1st Five Year Plan
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Introduction || APPENDIX (CH-4) || APPENDIX (CH-9) || ANNEXURE (CH-12) || APPENDIX (CH-14) || APPENDIX (CH-24) || APPENDIX (CH-29) || Conclusion
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Chapter 39:

The problem of finding employment for all the able-bodied persons willing to work is a problem common to all countries—advanced as well as industrially backward,— although the causes and the extent of such unemployment may differ from country to country. Three main types of unemployment, distinguished according to causes, are : (i) unemployment arising from deficiency in aggregate demand ; (2) unemployment arising from shortage of capital equipment or other complementary resources; and (3) frictional unemployment. The first type is mainly cyclical in character and has been recurring in all advanced countries from time to time. The second is found mainly in under-developed countries, while the third may occur in any type of economy. The goal of social policy in all countries, especially in the advanced ones, has been to achieve full employment by directing investments along certain channels chiefly and by encouraging capital formation.

2. In India, in common with other under-developed countries, production is carried on with insufficient amount of real capital per head of the population. In almost all processes of production and distribution, the techniques are relatively backward leading to various forms of unemployment, seasonal unemployment in agriculture, and disguised or even manifest unemployment in certain industries and services. It, perhaps, appears strange that an under-developed economy, in which there is shortage of goods and services, should at the same time have insufficient employment opportunities, resulting in a surplus labour force. The consequent social and economic injury cannot be exaggerated. The problem is one of devising ways and means of utilising the labour power for productive purposes so as to increase the volume of goods and services available in the country and to raise living standards all round. In formulating a solution, however, the basic fact of the shortage of land and capital equipment has always to be kept in view.

3. To assess the magnitude of the problem in quantitative terms with the existing data on the subject is an almost impossible task. There have been no attempts so far for collecting statistical material on employment and unemployment ; the only published figures at present available are the registrations and placements of employment exchanges. These figures cannot, however, give an idea of the total volume of unemployment. Firstly, employment exchanges are confined to industrial towns and the figures of registrations and placements which they compile are restricted mostly to the industrial and commercial sector. Secondly, even in the industrial sector, there is neither compulsion for the unemployed, to register with the exchanges, nor is there any obligation on the part of the employer to recruit labour only through these exchanges. Even the information regarding unemployment among the industrial workers is thus inadequate. Thirdly, in the nature of the case, employment exchange statistics cannot indicate the amount of disguised unemployment which is otherwise believed to exist. This means that the extent to which qualified persons have to accept work which does not give them the income which persons with similar qualifications get elsewhere cannot be assessed from these data. There is also to some extent registration of persons who are already in employment and who desire to seek better jobs. This tendency is reported to exist in the more qualified section of registrants, but to the extent a region maintains these persons on the register of employment seekers, there is an overestimate of the number unemployed. In spite of these serious limitations, the following table containing occupational distribution of the applicants on the live register of the employment exchanges, does, to some extent, confirm the popular belief that unemployment is on the increase. This increase is mostly among the unskilled and clerical categories:—

Occupational Distribution of Applicants on Live Register

Month Number on live register of applicants for employment
  Technical Clerical Unskilled Total
Dec. 1947 42,194 44,468 84,942 1,71,604
Dec. 1948 35.012 62,320 86,546 1,83,878
Dec. 1949 41,115 63,519 1,27,676 2,32,310
Dec. 1950 . 45.623 77,745 1,64,108 2,87,476
Dec. 1951 41.469 85,057 1,62,445 2,88,971
March 1952 43,947 88,566 1,68,682 3,01,i95
June 1952 47,868 1,10,920 1,76,864 3,35,652
Oct. 1952 . 49,879 1,20,221 1,94,579 3,64,679

4. In this country the problem of unemployment and under-employment seems to have been there for a long time. Its awareness is manifest in the fact that the nationalist movement in the earlier decades of this century laid a great emphasis on propagating the ' swadeshi ' idea and the promotion of khadi and other village industries. The two wars to some extent obscured the issue during their duration and for a short period thereafter. The main factors which have aggravated the problem are the following :—

  1. the rapid growth of population ;
  2. the disappearance of the old rural industries which provided part time employment to a large number of persons in the rural areas ;
  3. inadequate development of the non-agricultural sector from the point of view of employment, (in spite of the considerable development during the last forty years, the shift of occupation from agricultural to non-agricultural sector since 1911 is only about 3%) ;
  4. the large displacement of population as a result of partition.

