India Faces Job Creation Challenge Despite Strong Economic Growth
India is expected to struggle with job creation for its expanding workforce over the next decade, even if the economy grows at a robust pace of 7%, according to Citigroup Inc. Citi estimates that India needs to generate approximately 12 million jobs annually to accommodate new labor market entrants. However, with a 7% growth rate, the country can only produce 8-9 million jobs per year, according to economists Samiran Chakraborty and Baqar Zaidi.
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The quality of jobs in India is also a concern, as 46% of the workforce remains in agriculture, which contributes less than 20% to the GDP. The manufacturing sector, which accounted for 11.4% of total jobs in 2023, has not recovered to pre-pandemic levels. Additionally, fewer people are employed in the formal sector now than before the pandemic, with only 21% of the workforce receiving salaries or wages compared to 24% previously. More than half of India’s 582 million workers are self-employed.
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Unemployment, particularly among young people, has been a significant issue in recent elections, impacting voter support for Prime Minister Narendra Modi’s ruling party. The official unemployment rate of 3.2% is considered understated, with the Centre for Monitoring Indian Economy (CMIE) placing the jobless rate at 9.2% in May, the highest in eight months. For those aged 20-24, the unemployment rate exceeds 40%. To address these challenges, Citi’s economists recommend enhancing manufacturing exports, attracting foreign investments, and consolidating employment programs to improve job creation.
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