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Employment Generation: India’s Specific

INTRODUCTION

India’s demographic profile, characterized by a substantial youth population, makes job creation a priority for India’s economic and social growth policy. Even though India has been witnessing sustained GDP growth and aspires to become a 5 trillion economy by FY 2028-29 (Hindustan Times, Jan 2025), India still lags in job creation. Thus, recurring the question – ‘Does Employment generation work in India?’ and to answer this we need to deeply dive into factors like the formal-informal sector divide in India, underpaid jobs, quality of work, and most importantly the old and outdated Indian Education Curriculum affecting the employability of youths.

In this paper, we have analyzed this question by assessing various factors, government initiatives, and global examples. Furthermore, we have put forward suggestions to tackle unemployment in India.  

Though the Indian government launched various initiatives to create jobs in the formal sector, still youth’s participation in economic activities has declined from 52% to 37% in 2022, according to the Indian Employment Report 2024.

These initiatives are constrained, given that India’s labor market continues to be dominated by the informal sector, and with the rising population and structural transformation, the new Indian market cannot absorb the youth in the formal sector. Another significant reason for this jobless growth of the Indian economy is the lack of educational and skill training infrastructure, making the youth graduate without proper in-hand skills, making them unfit for employment in high-growth areas. Realizing these issues, the government of India needs to work on financial support and subsidy schemes along with vocational training schemes in partnership with training centres of private companies, so that youth can gain skills and the companies can create working professionals for themselves, for example, Infosys foundation and Unnati foundation empowered one-lakh learner to be job ready through their training centres (The New Indian Express, April 2024).

MAPPING INDIA’S CURRENT EMPLOYMENT GROWTH

India’s current employment rate stands at 47.20 % (Trading Economics) with a Gross Domestic Product growth rate of 6.5% in 2025-26, according to the International Monetary Fund (IBEF, 2025). India’s Labour Force Participation rate for individuals aged 15 years and older is 55.5% (ILO 2025), i.e. lower than the world average of 60.8%, making India the second lowest. In 2025, the distribution of LFPR rate for females stood to be 32.8% whereas for men it stood to be 77.1% (ILO, 2025). The gender distribution shows that the female LFPR remained unchanged and has been below the global average of 47 percent for several years. According to the current weekly status (CWS) of the Periodic Labour Force Survey of October to December 2024, the Worker Population Ratio (WPR) in urban areas for 15 years and above for males stood at 70.9%, while for females it was 23.2% only. The percentage distribution of regular wage or salaried employees, for males, stood to be 47.7%, whereas for females it stood to be 54.8% (PLFS Quarterly Report 2024). However, for rural workers in India, agriculture has been the major source of employment accounting for almost 60% of the workforce in 2024 (Statista, 2024).

Although the unemployment rate in India has declined to 3.2% (Business Standard), many Indians still face problems finding a stable and secure job. This is due to fewer job creations with limited options available in the different job sectors.

Total

Male

Female 

26072.3

17940.3

8131.9

Fig.1: Unemployment by sex and age – (2025)

 

Total (in %)

Male

Female 

23.6

10.2

38.2

Total (in thousands)

Male

Female

60491.1

13711.1

46780

Fig.2: Share of youth not in employment, education, or training  (2025)

 

Total

Male

Female 

88.8

87.2

92.1

Fig.3: Informal employment rate by sex (%)  – (2023)

 

INITIATIVES TAKEN BY THE INDIAN GOVERNMENT

The Government of India has taken various measures to create employment opportunities in diverse sectors. For instance, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) was passed in September 2005 to generate employment in rural areas. Research indicates that MGNREGS impact is mixed, wherever village communities have been enthusiastically supported by able, capable local governance institutions, the results were positive while in other instances it lags in process and procedure and has reduced the efficiency of assets. 92% of its beneficiaries’ main occupation is agriculture. Additionally, Make in India was launched in September 2014 to transform the country into a global manufacturing world. But surprisingly, at present manufacturing growth has slowed to 5.5% (The Hindu). Furthermore, the National Skill Development Mission was launched in July 2015 to create convergence across sectors and states in terms of skill training activities. Under this scheme, the percentage of employable pre-final and final-year students has increased from 33.9% in 2014 to 51.3% in 2024.

Despite these results and strategies, the country still lags in job creation, which is a major concern for current India.

WHY ARE INDIANS STILL FACING CHALLENGES?

