What Is India's Unemployment Rate and Why Does It Matter?

The unemployment rate in India is an important indicator of the country’s economy because employment enables people to earn income, supports families, and improves living standards.

According to the Economic Survey 2025-26, the unemployment rate has improved in recent years.

The unemployment rate fell from 6% in 2017-18 to 3.2% in 2023-24 under the usual-status measure.

This unemployment rate tells us how many people are unemployed and are looking for a job, and knowing this rate is very important for analyses of unemployment in India.

What Is Unemployment?

Unemployment means a person who is 

• able to work

ready to work

looking for a job, but unable to find a job.

It serves as the crucial indicator of national economic health. So, as per the International Labour Organisation, “The unemployed comprise all persons of working age who were:

a) without work during the reference period, i.e. were not in paid employment or self-employment;

b) currently available for work, i.e. were available for paid employment or self-employment during the reference period; 

c) seeking work, i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment. 

The labour force is the sum of all persons of working age who are employed and those who are unemployed.” 

Types of unemployment

Three types of unemployment are:

1. Cyclical unemployment: This type of unemployment occurs with the changes in economic activity over the business cycle.

2. Structural unemployment: This type of unemployment occurs when there is a mismatch between the jobs that are available in the market and the people who are looking for work in job.

3. Frictional unemployment: This type of unemployment occurs when people move between jobs in the labour market, as well as when people transition into and out of the labour force.

Other Types of Unemployment

• Underemployment: This type of unemployment occurs when people are employed but would like and are available to work more hours.

• Hidden unemployment: This type of unemployment occurs when people are not counted as unemployed in the formal ABS labour market statistics but would probably work if they had the chance.

• Seasonal unemployment: This type of unemployment occurs at different

• points over the year because of seasonal patterns that affect jobs.

What Is the Unemployment Rate?

The unemployment rate is the share of persons who are unemployed as a per cent of the labour force.

Unemployment Rate = Unemployed People ÷ Labour Force × 100

The labour force includes people who are:

• Already working, or

• Looking for work and available to work.

What Is India’s Unemployment Rate?

The Economic Survey of India 2025-26 reported that there is a decline in the unemployment rate to 3.2% in 2023-24, compared with 6% in 2017-18.

For the people whose age is above 15 years, using the Current Weekly Status (CWS) measure, the unemployment rate during the first half of FY2025-26 was 5.4% in Q1 and 5.2% in Q2.

Unemployment Rate in FY2025-26

Why Does Unemployment Matter?

The unemployment factor is one of the important tools that measure the rate of unemployed people, and jobs are closely connected with people's lives.

This becomes important because of:

1. Jobs Give People Income

When people have jobs, they earn money. They can use this money for:

• Food

• Education

• Healthcare

• Housing

• Transport

• Other daily needs

2. Jobs Help Families

A person who has stable job can support the family financially.

3. Jobs Help the Economy

When more people work, they earn and spend money. Businesses then sell more goods and services. This can help economic activity grow.

4. Unemployment Can Affect Young People

Young people entering the job market may find it difficult to get their first job.

The latest PLFS Annual Report 2025 reported youth unemployment of 9.9% for people aged 15–29, showing that young people still face challenges in finding work.

5. Education Does Not Always Mean a Job

A person may have a degree but still struggle to find suitable work.

This can happen when the skills people learn do not match the skills employers need. This is often called a skill mismatch. The Economic Survey 2025-26 stresses the importance of improving vocational education and skills.

Unemployment Rate vs Employment Rate

These two terms sound similar but are different.