India’s job market is projected to require around 10 million new positions annually from FY25 to FY30 in order to sustain a 6.5 per cent growth in Gross Value Added (GVA) each year, as stated in a report by Goldman Sachs. To stimulate job creation across various skill levels, incentivizing affordable housing developments could provide a significant boost to the real estate sector, which employs over 80 per cent of the construction labor force. Additionally, establishing IT hubs in tier-2 and tier-3 cities, as well as Global Capability Centers (GCCs) in smaller urban areas, could ease pressure on Tier-1 cities and create more job opportunities in underserved regions.
Shifting fiscal incentives towards labor-intensive manufacturing sectors such as textiles, food processing, and furniture could further support job creation for low- to middle-skill workers. While the government’s Production-Linked Incentive (PLI) schemes have primarily benefited capital-intensive industries, there has been a positive shift towards more labor-intensive sectors like textiles, footwear, toys, and leather goods. This realignment of focus aims to align India’s manufacturing sector with broader employment goals, considering that the majority of manufacturing jobs are found in labor-intensive fields.
Over the past two decades, India has added approximately 196 million jobs, with a significant portion of these positions created in the last decade. The transition of workers from agricultural to construction and service roles has been a notable trend in job market dynamics. Construction remains a significant driver of employment in India, accounting for about 13 per cent of all jobs. Investments in real estate and infrastructure have not only generated jobs but have also positively impacted income levels among low- to medium-income households.
The services sector, which contributes roughly 34 per cent of total employment in India, has experienced substantial growth. The retail trade segment, in particular, has benefited from digital transformation, as more retailers move to online platforms, leading to the creation of new roles in areas like inventory management, packaging, and delivery services. The increase in India’s Labor Force Participation Rate (LFPR) from 50 per cent in FY18 to 60 per cent in FY24 has been largely driven by female participation, especially in rural areas, due to improved measurement practices, enhanced financial inclusion through credit schemes targeting women, and the rise of opportunities in small and micro-enterprises.
India’s demographic transition presents a unique opportunity to leverage a low dependency ratio with a substantial working-age population ready to enter the labor market. Capitalizing on this window of opportunity is crucial for sustaining economic growth and meeting the country’s employment needs. By focusing on incentivizing key sectors, expanding job opportunities in underserved areas, and fostering a conducive environment for job creation, India can work towards achieving its job market targets and ensuring sustainable economic development in the years to come.
