Hardbound

A Nation Stuck Between Missing Jobs and Growth Ambitions

India grapples with a job crisis fuelled by factors including high youth unemployment, educational and skill imbalance and low female participation, among others. In their book, The Elephant Moves: India’s New Place in the World, Amitabh Kant and Amit Kapoor explore India’s economic evolution through the lens of competitiveness, stressing the need for, and challenges to, policy changes in its run to becoming a developed economy by 2047

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Published a month ago on Mar 01, 2024 5 minutes Read

India is confronted with a significant challenge in generating productive jobs, despite having one of the largest potential workforces globally, with over 660 million people aged between eighteen and thirty-five. Alarming statistics reveal that the country’s unemployment rate stands at around 7 per cent, a concerning figure given the sheer size of the workforce. Furthermore, the quality of jobs in India raises concerns, as most of the population is engaged in low-value-added and low-paying employment. The State of Inequality in India Report 2022 points out that an individual earning over Rs 25,000 per month belongs to the top 10 per cent of earners in the country, emphasizing the dearth of well-compensated positions.

Female labour force participation remains strikingly low at just 23 per cent, significantly below the global average of 47.4 per cent, presenting a substantial hurdle to India’s economic development due to cultural and societal constraints. The country’s youth unemployment rate is notably high at 23.2 per cent, reflecting deficiencies in the education and training systems that fail to equip the youth with the necessary skills for the job market.

India’s industrial sector has not grown at par with its services sector. While the manufacturing sector shrank to 15.3 per cent of overall GDP in 2021–22, the service sector contributed to over 50 per cent in the same financial year. This trend indicates that the country has not realized the Kuznetsian structural transformation, which is denoted by the mobility of economic resources from agriculture to manufacturing and finally to services as an economy develops. The economic phenomenon of deindustrialization can arise due to a lack of investment in manufacturing capabilities and the resultant lack of competitive advantage of the sector. The aftermath is India becoming a net-importer of manufacturing while the service sector growth in productivity outpaces its manufacturing counterpart. Moreover, the agricultural sector, employing 43 per cent of the working population, exhibits disguised unemployment, leading to low productivity and wages due to limited non-agricultural opportunities in rural areas. The service sector’s significant growth has outpaced the industrial sector, indicating a lack of investment in manufacturing capabilities and a reduced potential for high-productivity, high-wage jobs in the formalized economy.

Furthermore, significant disparities in the quality of jobs persist in India, characterized by the glaring contrast between highly skilled, well-compensated jobs and low-skilled, low-paying positions. Informal employment, accounting for over 80 per cent of India’s workforce, results in poor working conditions, low wages and job insecurity. Gender-based discrimination further compounds the issue, relegating women to low-paying, low-skilled jobs with limited access to formal employment opportunities. Women in India face significant cultural and social barriers to entering the labour force, including discrimination and lack of access to education and job training. Addressing these challenges requires a coordinated effort from the government, civil society and the private sector. We have seen previously in this chapter how educational and skill imbalances create a mismatch between the supply and demand of labour in the job market, with a growing demand for skilled workers in high-paying positions. Despite having a vast reservoir of young workers, both low skilled and highly skilled, many remain out of formal employment and engage in low-paying and low-value-added activities. Unprecedented policy changes are required to improve the learning outcomes of those currently in the education ecosystem and create better linkages between jobseekers and employers. 

While India’s economic growth is commendable, addressing these multifaceted challenges is essential to harness the full potential of its workforce and ensure more equitable and productive employment opportunities for all citizens.

The Policy Implementation Challenge

To overcome the aforementioned challenges, policymaking is an efficient tool. India’s economic growth has been the result of policy changes, such as liberalization in the 90s, to more business-friendly policies that fostered environment for market forces to grow and meet the economic realities of the country. The opportunities thus created by these policies have been the drivers of change in the Indian economy. Furthermore, since 2014, policies have been aimed at unlocking the underlying competitiveness of the economy. To meet the jobs challenge, various incentivized schemes, such as Make in India and Skill India, have been launched in the country. For these schemes to translate into greater outcomes, there is scope to address institutional inefficiencies. Policy implementation is a complex process that involves a range of actors, institutions and factors. Its impact often depends not simply on executing given policies uniformly across the country but on adapting them to the specific circumstances in each state, district or city. One of the major challenges of policy implementation in India are the resource constraints and lack of capacity at the state and local levels. While policies are formulated at the national level, the actual implementation is carried out at the state and local levels. However, many states and local governments lack the necessary resources to implement policies effectively. This results in poor implementation, which undermines the intended impact of policies.

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