5. One of the objects of the Plan is to increase employment opportunities and to raise the standard of living of the masses. Among the measures intended to be taken to tackle the problem of unemployment, foremost consideration is given to the rural sector on account of the magnitude and seriousness of the problem there. Moreover, offer of better employment opportunities in the rural sector will have a salutary effect on the unemployment situation in the urban sector. The extent of unemployment in rural areas is, however, difficult to estimate. Some authorities put the figure at 30% ; but in addition to this, there is chronic under-employment. The quantitative estimates of this are even more difficult to work out. The reports of the Agricultural Labour Enquiry of the Government of India when published may throw some light on this subject.

6. Of the various measures proposed to be taken in the Plan to reduce the incidence of rural unemployment mention may be made of the major and minor irrigation works. These are expected to irrigate over 19 million acres. There arc large scale land reclamation schemes which will, to some extent, help to relieve the pressure on the existing land resources. The large-scale unemployment and under-employment in rural areas can, however, be tackled only by providing the village community with other avenues of employment in additir n to agriculture. The revival and development of rural industries have therefore found a cei tral place in the rural development programmes. These industries have been considered both economically and socially desirable because the requirements of capital and skill are low. For the same amount of capital investment, these industries provide more employment than large scale industries. The Plan has, therefore, made provision for development of 12 village industries. The experience gained as a result of the development of these industries should be valuable in reviving and developing other village industries. Equally important is the revival of old handicrafts, the principal feature of which is skilled craftsmanship. The Plan makes various suggestions for the rehabilitation of these handicrafts. The financial provision for village industries and handicrafts for the period of the Plan is Rs. 15 crores. The cess proposed to be levied on large-scale industries to provide finance for the development of small scale industries will encourage the starting of more small scale industries and thus provide additional employment. Two other steps, which might help in reducing the pressure on employment in rural areas, are : (a) the extension of mixed farming and (b) the undertaking, of public work programmes in slack agricultural seasons. The possibilities of these measures will be investigated.

7. Unemployment or under-employment is not confined to the rural sector ; it also exists in the urban centres. The increasing pressure on land has forced a large number of able-bodied persons to go to towns and cities in search of employment. They are mostly without much education and possess but little technical skill. There is, therefore, keen competition for unskilled jobs in factories, and in a number of small occupations ; the tertiary sector, especially the domestic service, absorbs also a good deal of this labour. Hotels, restaurants, stations and other public places are other sources of employment. Most of the occupations are generally overstaffed and the wages paid consequently are extremely low. The problem has to some extent been aggravated after the end of the war due to the difficulties faced by a number of small-scale industries, which came to be started during war-time on account of the ceasing of imports. Even industries like jari weaving, power-looms etc. which have existed for a long time have been encountering difficulties of one type or the other. These industries occupy the same place in urban centres as village industries do in rural areas. The solution of this unemployment problem lies mainly in the contemplated expansion of existing large-scale industries and the starting of new ones. Along with this, suggestions are made in the Plan to save the existing small-scale industries and also to encourage the starting of similar new industries, especially those industries which can serve as complementary to large-scale industries. The provision made for small-scale industries in the Plan has to be viewed in this light.

8. The question has frequently been raised as to what would be the quantitative effect of the plan on employment. For this purpose, on the one side, information would be necessary on the estimates of available population for gainful occupation in various age groups, and on the other, on the expected volume of employment in different economic activities in the country, primary, secondary, and tertiary. Fairly reliable statistics of employment are available only in respect of organised productive activities. In respect of unorganised processes of production and distribution such as, agriculture, forests, fishing, animal husbandry, small-scale industries, trade etc. the information can be had fully from Census Reports for the year of enumeration but there is no machinery to keep this information up-to-date. About unemployment, practically no data are available. It is also necessary to have estimates of the man-power requirements in all branches of economic activity. The absence of all these statistics makes it difficult to assess with any degree of accuracy the results of the plan on the employment situation. But this does not mean that attempts should not be made in the direction of estimating future employment trends, however imperfect such attempts may be. These imperfections have to be viewed against the background of physical and organisational difficulties and will help to build a clearer picture for future work of this kind. It is for this purpose that an attempt has been made to work out the effect of the Plan on employment in certain schemes of development. We recognise that the estimates given here are very rough approximations and may perhaps be wide of the mark. The assumptions made in every case, therefore, have been clearly stated.

