Manufacturing and non-government sector are key to India’s employment challenge. | So Good News


The GoI launched a drive to recruit 1 million people on Saturday, with 75,000 in the first batch. The move is a reminder of India’s employment challenge: government jobs are not enough to meet demand. CMIE’s employment data for the May-August period underscores the scale of the challenge. People aged 20-29 are actively looking for work, accounting for 84% of the unemployed. In the Indian employment situation, even among the 25-29 age group, the unemployment rate is 12.3%.

The main reason for the employment crisis is that productivity growth was led by capital-intensive firms. Consequently, the ratio of employment growth to output growth for the economy has been steadily declining since 1991. It was 0.38 in the period 1991-2000 and fell to 0.11 in 2010-18. India’s experience contrasts with what Bangladesh and Vietnam managed at the same time. At the 2010-18 level, Bangladesh and Vietnam had employment elasticities of 0.32 and 0.38, respectively. India will not escape the employment crisis unless manufacturing can absorb the large numbers of young people trying to get out of the largely unrewarding agricultural workforce.

The manufacturing sector has been the best stage of India’s economic growth, but employment in the manufacturing sector has fluctuated around 12% over the last three decades. The policy focus is on young people leaving the farm; There is a need to focus on removing barriers, especially for sectors such as textiles, where women have the potential to absorb more. When encouraging manufacturing, the GoI must consider the employment intensity of the sector. In a rapidly changing world, many adjustments must be made simultaneously. Both the GoI and the states need to improve the quality of integration with industries so that young job seekers can get skilled quickly. Today’s employment crisis is tomorrow’s social crisis.


This piece appeared as an editorial opinion in the print edition of The Times of India.

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