Persisting Challenges in India’s Employment Landscape
Presenting the report, Chief Economic Adviser V Anantha Nageswaran stated that it is inaccurate to believe that every social or economic issue requires government intervention. He emphasized the need for industries to increase hiring.
Despite recent improvements in overall labor force participation, workforce participation, and employment rates in India, following a prolonged decline from 2000 to 2019, the ‘India Employment Report 2024’ released by the Institute for Human Development (IHD) and the International Labour Organisation (ILO) on Tuesday indicates that employment conditions remain unfavorable.
According to the report, the gradual shift towards non-farm employment has halted, with women primarily contributing to the rise in self-employment and unpaid family labor. Furthermore, youth employment quality is inferior to that of adults, characterized by a higher prevalence of unpaid family labor among youth compared to adults, along with stagnant or decreasing wages and earnings.
Chief Economic Adviser V Anantha Nageswaran, upon presenting the report, emphasized that it is erroneous to believe that government intervention is necessary for every social or economic issue. He stressed that the responsibility lies with the commercial sector to increase hiring, stating, “We must shift away from this mindset. In ordinary circumstances, it is the for-profit sector that should be responsible for recruitment.”
Nageswaran mentioned that the government has implemented various measures to facilitate employment, such as skill development initiatives and the National Education Policy (NEP), which he described as “forward-thinking.” He emphasized the importance of ensuring that these initiatives are not influenced by political factors. Additionally, he highlighted other government initiatives for employment, including the payment of employers’ contributions for new employees through the Employees’ Provident Fund Organisation (EPFO) and the Atmanirbhar Bharat Rozgar Yojana. He also noted the new tax regime, which allows for deductions of wages to employers, aiming to prioritize employment generation over capital accumulation.
Regarding the skill initiatives, he noted areas for enhancement, stating, “There is room for improvement in terms of instructor availability and addressing dropout rates. It is evident that there is significant potential for improvement, and I believe the government is aware of this.”
The IHD-ILO report highlighted that youth employment and underemployment rose from 2000 to 2019 but decreased during the pandemic years. Nonetheless, unemployment among young people, particularly those with at least a secondary level of education, has escalated over time. In 2022, unemployed youths accounted for 82.9 percent of the total unemployed population.
The proportion of educated young individuals among the overall unemployed population also grew, from 54.2 percent in 2000 to 65.7 percent in 2022. Within the educated (secondary level or higher) unemployed youth category, women represented a larger percentage (76.7 percent) compared to men (62.2 percent). This suggests that the issue of unemployment in India has become more focused on young individuals, particularly educated youth and women residing in urban areas.
The report emphasized the necessity for economic policies aimed at enhancing productive non-farm employment, particularly within the manufacturing sector. With India projected to incorporate 7-8 million young individuals into the workforce annually over the next decade, there is a need to prioritize labor-intensive manufacturing employment to accommodate the vast pool of unskilled labor. Additionally, it recommended integrating this with certain service sectors.
Greater assistance is required for micro, small, and medium-sized enterprises, particularly through the implementation of a more encouraging, decentralized strategy that encompasses digitalization and artificial intelligence, as well as a cluster-oriented approach to manufacturing.
India must enhance job quality by investing in and regulating sectors expected to provide significant employment opportunities for young individuals, including the care sector and digital economy. With increased urbanization and migration projected in India, there is a need for an inclusive urban policy to cater to the requirements of migrants, women, and economically disadvantaged youth, as outlined in the report.
The report emphasized the necessity for a more effective involvement of skills development and active labor market policies (ALMPs) in closing the gap between job supply and demand and in fostering greater inclusivity in the overall labor market. It underscored the importance of expanded and more targeted involvement of state governments, enhanced partnerships with the private sector and other stakeholders, and increased contribution from the private and non-state sectors.
The report identified five crucial policy domains for additional action: fostering job generation; enhancing job quality; tackling labor market disparities; reinforcing skills and active labor market policies; and reducing knowledge gaps regarding labor market trends and youth employment.