(a) Industry—The estimates in case of some industries have been made on the basis of information collected through employers' organisations as regards the future labour requirements. But in majority of cases they have been worked out on the assumption that additional production will lead to proportionate rise in employment which may or may not be true in most of the cases because of so many other factors, viz., idle labour engaged at the moment, revised man-machine ratio in view of the installation of new machinery, rationalisation schemes under contemplation and so on. The right approach to this problem, therefore, will be to call for the forecasts from the employers themselves and to test them in the light of objective standards, evolved after tripartite consultations (Government, employers and workers). Though the authenticity of this method is fully recognised, it has not been possible to get in touch with each and every employer and even in case of those industries where this has been possible, the estimates given by employers could not be tested because of the non-existence of any objective standards. The industries in case of which such estimates could be had are agricultural machinery, power alcohol, salt and one or two light engineering industries. No estimates have been possible in case of fertilizers, fine chemicals, pharmaceuticals, heavy chemicals, railway rolling stock and some of the rayon industries due to the non-availability of employment figures in the base year. Subject to all these limitations it has been estimated that the additional employment in this sector will be of the order of 4 lakhs inclusive of additional employment offered in small-scale industries.

(b) Major irrigation ^ind power projects—-An. expenditure of about Rs. 100 crores a year is contemplated under the Plan -for the construction of major irrigation and power projects. Assuming that 20 per cent of this would be spent on wages (direct and indirect) and that worker's average earnings would be about Rs. 750 per annum (Rs. 2-8-0 per day for 300 days), the resulting employment will be about 21/2 lakhs annually for the period of the Plan.

(c) Agriculture—On completion of the irrigation projects, the additional area irrigated will be nearly 19 million acres. Mostly this will lead to fuller employment rather than additional employment. It is estimated, however, that 30 per cent of the area may be expected to require the attention of new hands. Taking an economic holding to be of the size of 4 acres per person employed, major irrigation schemes will provide additional employment to 14 lakh persons in 1955-56. Additional employment for i 1/2 lakhs of persons annually will result from repairs to tanks etc. for minor irrigation schemes.

Apart from this, additional employment in agriculture will also result from land-reclamation schemes which will bring 7-4 million acres of new land under cultivation by 1955-56. Taking an economic holding of the size of 10 acres per cultivator in the case of such land the. resultant employment will be for about 71/2 lakh persons. These estimates do not take into account the fuller employment accruing to under-employed agricultural population as a result of minor irrigation schemes and schemes of intensive cultivation and improved agriculture.

(d) Minerals—The policy advocated by the Commission regarding minerals relates to their conservation rather than their exploitation. The emphasis has been more on improved methods of mining and research and not on suggesting targets for increase in production. The additional production will be necessary only in case of iron ore to feed the iron and steel plants. This will lead to employment for 4,000 persons which may be considered negligible.

(e) Building and construction—The Plan makes provision for the construction of about 25,000 houses annually for industrial workers. It has been worked out that 600 man-days are required to build a house of the specifications recommended in the Plan. 50,000 workers of all categories will thus be annually employed on this project. In addition to this, 50,000 persons can be assumed to find employment in building activity in the private sector.

(f) Roadf—Another major item of additional employment is roads. An expenditure of Rs. 20 crores a year is envisaged during the Plan period. Assuming that 60 per cent of this will go for wages and assuming the average annual wage per person at Rs. 600 a year {i.e., Rs. 2 per day, for 300 days) the additional annual employment will be for 2 lakhs of persons.

(g) Cottage industries—Considerable additional employment will result from cottage and small-scale industries. It has been estimated that development schemes in this sector will give additional employment to about 20 lakhs of persons and provide fuller employment to about 36 lakhs under-employed persons. Bulk of additional employment {i.e., 18 lakhs) will result from cotton handloom industry.

(h) Tertiary sector and local works—The employment figures given above consider the sectors in which there is going to be direct investment and development. But the development of agriculture, industries and roads, major and minor irrigation projects, and the building and construction activities will lead to the development of the tertiary secior e.g., there will be more demand for transport, storage, banking and other kinds of services. This sector will, therefore, provide additional employment, although any estimate of such employment will be difficult to make. Similarly, there will be increased activity in regard to works undertaken by local bodies and therefore, more employment. The figures worked out have not taken into account this source of employment due to the difficulty of estimating the figures.


