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.
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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 labour force consists of persons who are of age 15 years or older, and belong to either of the following two categories:
are employed
are unemployed and are willing to work and are actively looking for a job
There is a crucial commonality between the two categories — they both have people “demanding” jobs. This demand is what LFPR refers to. While those in category 1 succeed in getting a job, those in category 2 fail to do so.
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 labour force.
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