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India’s Labour Force Participation Rate

India’s Labour Force Participation Rate:

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.
  • 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 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.