9. The problem of unemployment among the educated has not received due attention elsewhere in the report. It is, therefore, proposed to deal with it here in greater detail. The problem in its present form is not new. Between the two wars unemployment of the educated had assumed serious proportions everywhere including this country where perhaps it assumed a more acute form. The war, to some extent, helped in temporarily relieving this unemployment by providing opportunities of service in armed forces and in the expanded avenues of production and services which were dependent on the war. There was a time during the war and in the immediately post-war years when it was difficult to get persons of one's choice to man the production processes. After the end of the war and with the demobilization of armed personnel and large-scale retrenchment in industries producing materials for the armed forces, and the consequent retrenchment in Government, commercial and business houses, the problem has again come to the forefront. The awareness of Government of the situation is evident from the fact that simultaneously with demobilisation, training facilities were provided by Government for equipping the demobilised personnel for alternative employment. There was also some reservation of vacancies for such persons, but its result was to deny corresponding opportunities to fresh entrants. Partition of the country further aggravated the problem because of the preferences shown by Government to the displaced persons in the matter of employment. It is, therefore, necessary to seek a solution, not through the negative approach of relief to the unemployed, but with a positive approach for organising employment as a part of economic development.

10. Subject to the remarks made above regarding the employment exchange figures, the position of the educated unemployed as revealed by the employment exchanges over a period of five years, is shown by the following figures :

  Dec. Dec. Dec. Dec. Dec. Oct.
  1947 1948 1949 1950 1951 1952
Technical* 42,194 35,012 41,115 45,623 41,469 49,879
Clerical 44,468 62,320 63,519 77,745 85,057 120,221

*In the absence of a detailed classification, all the persons given under this head are regarded as educated.

The figures show that the unemployment among the technical personnel is smaller as compared with the clerical personnel and that while the number of unemployed technical persons has gone up a little over a period of 5 years, the number of persons seeking clerical posts has gone up considerably over the same period. As against this, the following figures obtained as a result of an ad hoc enquiry conducted by the Directorate General uf Resettlement and Employment last year, illustrate the position of the employment opportunities for the technical and clerical personnel :—


Number of vacancies made available by employers Percentage of vacancies to applicants awaiting jobs
Technical 5,180 12.5
Clerical 3,212 3.8

This means that of every 100 unemployed technical persons, only about 12 persons could be provided with jobs, while in the case of clerical jobs the vacancies were only 4 for every 100 unemployed registrants. This indicates that, while the problem of unemployment amongst the technical personnel is serious enough, in the clerical cadres it is at least thrice as bad.

11. A recent investigation undertaken by the Employment Exchanges Organisation into the number of matriculates and graduates seeking employment assistance reveals that over a lakh of persons with such education were in search of employment through the exchanges. 14% of these were University graduates. Amongst the persons with University degrees the largest number of employment seekers was of graduates in subjects other than engineering and medicine. Even these latter claim nearby 800 graduate registrants. This is a fairly large number in view of the fact that such personnel has been reported to be in short supply in the country. In these categories, therefore, unemployment seems to be either structural or resulting out of distaste for mobility. Another finding of this investigation was that the unemployment among graduates was mostly in non-technical lines. This reinforces the conclusions reached by the Scientific Man-power Committee.

12. The data discussed above have obviously their limitations. One thing, however, is clear that the unemployment in this class is on the increase and suitable measures appear to be necessary. The First Five Year Plan lays emphasis on increasing agricultural production and at the same time creating a base for future industrial expansion. This limits the immediate expansion of employment opportunities for the educated unemployed. It is only when a more rapid expansion of the industrial sector than is envisaged in the present Plan takes place that there will be a possibility of increasing avenues of employment for the educated class. As a matter of fact, the experience of other countries shows that " although the expansion rate of the manual labour force employed by processing and production industries seems as a whole to have slackened to a great extent as a result of the concentration and extension of undertakings, improvements in technique, mechanization, and the scientific organization of labour, these same factors nevertheless give rise to a considerable increase both in the administration, financial, supervisory and marketing services and also in the preparation, organization, co-ordination and supervision of the processes assigned to manual workers. An increasingly important place is also being reserved for research and laboratory work. All these manifold tasks involving increasing specialization, are carried out by commercial and office workers, supervisors, technicians and managerial grades of staff of every kind, i.e. by non-manual workers ". These are no doubt long-term solutions but some immediate steps are necessary to deal with the problem. It seems necessary that the plans for education, especially in the post-primary stages, will have to be so. framed that our future requirements will not suffer for want of structural adjustments. In this connection we recommend that the suggestions made by the Scientific Man-power Committee for overcoming shortages in certain technical lines should be given effect to, if necessary by reassessing our requirements in the light of changes that have taken place since 1947.

