India faces a daunting challenge in creating enough jobs for its burgeoning workforce over the next decade. Despite an anticipated robust economic growth rate of 7%, Citigroup Inc. warns that this will not be sufficient to meet the demands of the job market.
A comprehensive report by the bank’s economists, Samiran Chakraborty and Baqar Zaidi, points to the need for more focused measures to boost employment and skill development in the world’s most populous nation.
Job Creation Shortfall
Citigroup’s analysis indicates that India needs to generate approximately 12 million jobs annually over the next decade to accommodate new entrants to the labor market. However, even with a 7% growth rate, the country is projected to create only 8-9 million jobs per year.
“The quality of jobs being created is another challenge,” said the economists, noting that about 46% of the workforce is still employed in agriculture, which contributes less than 20% to the GDP. Manufacturing, which accounted for 11.4% of total jobs in 2023, has not recovered from the pandemic-induced slump, further exacerbating the employment crisis.
“The official unemployment rate of 3.2% significantly underestimates the scale of the problem,” the report states. The Centre for Monitoring Indian Economy (CMIE) reported a jobless rate of 9.2% in May, the highest in eight months.
Particularly alarming is the unemployment rate for those aged 20-24, which exceeds 40%. This discrepancy shows the urgent need for more accurate and comprehensive employment data to address the growing joblessness effectively.
The formal sector in India has seen a significant decline in employment, with only 25.7% of the workforce engaged in this sector in 2023, the lowest level in 18 years. The number of salaried or wage-paying jobs has also decreased to 21%, down from 24% before the pandemic.
More than half of India’s 582 million workers are self-employed, revealing the precarious nature of employment in the country. “Fewer people are employed in the formal sector now than before Covid,” the economists noted, pointing to the need for targeted interventions to revive formal sector employment.
The high unemployment rates, especially among young people, have become a critical issue in recent elections. Voters have expressed concerns over joblessness, which has been cited as a reason for the drop in support for Prime Minister Narendra Modi’s ruling party.
This political dimension adds another layer of urgency to the need for effective employment policies and initiatives.
Government Response To The Report
In response to Citigroup’s report, the Union Labour Ministry has contested the findings, stating that the analysis fails to consider positive trends and comprehensive data from official sources such as the Periodic Labour Force Survey (PLFS) and RBI’s KLEMS data.
According to these sources, India generated over 80 million job opportunities between 2017-18 and 2021-22, averaging more than 20 million jobs per year, even during the pandemic. This contradicts Citigroup’s assertion and demonstrates the effectiveness of government initiatives aimed at boosting employment.
Citigroup’s economists propose several measures to address the job creation shortfall. These include enhancing the export potential of manufacturing sectors, extending incentives to attract foreign companies, and filling up approximately 1 million government vacancies.
The report also emphasizes the need to consolidate multiple employment generation programs for better impact. “The government needs to strengthen the export potential of manufacturing sectors,” the economists suggested, pointing to a strategic area for intervention.
The government, however, maintains that private data sources cited in the report have shortcomings and that official data shows consistent improvements in labour market indicators.
Read more: How Over 40% Of Indian Workers Have 2 Or More Sources Of Income
Government Response and Employment Data
The Labour Ministry emphasizes various positive trends in employment data from official sources. More than 6.2 crore net subscribers joined the Employees Provident Fund Organisation (EPFO) between September 2017 and March 2024.
Additionally, data from the National Pension System (NPS) indicates a significant increase in new subscribers, reflecting growing formal sector employment. Improvements in the Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and declining unemployment rates further support the ministry’s stance on positive employment trends.
The trends in manufacturing, expanding service sector, infrastructure growth, and emerging opportunities in multiple sectors such as the gig and platform economy indicate robust prospects. “The government remains committed to creating a robust and inclusive job market,” the Labour Ministry added, emphasizing the credibility and comprehensiveness of official data.
These positive trends suggest that while challenges remain, there are significant opportunities for growth and development in India’s labour market.
While Citigroup’s report raises valid concerns about India’s ability to generate sufficient jobs for its growing workforce, the government’s response shows the complexity of the issue. Official data suggests that significant strides have been made in job creation, and various measures are in place to boost employment.
However, addressing the quality of jobs and ensuring sustainable employment growth remain critical challenges for India’s policymakers. A balanced approach that incorporates insights from both private and official data sources will be essential in crafting effective employment policies for the future.
Image Credits: Google Images
Feature image designed by Saudamini Seth
Sources: Hindustan Times, Live Mint, Money Control
Find the blogger: Katyayani Joshi
This post is tagged under: India Jobs, Employment Trends, Job Market,Economic Growth, Workforce Development, Youth Unemployment, Labor Market, Government Policy, Manufacturing Sector, Economic Policy, Job Creation, Employment Opportunities, Skill Development, Economic Challenges, Future Of Work, Indian Economy, Labour Ministry, Citigroup Report, Formal Sector, Self Employment, Employment Data, Public Sector Jobs, Private Sector Jobs, Gig Economy
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