Employment Trends in India

Since 2017-18, India's working-age population has increased by approximately 9 crore, while formal sector jobs have risen by 6 crore, resulting in a deficit of 50 lakh jobs annually. The surge in employment mainly stems from self-employment in rural areas and informal services, presenting challenges in both quality and quantity of job opportunities.

Technological Impact on Employment

• Labour Intensity Decline: There has been a consistent decline in the labour intensity of production across sectors due to increased capital intensity.
• Advent of AI: The trend towards capital-intensive production is expected to accelerate with AI advancements.
• Capital vs. Labour Costs: The fall in the relative cost of capital encourages investment in capital-intensive technologies, even without productivity gains.
• Skill Gap: Less than 10% of India's labour force has formal technical or vocational training, leading to a mismatch between available skills and market needs.

Sectoral Contributions to GDP

• The services sector has shown the most significant increase in value added, contributing more to Gross Value Added (GVA) and GDP.
• The manufacturing sector's contribution remains stagnant, while agriculture's share of GDP has declined.

Government Policy Responses

Production Linked Incentive (PLI) Scheme

• Aim: Expand production capacity, focusing on high-value products with high-skilled labour.
• Allocation: Over 50% of the PLI budget is for electronics, IT hardware, and drones.
• Employment: Most jobs under the scheme have been created in food processing and pharmaceuticals, highlighting a mismatch between budget allocation and job creation potential.

Employment Linked Incentive (ELI) Scheme

• Aim: Create jobs in the formal sector by lowering the cost of hiring untrained labour through government cash transfers.
• Duration: Subsidies last about two to three years, with the effectiveness in creating durable employment yet to be evaluated.
• Challenges: The scheme needs to address the encouragement of continuous upskilling to meet new technological demands.

Policy Recommendations

• Link production and labour skilling strategies to ensure a comprehensive approach to job creation.
• Improve coordination between various ministries to integrate skilling and employment strategies.
• Amend ELI incentives to be graded, increasing with certified skill levels.
• Reform and incentivize training institutes based on employment and earnings outcomes.
• Loosen labour regulations to avoid artificially inflated labour costs.

To achieve the vision of Viksit Bharat, India must invest in both the quality and quantity of its workforce, addressing both demand and supply side challenges in job creation.