India’s 7% growth insufficient to create enough jobs: report.
India Faces Job Creation Challenge Despite Economic Growth
India, the world’s most populous nation, is grappling with a significant employment challenge. Despite an anticipated economic growth rate of 7%, the country will struggle to generate enough jobs to accommodate its expanding workforce over the next decade, according to a report by Citigroup Inc. This forecast underscores the urgent need for concerted efforts to boost employment and skills development in India.
The Employment Challenge
Citigroup’s economists, Samiran Chakraborty and Baqar Zaidi, estimate that India will need to create approximately 12 million jobs annually over the next ten years to absorb new entrants into the labor market. However, with the current growth trajectory, the country is expected to generate only 8-9 million jobs each year. This gap highlights a critical issue: economic growth alone may not be sufficient to address the employment needs of India’s burgeoning population.
Sectoral Employment Disparities
One of the significant challenges in India’s job market is the quality of jobs being created. An analysis of official data reveals that about 46% of the workforce is still employed in agriculture, a sector that contributes less than 20% to the country’s gross domestic product (GDP). This disparity indicates a misalignment between employment and economic productivity.
The manufacturing sector, which is often seen as a potential driver of employment, accounted for 11.4% of total jobs in 2023. This figure is lower than the share in 2018, suggesting that the sector has not fully recovered since the pandemic. The decline in manufacturing employment underscores the need for targeted policies to revive this critical sector and create sustainable jobs.
Formal vs. Informal Employment
Another area of concern is the decline in formal sector employment. The share of people employed in the formal sector fell to 25.7% in 2023, the lowest level in at least 18 years. Before the pandemic, this share was around 24%. The reduction in formal employment indicates a shift towards more precarious, informal jobs, which often lack benefits and job security.
This is a decrease from the 24% recorded before the pandemic. Additionally, more than half of the 582 million workers in India are self-employed. These figures illustrate the challenges faced by the formal sector and the predominance of informal employment in the country.
Unemployment Rates and Youth Joblessness
India’s joblessness, particularly among young people, has been a significant concern among voters in recent elections. The official unemployment rate is reported at 3.2%. However, this figure is widely considered to underestimate the true scale of the problem. Many economists rely on data from the Centre for Monitoring Indian Economy (CMIE), a private research firm, which reported the jobless rate at 9.2% in May, the highest in eight months. For those aged 20-24, the unemployment rate is even more alarming, exceeding 40% according to CMIE figures.
The high rate of youth unemployment is particularly troubling, as it not only impacts the individuals affected but also poses a broader risk to social stability and economic growth. Young people who are unable to find gainful employment may become disillusioned, leading to increased social unrest and potential political ramifications.
Political Implications
The employment crisis has political implications as well. Joblessness, especially among young people, has been a key concern among voters and has been cited as a reason for the drop in support for Prime Minister Narendra Modi’s ruling party in recent elections. Addressing the employment challenge is therefore not only an economic imperative but also a political necessity for the government.
Addressing the Employment Gap
To bridge the employment gap, India will need to implement a multi-faceted strategy that goes beyond merely relying on economic growth. Here are some potential steps that could be taken to address the employment challenge:
- Skills Development: Enhancing the skill sets of the workforce to align with the demands of modern industries is crucial. This includes investing in vocational training and education programs that equip individuals with relevant skills.
- Reviving Manufacturing: Policies aimed at reviving the manufacturing sector, such as incentives for investment, infrastructure development, and easing regulatory burdens, could help create more jobs in this sector.
- Encouraging Formal Employment: Efforts to increase formal sector employment could include providing incentives for businesses to hire formally, improving labor laws, and ensuring better enforcement of existing regulations.
- Supporting Small and Medium Enterprises (SMEs): SMEs play a significant role in job creation. Providing support through easier access to credit, reduced compliance burdens, and targeted development programs could help these businesses thrive and hire more workers.
- Promoting Entrepreneurship: Encouraging entrepreneurship and startups can be another avenue for job creation. This could involve creating a more conducive environment for business creation, including simplifying the process of starting a business and providing mentorship and support programs.
- Agricultural Reforms: Given the large proportion of the workforce still employed in agriculture, reforms in this sector are essential. Improving agricultural productivity, promoting agro-based industries, and providing better market access for farmers can help transition workers to more productive and remunerative employment.
- Leveraging Technology: Embracing technological advancements and digitalization can create new job opportunities, particularly in sectors such as information technology, e-commerce, and digital services.
- Strengthening Social Safety Nets: Ensuring robust social safety nets can help support those who are unemployed or underemployed. This includes unemployment benefits, health insurance, and other social security measures.
Conclusion
India’s challenge of creating enough jobs for its growing workforce is a complex issue that requires a comprehensive approach. While the anticipated 7% economic growth is a positive sign, it is not sufficient to meet the employment needs of the nation. Addressing the quality of jobs, reviving key sectors, and implementing targeted policies to boost formal employment and skills development are essential steps to ensure sustainable economic growth and social stability.
The government’s ability to effectively tackle this issue will have significant implications not only for the economy but also for the political landscape. As India navigates this critical period, the focus must remain on creating inclusive and sustainable employment opportunities that can support the aspirations of its young and dynamic population.