India’s impressive economic growth hides a troubling paradox: the lack of quality job creation for its workforce. With 40% of working-age individuals disengaged from the labor market and women’s participation limited to low-productivity sectors, the employment challenge is acute. Informal work dominates, social security is scarce, and formal training remains inaccessible to most. Despite being a tech powerhouse, a third of youth are neither studying nor working. Bridging this gap between growth and equity is crucial for ensuring social justice and sustainable development.
| GS Paper | GS Paper II |
| Topics for UPSC Prelims | Employment ,Labour force participation rate, Youth unemployment, GDP growth rate, India Employment Report 2024, Micro, small, and medium enterprises, Economic Survey 2023-24, Labor Codes, Support for Marginalised Individuals for Livelihood and Enterprise, PM-DAKSH (Pradhan Mantri Dakshta Aur Kushalta Sampann, Mahatma Gandhi National Rural Employment Guarantee Act, Pradhan Mantri Kaushal Vikas Yojana, Start-Up India Scheme |
| Topics for UPSC Mains | Current Status of Employment and Job Creation in India, Issues Related to Employment and Job Creation. |
Origin of the Article
This editorial is based on “Jobs: Bridging the gap between growth and quality” which was published in The Hindu Business Line on 18/11/2024. The article brings into picture the paradox of India’s economic growth, where rising GDP fails to translate into quality employment, with low workforce participation, widespread informal jobs, and limited skill development threatening equity and sustainability.
Relevance for UPSC Aspirants
Understanding this topic is vital for UPSC aspirants as it relates to key areas of the syllabus, including Indian Economy and Government Policies. It provides insights into the real-world implications of economic policies and the need for inclusive growth, enhancing their ability to analyze and answer questions in both Prelims and Mains.
Why in News?
The topic is in news due to India’s paradoxical economic growth where rising GDP fails to create quality employment, a critical issue for UPSC aspirants. This situation echoes previous UPSC topics such as “jobless growth” and the structural nature of unemployment, highlighting the importance of understanding the complex dynamics of India’s labor market for both prelims and mains examinations.
Current Status of Employment and Job Creation in India
India’s employment landscape is marked by significant challenges despite economic growth. The labour force participation rate (LFPR) has seen notable changes, but the quality of employment remains a concern. Sectoral shifts and persistent unemployment trends highlight the need for comprehensive policy interventions to address the employment crisis. Key statistics and trends offer insights into these dynamics.
Labour Force Participation Rate (LFPR)
The LFPR has increased from 49.8% in 2017-18 to 60.1% in 2023-24. However, there has been a decline in women’s salaried employment, with a rise in self-employment, indicating a shift towards more precarious job forms. This highlights the limited employment opportunities available for women, necessitating targeted measures to improve gender equity in the labor market.
Informal Employment
A significant portion of India’s workforce remains in informal employment. In 2023-24, 73.2% of workers were engaged in informal firms, a slight decrease from 74.3% in 2022-23, but still higher than 68.2% in 2017-18. This persistent informality underscores the need for policies aimed at formalizing the labor market and providing social security to these workers.
Sectoral Distribution of Employment
The sectoral distribution of employment has seen shifts, with the share of workers in agriculture rising from 44.1% in 2017-18 to 46.1% in 2023-24. Meanwhile, employment in manufacturing has stagnated, remaining at around 11.4% in 2023-24. These trends reflect ongoing structural changes in the economy and the need to diversify job creation across sectors.
Unemployment Trends
Overall unemployment has declined from 6% in 2017-18 to 3.2% in 2023-24. Youth unemployment has also decreased from 17.8% to 10.2% during the same period. Despite these improvements, unemployment remains disproportionately higher among the educated workforce, highlighting a mismatch between education and job market needs.
Why is India’s Economic Growth Failing to Generate Quality Employment Opportunities?
Despite robust GDP growth, India struggles to create quality jobs. Structural issues, skills mismatch, gender disparities, policy focus, digital disruption, implementation gaps, and regional imbalances contribute to this disconnect. Addressing these factors is crucial for ensuring that economic growth translates into meaningful employment opportunities.
Structural Issues in Job Creation
India’s GDP growth has not translated into proportional job creation. The worker-to-population ratio declined from 38.6% in 2011-12 to 37.3% in 2022-23. Increasingly capital-intensive production processes further complicate efforts to generate employment, necessitating a reevaluation of economic policies to foster labor-intensive growth.
