Link skill development with production-linked, job-linked sops in high-growth areas: Economic Survey
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Deliberations around a ‘pro-employment’ growth focus in the Union Budget and its likely macro-fiscal implications offer critical insights on the ‘jobless growth’ debate in India’s macroeconomic landscape.
Let’s observe the data more closely.
For a country that on average had a large proportion of its employed workforce moving from agriculture to non-farm jobs (70 per cent to 42 per cent) over the last few decades, the past few years have seen a sudden increase in farm-based employment (from 42 per cent to 46 per cent roughly), signalling the return of more than 20 million people (willing to find employment) to farming.
There has been a large increase in the proportion of casual, self-employed workers, those employed within the unorganised, informal landscape. These aren’t ‘good’ secured jobs we are talking about, but rather a survival-employment strategy that workers are taking since they are not finding enough opportunities in the secured, organised sector.
The government cited an increase in self-casual-farm sector employment combined as ‘job creation’ happening over the last few years. Even the recent RBI report was craftily designed to validate this ‘fact’ even though key indicators around labour productivity, labour force participation rate (LFPR), sectoral organised employment, real wages, upward mobility in incomes/wealth creation etc. show how such a concocted ‘pattern of employment increase’ is anchored by people’s ability to find work to survive, not thrive.
Behind this is an exclusive pattern of growth where the labour-substitutive mode of production driven in favour of capital-intensive growth has made ‘good jobs creation’ in the organised sector more difficult, creating uncertainties for the workforce entering the employment scene.
An ‘exclusive’ pattern of ‘jobless’ growth
Development economist Ajit Ghose’s critical 2023 paper highlights a pattern of ‘exclusive growth’ in India’s economy since the early 1990s, benefiting primarily the urban rich.
hose observed that skilled employment continued to grow, albeit insufficiently, while low-skilled workers faced increasing exclusion from the job market.
Under the Narendra Modi government, the employment rate among semi-skilled workers declined even more rapidly, particularly in areas that previously saw job creation.
This decline was compounded by deeply exploitative worker contracts and a demand-side crisis that hindered the success of supply-side economic policies.
What is unclear is the consequential link between ‘skilling India’ and/or ‘employing India’, which is rarely studied.
Established in 2014, the Ministry of Skill Development and Entrepreneurship absorbed the National Skill Development Corporation (NSDC) and other programmes to train 300 million people by 2024. Despite partnering with various organisations and raising awareness, the ministry’s goals weren’t achieved.
It can also be argued that traditional degrees and the government’s own skilling programmes no longer guarantee good, organised employment as these come without substantive public investments in human capital formation. The current education system is also outdated and not oriented towards the demands of the industry and the tech-restructured employment landscape.
This is evident as only a small percentage of candidates certified by the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) programme have secured jobs, underscoring the fundamental challenges in existing skilling initiatives.
The Economic Survey 2023-2024 also highlights a critical issue here: 65 per cent of India’s population is under the age of 35, and many lack the skills needed by a modern economy. The survey also states that only about 51.25 per cent of the youth is deemed employable, meaning that approximately one in two graduates are not readily employable straight out of college. The issue is further supported by the India Skills Report (ISR) 2024, which reveals that only 50.3 per cent of graduates from higher educational institutions are considered employable.
A skill gap study conducted by the NSDC from 2010 to 2014 projects that by 2025, India will need nearly 109.7 million additional skilled workers, while highlighting the critical issue of the widening skill gap, where the average Indian worker is competitively ‘as skilled’ and ‘employable’ as a foreign (more competitive partner) worker in the same occupation and employment category.
A comparable classification of ‘competitive’ skilling for better productivity gains that make the educated (and lesser educated) citizenry more functionally literate and capable of higher, more decent, secured wage employment remains critical as we move forward. Market design and policy interventions need to be framed around these concerns.
Human capital investment with higher, medium- to long-term fiscal interventions, while taking the private sector along (not being dependent on it), also remains key.
Finally, this has hardly been the government’s focus in its fiscal strategy. Despite substantial increases in outlays of capital expenditure — from Rs 465,277 crore in 2015-2016 to Rs 1,111,111 crore in the current Union Budget — social spending for human capital formation has not kept pace. This imbalance underscores the challenges in addressing the skill-gap effectively.
To truly bridge the skill gap and enhance secured employment prospects, a more cohesive approach towards functional literacy and competitive skilling is needed — one that aligns training programmes with job market needs, ensures sustainable funding, and integrates robust mechanisms for tracking progress and impact. Addressing these issues, fiscally, through greater private sector partnership for job/labour-intensive sectors, will be crucial for turning ambitious plans into tangible outcomes and fostering a workforce capable of meeting the demands of a modern economy.
(The writer is professor and dean, and director, Centre for New Economics Studies, O P Jindal Global University. He is a Visiting Professor at LSE and University of Oxford. )
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.