and relied on an import-substitution industrialization model. The retreat was gradual. The crises of the mid-1960s (wars of 1962 and 1965, the droughts of 1965–67, the 1966 devaluation and the three-year Plan holiday) shifted priority to agriculture and the Green Revolution; the 1980s brought partial liberalisation; and the 1991 balance-of-payments crisis ended the strategy in favour of market-oriented reforms.

Its fundamental inadequacy lay in the acute neglect of agriculture and the consumer wage-goods sector. This caused severe foodgrain shortages, necessitating emergency food imports (such as under US PL-480) and triggering structural inflation. Furthermore, capital-intensive heavy industries had long gestation periods and low employment-absorption capacity, failing to absorb surplus rural labor. The public sector suffered from bureaucratic inefficiencies, unviable cost structures, and persistent losses without market discipline. Additionally, export pessimism and strict import substitution created severe foreign exchange constraints and technological obsolescence, while centralized licensing exacerbated regional industrial imbalances rather than mitigating them. Economists such as Vakil and Brahmananda argued for a wage-goods strategy instead. The strategy did leave a lasting industrial base, capital-goods capacity and technical institutions.

(c) Problems of the Jute Industry: Pre-Independence and Post-Partition

In pre-independence India, the jute industry around the Hooghly basin suffered from systemic colonial distortions. It was monopolized by British managing agencies that prioritized short-term extraction over long-term capital re-investment. Indian peasant cultivators were trapped in exploitative dependency under the baldadari and dadan financing systems, where layers of intermediaries pocketed profits while growers received unremunerative prices. The sector faced excessive exposure to global trade volatility due to heavy raw jute export dependence, suffered from technological stagnation and a lack of mill modernization, and was penalized by discriminatory colonial railway freight tariffs that subsidized the export of raw fiber over finished domestic manufactures.

Partition in 1947 severely aggravated these structural problems. The Radcliffe Line inflicted a spatial decoupling: approximately 75% to 80% of the superior raw-jute-producing acreage went to East Pakistan (now Bangladesh), whereas all the jute mills (over 100) remained in West Bengal (India). This truncated supply chains overnight, plunging Indian mills into an acute raw-material famine, driving input costs up, and forcing mills to operate below capacity. The crisis was exacerbated by a massive influx of refugees into West Bengal, straining the provincial economy. Simultaneously, Pakistan developed its own modern processing mills using superior local raw fiber, drastically eroding India’s international competitive advantage in global packaging markets.