India has seen higher growth in employment in capital-intensive sectors compared to labor-intensive sectors, as reported by Goldman Sachs. The focus on promoting assembly of electronics, machinery, and pharmaceutical products by the government has led to significant growth in these sectors, both in terms of exports and employment. The past decade has shown a major increase in exports to developed markets, reflecting India’s progress in establishing a strong export base for high-value products. Capital-intensive sub-sectors within manufacturing, such as chemicals and machinery, have experienced higher employment growth compared to labor-intensive sectors like textiles and footwear.
Despite the impressive growth in capital-intensive sectors, labor-intensive sectors still account for a higher share of jobs in India. Around 67% of manufacturing jobs are in labor-intensive sectors like textiles, food processing, and furniture. The government’s Production-Linked Incentive (PLI) schemes have primarily targeted capital-intensive industries to drive growth. However, there has been a recent shift to support labor-intensive sectors as well, with PLIs expanding to cover areas like textiles, footwear, toys, and leather products, which are traditionally more labor-driven.
Construction has been a major sector for job creation in India, accounting for 13% of total employment. During the construction boom from 2004-2008, 40% of incremental non-agricultural jobs were created in this sector due to increased capital investment in real estate and infrastructure. Construction also has the highest labor income share among the broader sectors, making it significant for both employment generation and income improvement.
Business services and retail trade have led the growth in the service sector, which comprises 34% of total employment in India. The service sector’s contribution to gross value added (GVA) is still below its total employment percentage, standing at 54%. Retail and wholesale trade account for a significant number of service sector jobs, with additional growth in business and transportation services. Technology advancements and the expansion of e-commerce have transformed the retail sector, creating new job roles and increasing demand for digital skills, logistics, and warehousing roles across the country.
The IT industry has had a significant impact on India’s employment landscape within business services. By FY23, the IT industry had reached a revenue of USD 245 billion, representing around 7% of the country’s nominal GDP. Over the past eight years, the IT industry has added about 1.9 million jobs, boosting the total workforce to around 5.4 million. The growth of the IT sector has been a key driver in employment generation and economic growth in India.
