India's Employment Future 2030 & Understanding Sector Trends and Essential Skills

India’s job market is changing because the country is now the fastest-growing large economy globally after COVID-19. The young population, with a median age of 28.4 years, is essential for driving economic growth. With a GDP growth rate of 7.8 percent, India might reach its goal of becoming a $5-trillion economy by 2026-27. This growth relies on strong private spending and government investments.

These objectives are shaped by ongoing changes in the global manufacturing settings, influenced by the pandemic, geopolitical tensions, and supply chain disruptions. The United States (US) has shifted its import demand from China to India due to India’s competitive cost structure, abundant labor resources, and growing domestic market. Manufacturing is a decisive sector in India, consistently contributing 17-19 percent to Gross Value Added (GVA). The Indian government has prioritized manufacturing through initiatives like Make in India, Production Linked Incentive Schemes, and SAMARTH Udyog. The service sector also plays a significant role in GVA, offering the potential for job creation and economic growth.

While the manufacturing sector remains vital to the economy, employment within it has stalled or decreased, particularly in urban areas, over the past decade. Technological progress has caused a decrease in the capital-to-output ratio and an increase in the capital-to-labor ratio, casting doubt on the sector’s ability to absorb India’s growing workforce. The employment prospects for India’s manufacturing sector indicate a continued decline in overall employment within the sector.

In the coming decade, to which job markets should the youth of India direct their focus?

India’s service sector is looking bright for the future, as it has the strongest connection to economic growth and job creation. This highlights ten specific areas within the service sector that are expected to grow the most and provide the most jobs for India by the year 2030. These areas include digital services (like advanced technology and online content), financial services (such as banking and insurance), health services, hospitality services, retail services, global capability centers, renewable energy, online shopping, small businesses, and startups. By working in these sectors, India could potentially create over 100 million new jobs by 2030.

This also analyzes India’s employment elasticity through a calculation exercise. It calculates how changes in employment relate to economic growth in different sectors over both short and long periods, considering factors like region and gender. The authors then discuss the policy implications of their findings, exploring what these estimates mean for government policies and actions.

The projected decrease in unemployment as India aims to achieve the US$ 5 trillion economy goal is as follows:

With the capacity to generate employment equivalent to a US$ 5 trillion economy, there is an estimated decline in unemployment by 22%, which translates to 97 basis points.

It’s noteworthy that the service sector has been identified as having the highest employment elasticity. This means that the service sector has the greatest potential to create jobs in response to economic growth.

The long-run employment elasticity across different sectors in both urban and rural areas:

  • In the primary sector, such as agriculture, there is a negative employment elasticity, indicating a decrease in employment with economic growth. This effect is more pronounced in urban areas compared to rural areas.
  • The secondary sector, including industries like manufacturing, has a positive employment elasticity in rural areas but close to zero in urban areas.
  • The tertiary sector, which encompasses services like healthcare and finance, exhibits positive employment elasticity in both urban and rural areas, with a higher value in rural areas.

Furthermore, the service sector is highlighted as having the potential to create sustainable jobs and increase female labor force participation rates.

Sectoral employment elasticity as broken down by gender:

  • In the primary sector, both males and females experience negative employment elasticity, but the effect is slightly less pronounced for females.
  • The secondary sector shows positive employment elasticity for both genders, with males experiencing a higher elasticity than females.
  • The tertiary sector exhibits positive employment elasticity for both males and females, with females having a higher elasticity than males.

Overall, it identifies key sectors and suggests policies that can promote inclusive growth through job creation.

To support India’s growing employment prospects in the coming decade, the following key recommendations are proposed:

  1. Collaborative Efforts: Policymakers should work closely with educational institutions, private sector employers, and civil society organizations to identify gaps in employability. This collaboration should lead to adjustments in curricula and program designs to meet the changing needs of the labor market, thereby enhancing the employability and productivity of youth.
  2. Diversification of Skills: There is a need to diversify skill sets, focusing on both forward-looking technology skills and job skills resilient to technological advancements. Formal mentorship programs and bridge courses should be implemented to ensure the continuous development of human capital.
  3. Facilitation of Employment Transitions: Governments and stakeholders should facilitate smooth transitions in employment sectors, with a focus on industries with high employment elasticity, such as tourism, hospitality, financial services, and healthcare. Prioritizing growth in these service sectors can help absorb surplus labor displaced by technological advancements in manufacturing.
  4. Promotion of Entrepreneurship: Creating a supportive environment for entrepreneurship is crucial for stimulating job creation and nurturing innovation, especially in the startup ecosystem. Supporting small businesses and promoting gender-sensitive workplace environments can also empower female workforce participation.
  5. Public-Private Collaboration: Collaboration between the public and private sectors is essential for developing job-ready workforces and strengthening research and development (R&D) departments within businesses. This collaboration can drive innovation and create employment opportunities.
  6. Utilization of Public Policies and Initiatives: Existing government policies and initiatives such as Digital India, Pradhan Mantri Kaushal Vikas Yojana (PMKVY), Startup India, Production Linked Incentive (PLI) Schemes, and PM Vishwakarma Yojana should be used to stimulate employment growth. Negotiating mutually beneficial trade agreements, especially for labor-intensive export sectors, can attract investments and create jobs.

India’s employment outlook for 2030 is characterized by a mix of challenges and opportunities. Seizing these opportunities requires coordinated and focused efforts from various stakeholders, including individuals, the private sector, civil society, and the government. The goal is to transform India into a digitally empowered, skilled, innovative, and self-reliant economy. This vision can be achieved through collaborative action and strategic interventions aimed at harnessing India’s potential for growth and development in the coming decade.