While the economy of India has expanded steadily, employment growth has lagged, raising concerns about labor market stability, job quality, and workforce participation. Several key factors contribute to these employment challenges in India:

  1. Education-Employment Mismatch: Most educated youth don’t have sufficient and updated skills for a good-paying job. This is due to insufficient educational infrastructure and outdated curricula in many Indian institutions. According to research by Springer 2024, educational institutions are unable to offer students with relevant industrial skills. Therefore, many companies find it hard to hire people. Thus, making the unemployed section vulnerable to a good-paying job to sustain a better living.
  2. Limited Job Creation in the Formal Sector with automation and technological disruptions: In India major employment opportunities are concentrated in the informal sector, offering lower wages and no job security. Due to rapid advancements in automation and AI, formal sectors are replacing low-skilled jobs and workers, making it essential for workers to reskill and adapt to new-age technologies. With AI doing all the simple work, many companies are laying off their workers, thus even though their revenues are increasing, these companies are not hiring workers significantly. For example: According to a report by India Today (December 16, 2020), in India, only 80 employees are left at Twitter. Besides this, some companies find it difficult to increase vacancies due to the government’s heavy labor regulations and lengthy approval process (OECD, 2024).
  3. Vacant Government Posts: The most significant challenge is the high number of vacant government positions. During the 2023 monsoon session of parliament, the government informed that more than 9.64 lakh posts were vacant in the central government alone. Addressing this issue through timely recruitment drives will boost employment and enhance administrative efficiency. 
  4. Urban-Rural Employment Divide: Urban cities experience a surge in IT, financial services, and manufacturing jobs, whereas rural regions remain largely dependent on agriculture and government employment schemes, leading to migration to tier-1 or 2 cities and further economic disparities among the urban-rural population. Thus, diversifying rural employment opportunities is essential for balanced regional development with schemes like ‘Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY)’.
  5. Gender Disparities: Indian Social and cultural barriers limit female participation in economic activities, restricting potential employment growth. Also, factors like unequal pay and improper safety laws lead to harassment of female employees and their unstable career growth. Schemes like Mahila-e haat do provide a platform for women entrepreneurs but lack reach and proper support for any development of small businesses.
  6. Slow Growth in Factories and Small Businesses: India’s economic growth is projected to remain at 6.5% until 2026, due to an unexpected slowdown in industrial activity (Economic Times, 2025). This is because of problems like poor infrastructure and complicated rules (IMF, 2024). Although Micro, Small, and Medium Enterprises (MSMEs) create employment openings in the economy, they face cutthroat competition and insufficient financing.

MAJOR SECTIONS FOR EMPLOYMENT DEVELOPMENT

India needs to focus on key areas to boost its market and per-capita income development sustainably.

  1. Aligning Education with Industry Needs: India needs to look seriously at the problem of old and outdated curricula and update them with new-age skills by emphasizing more research and practical skills rather than rote learning. Ground-level fellowship training models are needed to be integrated and implemented under NEP. Also, India can learn from Germany’s dual education model and collaborate with industries to work on skill training of the youth alongside theoretical learning.
  1. Promoting Vocational Training and Reskilling: Just like Singapore, India needs to work on workforce development by expanding schemes like Skill India to focus on high demand and advanced skills of current trends like AI, robotics, and green energy jobs and focus on digital literacy of the working population in all sectors so that they can upskill and be well informed with changing technology. Along with that, government agencies can work on strengthening Public-Private Partnerships (PPPs) to enhance skill development and create better employment opportunities and conditions.
  1. Remote Work Opportunities: India should encourage companies to leverage technology and offer remote work arrangements. This expands job opportunities for individuals outside major cities and promotes a better work-life balance.
  1. Boosting the Gig Economy: With the rise of gig workers in India, the government needs to recognize them under labor laws and provide them with fair wages and social security.
  1. Encouraging MSMEs and Startups: Like South Korea, India should implement entrepreneurial programs like Stand-Up India more effectively by increasing its horizon and not limiting it to some class of people along with providing financial incentives and reducing regulatory burdens for startups. The promotion of export-oriented MSMEs is very crucial for integrating into the global supply chain.
  1. Infrastructure Development for Employment Growth: India needs to strengthen its transportation and digital infrastructure to attract investments from foreign MNCs to expand the industrial corridor and boost the manufacturing market with more stable and better jobs. Like China, India should work on developing its manufacturing market by creating Special Economic Zones (SEZs).

Furthermore, India needs to look to its backward states like UP, Bihar, and Jharkhand and work on developing better infrastructure along with strong law implementation to reduce criminal activities in the workplace.

CONCLUSION

While India stands at 5th place in world GDP currently, job creation remains still insufficient for such a large population. The Indian market faces structural challenges with the dominance of the informal sector and to address these issues, the nation needs to use its creative minds in making strategies to adopt a multi-faceted approach including skill development, entrepreneurship promotion, policy reforms, and sector-specific employment strategies. Along with that India needs to fill its urban-rural employment divide, reform education, strengthen MSMEs, and reskill its workers to adapt to AI and technological skills. A comprehensive and inclusive employment strategy will be key to transforming India’s demographic dividend into an economic powerhouse.

 

REFERENCES:  

Author
Shoo Phar Dhie

Shoo Phar Dhie

Kang Bakso

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