I often think that job creation and per-capita income should also be the major economic indicators and factors while measuring economic growth. Else, we have a situation where we are the fastest growing economy but there are not enough jobs. India is set to become the third largest economy in the world, but a humongous youth population is unemployed. Adding women, half of whom are out of the workforce, makes this a huge worrisome number.
At the ongoing ETBFSI Converge Summit 2024, held by our sister vertical, former RBI governor and finance secretary D Subbarao too highlighted the pressing need for the right job creation, He said that while India’s population continues to expand, the much-touted demographic dividend remains elusive without adequate employment opportunities.
“You cannot cash in the demographic dividend without creating jobs. Agriculture cannot create jobs, and jobs cannot come from the services sector. The software sector has 7-8 million jobs. We need to create jobs in the manufacturing sector where the potential is,” he remarked.
He observed that nearly 10 million individuals join the workforce annually, yet the majority of jobs being generated are at the lower end of the spectrum. “Growth is coming from sectors that are not employment-intensive,” he pointed out.
Speaking on India’s ambition to achieve developed nation status, Subbarao noted that a rich country is characterised by a per-capita income of at least $21,000. “We need to grow 7.6 percent annually for 25 consecutive years to achieve that,” he explained.
Subbarao stressed the pivotal role of quality education in this endeavour. “It is difficult, if not impossible, to become a rich country without quality education. Quality, not the quantity of educational institutions, shall result in a better quality of life. Reducing inequality is another critical factor. Breaking the middle-income trap will help the nation move toward the status of a rich country,” he stated.
Delving into the nature of India’s economic growth, Subbarao noted the divergence between overall growth and consumption trends. “While the economy is growing at 7.5 percent, consumption is expanding at only 4 percent,” he observed, questioning whether this growth stems from private consumption or government welfare measures.
“What we are experiencing is catch-up growth, fueled by government expenditure and services exports,” he quipped.
Subbarao was emphatic that India cannot achieve the stated goal of becoming developed country without second generation reforms that include addressing taxation, land, labour, and public-private partnerships. “We have a combative, contentious federalism, we need cooperative federalism,” he said.
The current state of jobs
For the Indian economy, which is growing at over 7 percent, tardy job creation has become a major pain point. While there has been a slight improvement on the job front, a lot needs to be done, as all the labour force indicators are providing evidence of an improved employment scenario in the country.
The latest data from the Ministry of Statistics and Programme Implementation (MoSPI) through the Periodic Labour Force Survey (PLFS) reveals encouraging trends in India’s labour market. Over the past six years, the Worker Population Ratio (WPR), which indicates employment levels, has steadily increased, while the Unemployment Rate (UR) has consistently decreased.
In 2017-18, the WPR was recorded at 46.8 percent, which rose to 58.2 percent in 2023-24. At the same time, the unemployment rate has declined from 6.0 percent in 2017-18 to 3.2 percent in 2023-24. These figures reflect a growing labour force participation and a reduction in joblessness, suggesting a positive shift in employment trends across the country.
The government has also realised the gravity of the job situation, especially the creation of high-end ones and has launched an internship scheme at India Inc companies. Several ministries have launched various schemes like Atmanirbhar Bharat Rojgar Yojana (ABRY), Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), National Career Service (NCS) Project, etc.
Job creation is a challenge due to various reasons. Private capex is lower and the majority of the manufacturing or the large companies are not expanding or doing it at a sluggish rate, which simply means they are not hiring any more. Services segment which is dominated by IT companies is also being disrupted by emerging technologies like AI, and many of them have slowed hiring. Also, these companies are seeing a slowdown in projects as their foreign clients are not expanding due to geopolitical tensions. This has forced IT companies to keep many people on the bench.
Positive factors
The silver lining is that with India being a low-cost talent destination, there is a boom in global capacity centres (GCCs), or tech hubs of multinational companies, in India. According to forecasts, GCCs in India are set to big hiring in the next six months on the BFSI, manufacturing push.
In a discussion with ETCFO earlier, Nagesh Bailur, Chief Financial Officer at Randstand India, said that hiring will increase by 20-25 percent in GCCs over the next six months.
The demand for skilled talent in sectors like IT, engineering, and manufacturing is rising as companies expand operations to tap into global markets.
On similar lines, Lohit Bhatia, President, Workforce Management at Quess Corp, said that GCCs will expand to 1,900-2,500 centres in India.
Indian private capex is also showing signs of revival, igniting hopes for job creation.
But the challenges are geopolitical tensions, political changes in the country and federal relations between the Centre and states. The next few years are crucial to whether and how India will reap its demographic dividend.
(Editor’s note is a column written by Amol Dethe, Editor, ET CFO. Click here to read more of his articles exploring several buzzing topics)