Skills Mismatch Crisis
A significant gap exists between educational outcomes and industry requirements. The focus on theoretical knowledge over practical skills results in graduates needing substantial retraining. Only 45% of engineering graduates meet industry standards, highlighting the urgent need for education reforms to align with market needs.
Gender Disparities in Employment
India’s labor market exhibits stark gender disparities. The male LFPR is 78.3%, while the female LFPR is only 41.3%. This discrepancy limits economic growth by not fully utilizing the talents and skills of women. Addressing systemic barriers to female workforce participation is essential for inclusive growth.
Policy Focus on Corporate Incentives Over MSMEs
Government policies favor large corporations, often neglecting MSMEs crucial for job creation. Initiatives like Make in India have disproportionately benefited larger firms. The Economic Survey 2023-24 highlights the need to address challenges faced by MSMEs, including financial access and technology adoption.
Digital Disruption and Traditional Job Displacement
Digitalization disrupts traditional employment patterns, eliminating many middle-skilled jobs. While the gig economy creates flexibility, it often results in precarious employment without adequate social protection. This shift necessitates policies to support workers transitioning to new economic realities.
Policy Implementation Gap
Ambitious employment policies suffer from poor implementation. Labor Codes, though comprehensive, face delays and bureaucratic hurdles at the state level. Many informal workers remain outside these codes’ ambit, limiting their effectiveness. Strengthening coordination and execution is critical.
Regional Economic Imbalance
Economic growth is concentrated in urban centers, creating regional disparities. Tier-2 and tier-3 cities lag in development, leading to unsustainable migration patterns. Addressing these imbalances requires targeted investments in infrastructure and business environments across regions.
Government’s Recent Initiatives Related to Employment
The government has introduced several initiatives to improve employment opportunities. These initiatives aim to address various facets of the employment challenge, from skill development to social security and support for marginalized groups. Each initiative has specific objectives tailored to different segments of the workforce.
Support for Marginalised Individuals for Livelihood and Enterprise (SMILE)
SMILE aims to provide livelihood and enterprise support to marginalized individuals. It focuses on enhancing economic opportunities for disadvantaged groups through skill development and entrepreneurship programs, thereby promoting inclusive growth.
PM-DAKSH (Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi)
PM-DAKSH targets skill development for marginalized communities, including SC, ST, and OBC individuals. The program aims to enhance employability and economic self-reliance through targeted training and capacity-building initiatives.
Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
MGNREGA provides rural employment by guaranteeing 100 days of wage employment to rural households. It plays a crucial role in alleviating rural poverty and creating infrastructure, thereby supporting rural development.
Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
PMKVY aims to provide industry-relevant skill training to youth, enhancing their employability. The program focuses on bridging the skill gap through short-term training and recognition of prior learning, promoting skill development across sectors.
Start-Up India Scheme
The Start-Up India Scheme aims to promote entrepreneurship by providing support to startups. It focuses on simplifying regulatory processes, offering tax benefits, and facilitating access to funding, thereby fostering innovation and job creation.
Rozgar Mela
Rozgar Mela aims to provide a platform for job seekers and employers to connect. These events facilitate employment opportunities by bringing together job seekers and potential employers, thereby addressing the unemployment challenge.
Indira Gandhi Urban Employment Guarantee Scheme- Rajasthan
This scheme in Rajasthan aims to provide urban employment similar to MGNREGA for rural areas. It focuses on creating jobs in urban local bodies, contributing to urban development and addressing urban unemployment.
Direct Benefit Transfer Scheme
The Direct Benefit Transfer Scheme aims to streamline subsidy distribution by transferring benefits directly to beneficiaries’ bank accounts. This ensures transparency and reduces leakages, enhancing the efficiency of welfare programs.
Pradhan Mantri Mudra Yojana
The Pradhan Mantri Mudra Yojana provides financial support to micro and small enterprises. It focuses on promoting entrepreneurship and generating employment by offering collateral-free loans to small businesses.
Measures to Complement Economic Growth with Quality Job Creation
To ensure quality job creation alongside economic growth, India must adopt comprehensive measures. These include transforming the MSME ecosystem, integrating skills with education, promoting local economic development, advancing manufacturing, modernizing social security, developing rural enterprises, embracing the green economy, and modernizing the service sector.
