Today, we uncover India's growth paradox—why a booming economy isn't creating enough jobs and what needs to change for a sustainable future.
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The Talk
India is growing fast, but there’s a big problem—where are the jobs? Walk into any college campus, and you’ll hear the same worries: “Will I get a good job after graduation?” “Why do so many people struggle to find work despite India’s booming economy?” The answer isn’t simple, but it comes down to one thing—India skipped a step in its growth journey.
Most countries follow a clear economic path—first, agriculture, then manufacturing, and finally, services. This pattern helps nations move from farms to factories, creating stable jobs before transitioning to high-value industries like IT and finance. But India took a shortcut. Until the 1990s, it was primarily an agriculture-driven economy. Then, instead of focusing on manufacturing like China, India jumped directly into services—becoming a global hub for IT, outsourcing, and financial services. On paper, this looks like a success story, but in reality, it left a gap—millions of people, especially low-skilled workers, found themselves with limited employment opportunities.
Today, services contribute 54% of India’s GDP, but they only employ 31% of the workforce. Manufacturing, which should have been the backbone of employment, is stuck at 23% of GDP, despite employing a similar percentage of people. Meanwhile, agriculture, which now makes up just 15% of the economy, still employs 46% of the workforce—showing how many Indians are stuck in low-income, labor-intensive jobs because they have nowhere else to go.
This imbalance is dangerous. Services, especially high-value ones like IT, finance, and real estate, thrive when there is global demand, but they don’t create as many jobs. Manufacturing, on the other hand, provides stable employment to a country’s workforce—especially those with fewer formal skills. Without a strong manufacturing base, India’s growth is becoming exclusionary, meaning it benefits some people but leaves out many others.
The numbers reveal the harsh reality. Out of 961 million working-age Indians, only 578 million are part of the labor force. Among them, only 9% have regular salaried jobs with contracts. Compare this to China, where 54% of workers have stable jobs, or even Bangladesh, where the number is 42%, and India’s struggle becomes clear. Instead, 58% of India’s workforce is self-employed, but a third of them are unpaid helpers in household businesses—meaning they don’t even earn a proper salary.
For many young Indians, education is supposed to be the way out. Study hard, get a degree, and secure a stable job. But here’s the shocking part—the more educated you are, the higher your chances of being unemployed. For workers with only primary education, the unemployment rate is just 3.2%. But for graduates and those with higher degrees, it jumps to 28.7%. This is because India’s education system isn’t preparing students for real jobs. Only 2.3% of Indians receive formal vocational training, compared to 80% in Japan and 96% in South Korea. At the same time, government spending on education is just 2.7% of GDP, far lower than the US (5%) or China (4.1%). The result? Millions of graduates with degrees but no employable skills.
Recognizing the crisis, the Indian government has been trying to revive manufacturing. To reduce dependency on imports and encourage local production, it has taken several bold steps: import bans on products in defense, electronics, and durables, higher tariffs than other emerging markets like Brazil, and production-linked incentives (PLIs) worth $33 billion across 14 key sectors. These policies are starting to show results. In 2018, only 55% of air conditioners sold in India were made domestically. By 2024, that number had jumped to 96%. Similar growth is happening in other industries, too. But there’s a catch—modern manufacturing is highly automated. Even if industries grow, they may not create enough jobs unless there’s a shift toward labor-intensive production.
India has one major advantage—its demographic dividend. This means that a higher percentage of its population is of working age compared to dependents (children and elderly). According to the Blume Report, India’s demographic dividend will last until 2055. But if the country fails to create enough jobs before then, it could turn into a crisis, with millions of unemployed youth.
There are also challenges to making India a global manufacturing hub. The biggest roadblocks include expensive industrial land for both domestic and foreign companies, high government overhead costs making it difficult to run large factories, and low skill levels as India has far fewer formally trained workers than other manufacturing giants.
Despite these challenges, there’s a bright spot—India is becoming a leader in Global Capability Centers (GCCs). These are offshore offices of multinational companies handling IT, finance, and business services. A decade ago, GCCs accounted for only 1/5th of India’s IT sector. Today, they make up 1/3rd. India’s advantage here is its large English-speaking population and relatively cheap skilled labor.
So, can India fix its job crisis? The answer isn’t simple, but one thing is clear—without a strong manufacturing revolution, India’s growth will remain unbalanced and unsustainable. The economy might expand, but millions of people will struggle to find decent jobs. The government’s policies are a step in the right direction, but they need better education, skill development, and labor-intensive industries to truly change the game.
India stands at a crossroads. If it acts now, it could become a global economic powerhouse. But if it delays, it risks missing out on its greatest advantage—its young and ambitious population. The clock is ticking.
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Indian Economy