The Persistent Challenge of “Jobless Growth” in India

Introduction

India has been among the fastest-growing major economies in the world. However, this growth has not been accompanied by a proportionate increase in employment opportunities—a phenomenon commonly referred to as “jobless growth.”

Despite an expanding GDP, many sectors have failed to generate enough quality jobs, especially for the youth and educated segments of the population. This mismatch raises critical concerns about income inequality, social unrest, and the sustainability of economic growth.

Understanding the roots of this challenge is vital for designing responsive and inclusive labor market policies that ensure India’s demographic dividend is not squandered.

What is “Jobless Growth”?

Jobless growth refers to a situation where the economy grows (GDP increases) but employment generation remains stagnant or grows at a much slower pace.

In India’s case, this means:

• Rising output without a proportional increase in jobs

• Growth driven by capital-intensive rather than labor-intensive sectors

• Structural transformation that bypasses the informal workforce

It contradicts the traditional economic model where GDP growth leads to more jobs and higher wages.

Data and Trends: Job Creation vs GDP Growth

• GDP Growth vs Employment Elasticity:
  Employment elasticity—the rate at which jobs grow relative to GDP—has declined from 0.39 in 1994–2000 to less than 0.2 in recent years, indicating weaker job responsiveness to growth.

• PLFS (Periodic Labour Force Survey):

  • India’s unemployment rate among youth (15–29 years) is consistently over 15%

  • In urban areas, unemployment for graduates touches 20%+

  • A large portion of new jobs is in the informal, low-wage sector

• CMIE Data (2023):

  • Labor Force Participation Rate (LFPR) for women hovers around 25–30%

  • Around 400 million workers are still in informal jobs with no job security

Key Causes of Jobless Growth in India

1. Technology-Driven Growth

Sectors like IT, fintech, and telecom are capital-intensive, relying on automation and AI, which reduce the need for large workforces despite high output.

2. Decline in Labour-Intensive Manufacturing

Manufacturing’s share in GDP has remained stagnant at 15–17%, failing to absorb low-skilled rural labor as seen in China or Southeast Asia.

3. Agrarian Distress and Underemployment

Over 40% of the workforce remains in agriculture, a low-productivity sector, reflecting hidden unemployment and lack of rural non-farm jobs.

4. Skill Mismatch

A disconnect between education and employability. Graduates lack the practical skills demanded by modern industries.

5. Informality and Gig Economy Rise

Jobs created are mostly gig-based, short-term contracts, or platform-driven (e.g., delivery, rideshare), often lacking stability or benefits.

6. Policy and Compliance Rigidities

• Complex labor laws deter MSMEs from scaling up or formalizing

• Land acquisition and regulatory delays limit industrial job growth

Sectoral Perspective

Government Initiatives to Tackle the Issue

1. Skill India Mission

Aims to train over 400 million people by 2025 through schemes like PMKVY, but suffers from placement gaps and quality control issues.

2. Make in India

Promotes manufacturing to boost employment, yet FDI and job creation have been below expectations in labor-intensive sectors like textiles, leather, and toys.

3. Startup India & Digital India

Created new job avenues in tech and services, but these are mostly urban-centric and not scalable for mass employment.

4. Production Linked Incentive (PLI) Schemes

Designed to boost manufacturing in key sectors like electronics, but still early in terms of employment outcomes.

5. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)

Acts as a safety net, especially during rural distress and migrant crises like COVID-19, but is not a long-term employment solution.

Challenges that Persist

• Youth Aspirations vs Job Reality: Educated youth aspire for formal jobs, but are often forced into gig work or remain unemployed.

• Women’s Workforce Participation: Remains low due to societal norms, safety concerns, lack of childcare, and unpaid care burden.

• Lack of Urban Job Planning: Migration to urban areas hasn’t translated into productive employment due to unplanned growth and poor infrastructure.

• Inadequate MSME Support: Micro and small enterprises are employment-rich, but they face credit, technology, and market access constraints.

The Way Forward

✅ Boost Labor-Intensive Manufacturing

• Focus on sectors like textiles, food processing, electronics, toys

• Ensure global competitiveness via logistics, power, tax rationalization

✅ Revamp Skilling Ecosystem

• Align courses with industry demand

• Promote vocational training and apprenticeships

✅ Support MSMEs and Informal Workers

• Simplify compliance burden

• Provide access to finance, tech, digital tools, and e-commerce platforms

✅ Promote Women’s Employment

• Ensure safety, transport, flexible hours, and childcare

• Incentivize firms to hire and retain women

✅ Urban Job Guarantee Pilot

• Consider schemes like urban MGNREGA or city-level public works

• Build jobs in green infrastructure, sanitation, and public housing

✅ Labour Law Modernization with Protection

• Implement labour codes with proper worker protections and social security expansion

Conclusion

India stands at a demographic crossroads. With more than 65% of its population below 35 years, it has the world’s largest working-age population. Yet, if economic growth fails to translate into jobs, this demographic dividend may become a demographic disaster.

Jobless growth is not just an economic concern but a social and political flashpoint, especially in a post-pandemic world grappling with automation, global disruptions, and climate change.

To ensure inclusive, equitable, and sustained development, India must shift from growth-centric policymaking to employment-centric development planning. Only then can India achieve its Viksit Bharat @2047 vision meaningfully—for both its economy and its people.