ECONOMIC DEVELOPMENT AND UNEMPLOYMENT IN INDIA: ASSESSING THE ROLE OF POPULATION, CAPITAL FORMATION AND PRODUCTIVITY

Abstract

Understanding the factors having bearing on the unemployment rate in any economy is vital for encouraging economic growth, eliminating poverty, and generating long-term prosperity. This topic becomes important especially in country like India, which is currently passing through the stage of demographic dividend, with a median age of 24 years. To this end current article explores the effect of capital formation, population growth and total factor productivity growth on unemployment rate in India under the framework of unemployment invariance hypothesis. For this purpose we use annual time series data on capital formation, population growth, total productivity growth and unemployment rate for the period of 1991-2020. The study was carried while using ARDL model framework. We provide evidence of positive relationship between capital formation, productivity and unemployment rate in the short run and positive relationship between capital formation, population growth, productivity growth and unemployment rate in long run. These findings lead us to doubt the pertinence of the unemployment invariance hypothesis for India for the study period.