India’s GDP-employment growth gap and why we should worry about jobs


In Jan 2022, violent protests rocked Bihar after the Indian Railways decided to change the recruitment procedure for non-technical posts. About 1.25 crore candidates had applied for the 35,000 advertised posts, and by then, candidates had already cleared the first stage. Four months later in Jun 2022, large-scale protests erupted across the country against the Agnipath scheme –a 4-year contract without a pension–that replaced the regular recruitment to the defense services. 

Incidents like these allude to rising anxiety over employment in the country, though post-COVID, we see a general rise in workforce participation and a decline in unemployment rates. Unfortunately, this seemingly positive trend hides certain worrisome patterns which become visible as the data is examined. 

Civil Society group Bahutva Karnataka recently released a ‘Guarantee check’ report on the promises and claims of the Modi government about employment. Using publicly available data from the Periodic Labour Force Survey (PLFS) and the now-discontinued Employment Unemployment Survey, the report juxtaposes reality against claims– while India’s GDP stands at an enviable level today, there seems to be a lack of correlation between GDP growth and real employment growth.  

Interestingly, the number of self-employed workers in the workforce has gone up 6% from pre-COVID levels. More than half of the men and two-thirds of the women are presently ‘self-employed’ – a category that includes rural weavers, farmers, potters, urban roadside vendors, tailors, barbers, etc., as well as unpaid workers in small household enterprises. In India’s case, this increase in self-employment signals people settling for whatever they can out of desperation and a lack of alternatives (reflected in flat wages), rather than a buoyant entrepreneurial spirit. 

For women in particular, the increase in the share of unpaid work is indicative of a worsened job market. 

Net new payroll additions from EPFO(Employees Provident Fund Organization) and NPS(National Pension Scheme) between FY20 and FY23 indicate roughly 61 lakh new formal sector jobs per year, in contrast to the 2 crore jobs promised by PM Modi before coming to power in 2014. Additionally, demonetisation in 2016 and the GST rollout in 2017 took a toll on MSMEs, as reflected in the K-shaped post-COVID recovery with growth in big companies and a decline in small firms. 

The Bahutva report also points out that youth unemployment(15-29 years) is particularly high, and over 40% of India’s graduates under 25 years of age are unable to find jobs. A decade ago, India’s young demographic was seen as a big advantage compared to other large economies; unfortunately today, our demographic dividend seems to have become a demographic liability. Among emerging economies, India is the one that faces the most acute youth unemployment problem.

India has a relatively low Labour Force Participation Rate(LFPR) between 50-60%, with a low youth LFPR of 36%, and a particularly low female LFPR of 30%. Contrast this with China, where overall LFPR and female LFPR are 76 and 71% respectively. To sustain robust economic growth, the participation of women and youth in the workforce should be far greater in India.

The Anoop Sathpathy committee recommended a national minimum floor wage of Rs 375 per day in India, and after adjusting for inflation, in 2023 the weekly minimum floor wage is Rs 3,050. Average wages in all categories – self-employed, casual wage, and regular wage workers – have fallen, and half of all regular wage workers (9 out of 10 casual wage workers, and 3 out of 5 self-employed workers) earn less than the national minimum floor wage –nearly 30 crore people. Despite the GDP growth, there has been little improvement in the lives of the majority of citizens, which when coupled with the widening gap between the rich and the poor is cause for concern. 

The fruits of India’s growth seem to have been primarily reaped by large corporations and wealthy industrialists. 

Coming out of the pandemic, it is strange that the government seemed unconcerned about making reliable data available to policy and decision-makers to chart the course forward as is evident from the scrapping of the 2017-18 Consumer Expenditure Survey data and the indefinite postponement of the 2021 Census. 

It is no surprise that social sector schemes targeting the poor are being rolled out by all parties, and as suggested in the Bahutva report, these are essential. However, reliable data, strong policies, and action about job creation are the need of the hour.  

Anupama Hegde is an experienced IT professional with an interest in culture, politics, and economics. She volunteers with a non-profit and is a part of Bahutva Karnataka, a citizens’ collective focused on social justice and communal harmony.

Akshit Arora is a Research Associate at the Centre for Sustainable Employment, Azim Premji University. He has a Master’s degree in Economics and is interested in the issues of employment and identity.

Views expressed are the authors’ own.

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