India’s Employment Crisis: Bridging the Skill and Job Gap

Context

• India’s working-age population has grown by 9 crore since 2017-18, but formal sector jobs increased by only 6 crore, creating an annual shortfall of 50 lakh jobs.

• Most new jobs are in the informal and self-employment sectors, leading to concerns about job quality and security.

Rising Capital Intensity in Production

Why is Capital Intensity Increasing?

• Labour-intensive industries are shifting to capital-intensive production due to:

  • Demand-side factors: Need for higher productivity and cost efficiency.

  • Supply-side factors: Shortage of skilled labour forcing automation.

Impact on Employment

• Services Sector: High GDP contribution but limited job creation.

• Manufacturing Sector: Stagnant growth despite industrial policies.

• Agriculture Sector: Declining share in GDP, pushing surplus labour into informal jobs.

Skills Deficit and Employment Readiness

• Less than 10% of India’s workforce has formal technical or vocational training.

• A skill gap exists between education and job market needs.

• Technological change is making low-skill jobs obsolete, reducing demand further.

Key Need: Continuous skilling and upskilling programs to ensure workforce adaptability.

Government Strategies for Job Creation

1. Production-Linked Incentive (PLI) Scheme

• Boosts high-value production and investments.

• Over 50% of funds allocated to electronics, IT hardware, and drones.

Challenge: Labour-intensive industries are underfunded despite high job creation potential.

2. Employment-Linked Incentive (ELI) Scheme

• Provides government cash transfers via EPFO to promote private-sector hiring.

Challenges:

• Short subsidy period (2-3 years) threatens long-term job sustainability.

• Lack of tracking mechanisms for employment outcomes.

Policy Recommendations

1. Align Skilling with Industrial Policies

• PLI incentives should be linked to skilling initiatives.

• Better coordination between Labour, Skill Development, and Industry ministries.

2. Reform ELI for Sustainable Jobs

• Shift to a graded incentive structure based on skill levels.

• Extend benefits to training institutes linked to employment outcomes.

3. Labour Market Reforms

• Easing restrictive labour laws can encourage hiring.

• Flexible regulations can prevent over-reliance on automation.

Conclusion

To achieve Viksit Bharat, India needs a comprehensive employment strategy that balances production growth with workforce development.

A skilled, future-ready workforce is essential for sustainable job creation and economic growth.