MSME Ecosystem Transformation
Strategies for transforming the MSME ecosystem include creating integrated digital platforms, establishing sector-specific clusters, providing targeted financial support, and implementing single-window clearance systems. Mentorship networks linking large corporations with MSMEs can also facilitate technology transfer and market access.
Skills-Education Integration
Integrating skills training with education is crucial. Methods include mandating industry internships, creating district-level industry-led skill councils, introducing digital skills from secondary school, and establishing real-time monitoring of training outcomes through industry partnerships.
Local Economic Development
Empowering city governments for local economic development involves creating specialized economic corridors, launching urban employment guarantee schemes, and developing City Skill Development Centers aligned with local industry needs. Financial and administrative autonomy is key.
Advanced Manufacturing Push
Developing integrated manufacturing zones and supplier development programs is essential. Specialized workforce training programs for Industry 4.0 technologies and incentives for maintaining employment-to-investment ratios can promote balanced growth.
Social Security Modernization
Modernizing social security requires implementing portable universal social security through unified digital platforms, creating a comprehensive gig worker protection framework, and designing special schemes for informal sector workers. Micro-insurance products for vulnerable sectors are also needed.
Rural Enterprise Development
Strategies for developing rural enterprises include transforming Gram Panchayats into micro-enterprise zones, establishing Rural Business Hubs, creating Rural Technology Centers, and developing specialized credit products for rural entrepreneurs. These initiatives can boost rural economic activity.
Green Economy and Job Transition
Establishing green technology training centers, creating specialized funding mechanisms for green enterprises, developing green industrial parks, and launching skill development programs for green jobs are crucial for transitioning to a sustainable economy.
Service Sector Modernization
Modernizing the service sector involves developing specialized training programs for high-growth sectors, creating service sector excellence centers, and promoting service sector exports. Specialized courses for emerging sectors can also enhance competitiveness.
PESTEL Analysis
| Political: Government policies have historically favored large corporations over MSMEs, which are pivotal for job creation. Policy implementation issues and poor coordination between central and state governments further hinder progress. Initiatives like MGNREGA and PMKVY are steps toward addressing employment challenges, but their effectiveness depends on robust execution and monitoring. Economic: India’s rapid GDP growth has not translated into proportional job creation due to the capital-intensive nature of production. Informal employment remains high at over 73%, and sectoral imbalances, such as stagnant manufacturing employment, exacerbate the issue. The concentration of economic activity in urban centers leads to regional disparities, limiting inclusive growth. Social: The labor force participation rate has improved, but gender disparities persist, with women’s LFPR at 41.3%, significantly lower than men’s. Educated individuals face higher unemployment rates, highlighting a skills mismatch. The shift of workers back to agriculture reflects the lack of high-quality job opportunities in urban and industrial sectors. Technological: Rapid digitalization and automation are displacing middle-skilled roles, creating a gap between traditional job opportunities and emerging tech-driven employment. There is a pressing need to integrate practical skills and technological training into the education system to prepare the workforce for the evolving job market. Environmental: The growing emphasis on the green economy presents opportunities for employment in renewable energy and sustainable industries. Initiatives like green technology training centers and green industrial parks can drive job creation in eco-friendly sectors, aligning economic development with environmental sustainability. Legal: India’s social security framework requires modernization to include gig workers and informal laborers. Universal social security schemes and specific legal frameworks for gig economy workers are essential to safeguard the workforce and ensure equitable benefits across sectors. |
Conclusion
India’s employment challenge requires a comprehensive approach. Addressing structural issues, fostering skills development, promoting inclusive growth, and strengthening social security are essential to bridge the gap between economic growth and quality job creation. These measures will ensure equitable development and position India as a global leader in human capital development.
| UPSC Civil Services Examination, Previous Year Questions (PYQs) Mains Q. The nature of economic growth in India in recent times is often described as jobless growth. Do you agree with this view? Give arguments in favor of your answer. (UPSC Mains 2020, GS Paper II) Q. India’s economic growth has been accompanied by jobless growth, with a significant proportion of the population either unemployed or underemployed. Critically examine the current status of employment generation in India in the context of the India Employment Report 2024 and the Economic Survey 2023-24. Suggest measures to bridge the gap between economic growth and job creation. |