13. In addition, we suggest the following short-time remedies :

  1. We have observed that there is some unemployment even among technical personnel, e.g. engineers and doctors. This may be due to unattractive service conditions of certain posts and concentration in large cities and towns. It is, therefore, necessary to take measures to remedy this situation. It has to be seen that the pay offered is consistent with the cost of training of such personnel. Inducements, such as subsidising of private dispensaries, which form a part of some of the State plans, should be offered to doctors elsewhere also for settling down in villages.
  2. As the University Commission has observed the utility to employers of graduates with certain qualifications, e.g., commerce, can be increased if the present purely theoretical knowledge imparted in colleges is supplemented by practical training. Its recommendation to impart such practical training either during college terms or during the periods of vacation deserves consideration.
  3. It has been seen that the problem of unemployment is very. acute amongst those seeking clerical posts. Amongst the educated classes there is a disinclination for manual jobs. They prefer soft jobs to manual work even if it means waiting and smaller emoluments. The result is keen competition and large scale unemployment among new entrants. It is not only graduates and matriculates who compete for these posts, but even non-matriculates who are not qualified to hold these posts, try for these jobs, rather than accept manual jobs. On the other hand there is bound to be a big demand for manual work of a skilled or specialised kind. Educated persons should be persuaded to rid themselves of prejudice against manual employment and should be encouraged to receive sufficient training for manual jobs rather than cling to clerical jobs.* It is expected that the reorientation of the educational system with emphasis on basic education as proposed in the Plan will be a corrective factor in future to bring about the desired change.
  4. Certain special problems arise in case of young persons without experience as well as in case of older persons. In the former case employers are usually reluctant to engage persons without experience. This can be solved only with the help of employers by providing apprenticeship training to such persons. In case of the latter category of persons, such persons may be precluded from public employment because of age bar, while private employers may prefer young persons to older people. It is only by reservation of certain number of posts in public service and by persuading private employers to engage such persons, especially those with family responsibilities, that the unemployment of such persons can be tackled.
  5. The better distribution of educated persons based on a choice of studies in accordance with the employment possibilities offered can be brought about only by collecting full and accurate information on present and future manpower requirements and reserves. It is, therefore, necessary to develop vocational counselling and guidance services and to see that greater use is made of them both by the young people intending to enter into service and also by the redundant workers who have already joined them.

14. All the above measures will no doubt bring a better distribution of educated labour force among different occupations helping to divert the people from occupations which are crowded to those where there is a shortage. In addition to these measures it is necessary that there should be a reduction in the number of job seekers. For bringing this about the following recommendations are made :

  1. It is quite conceivable that in the educated families there may be a desire for starting an independent establishment requiring small capital. A list will be made of small scale industries which could be started with different amounts of capital ranging from Rs. 500 to Rs. 5,000. Government should help them by advancing loans for initial capital and providing vocational training facilities. It should be a condition that the major portion of the fund required should be invested by the applicants for such loans. In such cases help should also be rendered for procuring raw materials and for disposal of the finished goods. The principle of co-operation in reference to such activities should be encouraged. Care should, however, be taken that such funds will not go for investment in distributive trades. What is required in short is the Extension to the educated unemployed of a scheme envisaged for assisting the displaced persons.
  2. Trading Estates in the United Kingdom provide factory sites or built up factory premises, with such facilities as transport and supply of electricity, water and gas laid on, to small amateur manufacturers on a rental basis. These facilities, which individuals could not have been able to provide except at very high cost have made possible the establishment of small and medium sized factories in selected areas. In the U.K. the Government took initiative in encouraging private capital to provide building up these estates after the great depression to reduce unemployment and to bring about better distribution of industries. While the objective of dispersal of industries is only a long-term process, the idea of trading estates can be experimented upon if it can help to some extent solve the unemployment problem of the educated classes. The built up factory accommodation with all the other ancillary facilities (like electricity, water, etc.) will provide the right type of incentive for persons who want to work hard and have small amounts to invest or can be given a measu1' of assistance. Some States have already taken initiative in the matter.
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