CHENNAI: India’s employment crisis is rooted in the absence of a coherent national industrial policy, Santosh Mehrotra, development economist and former Planning Commission adviser, said recently, arguing that the country was witnessing a “structural retrogression” pushing millions back into agriculture instead of creating jobs in manufacturing and other non-farm sectors.
Speaking at a discussion on ‘India Out of Work: Rethinking India’s Growth Story’, co-authored with economist Jajati Parida, Mehrotra said that India was facing a polycrisis, comprising a structural crisis in the economy, education system and resulting employment, threatening the country’s ability to capitalise on its demographic dividend.
“The challenge is particularly worrying because India’s demographic window is narrowing,” he opined. “While the country continues to be viewed as a young nation, nearly half its workforce is already aged 45 years or above, while the working-age population is expected to begin declining around 2040. We’re really running short of time. We have roughly 15 years left to fully realise its demographic dividend.”
At the centre of the problem, according to him, is the failure to build a national industrial strategy capable of generating jobs at scale. “While East Asian economies that successfully realised their demographic dividend relied on industrial policies to expand manufacturing and absorb workers leaving agriculture, India has failed to develop a comparable framework,” said Mehrotra said. “Initiatives such as Make in India and production-linked incentive schemes cannot substitute for a broader industrial strategy linked to manufacturing, trade, infrastructure, skills and employment generation.”
Manufacturing employment, which stood at about 60 million workers in 2012, remained around the same level more than a decade later, an evidence, he pointed out, as a failure of manufacturing to absorb labour at the scale required.
The consequences are visible in what he called a “structural retrogression”. Instead of workers steadily moving from agriculture to industry and services, India has seen a reversal of that process, with the number of workers in agriculture increasing by around 80 million between 2019 and 2024. “Never in the history of mankind, forget about our country, have so many million workers been added to agriculture in such a short period of time,” he said. “The increase pushed agriculture’s share of employment to around 46% of the workforce, compared with about 29% in China.”
The employment challenge is being compounded by an education system that has expanded rapidly without a corresponding improvement in quality, Mehrotra said. The gross enrolment ratio in higher education rose from about 11% to nearly 29% over the past 20 years, while the number of private colleges expanded sharply. “Yet employers continue to report a shortage of job-ready workers. Formal vocational training covered only about 2.4% of the workforce in 2004 and has risen to just around 4% despite years of focus on skill development,” he averred. “Countries like China, South Korea and Taiwan combined industrial policy with investments in education and vocational training, enabling workers to move from farms to higher-productivity jobs. India, by contrast, expanded higher education rapidly but failed to build a manufacturing ecosystem capable of absorbing its growing workforce.”
India needs to create between 11 million and 12 million non-farm jobs annually, he said, to absorb new entrants to the labour force, existing unemployed youth and workers trapped in low-productivity agricultural employment. “The impact is particularly visible among women. While women now account for nearly half of higher education enrolments, job opportunities have not expanded at the same pace. Female labour force participation remains among the lowest in the world, with many women continuing to work as unpaid family labour, particularly in agriculture,” he said.
To reverse the trend, he called for a comprehensive industrial policy centred on labour-intensive manufacturing, stronger industrial clusters, improved infrastructure, expanded vocational training, greater investment in research and innovation, and higher public spending on education and health.