Reducing youth unemployment in India? The impact of macroeconomic factors

Purpose In India, youth unemployment, particularly the rising not in employment, education or training (NEET) levels, poses a significant challenge to sustainable growth and inclusive development, making it crucial to address for achieving SDG 8 (Decent Work and Economic Growth). While broad research on unemployment exists, studies specifically targeting youth NEET in India remain limited. This empirical study investigates the impact of macroeconomic factors on reducing youth unemployment, with a focus on NEET levels. It explores how variables such as labour force participation, unemployment rates and remittance inflows influence NEET levels over time, providing valuable insights into how economic changes can help re-engage youth and promote inclusive economic growth. Design/methodology/approach Using a comprehensive time series dataset spanning from 1994 to 2023, the study employs a nonlinear autoregressive distributed lag (NARDL) model, a robust econometric approach that enables the examination of both short-term and long-term relationships between the variables. This technique captures the asymmetric effects of macroeconomic factors on youth NEET levels, allowing for the identification of differing impacts in times of economic expansion versus contraction. By considering the nonlinear dynamics, the study provides a richer, more detailed analysis of how shifts in unemployment rates, labour force participation and remittance inflows influence youth NEET levels across different economic conditions. Findings The results of the analysis demonstrate that a decline in unemployment rates is significantly associated with a reduction in youth NEET levels, while declining remittance inflows and labour force participation are linked to higher NEET levels. These findings underscore the complex and multifaceted interplay of macroeconomic factors influencing youth disengagement, challenging traditional views that focus primarily on employment rates alone. The study shows that a comprehensive approach to addressing youth NEET levels requires consideration of broader macroeconomic conditions, including labour market participation and external income sources like remittances. Originality/value This study makes a unique contribution to the relatively underexplored area of youth NEET levels in India by being the first to examine the interconnections between labour force participation, unemployment rates, remittance inflows and youth NEET status within this context. The research provides empirical evidence that can aid policymakers in formulating targeted, data-driven interventions aimed at reducing youth unemployment and disengagement. The findings offer valuable insights for researchers and decision-makers seeking to better understand and address the economic challenges faced by youth in India while also offering implications for similar developing economies facing youth unemployment.