India Needs to Address Challenges to Enhance Workforce Participation Quality and Quantity, Says NCAER Report
India is at a crucial juncture in its economic development, as highlighted by a recent report from the National Council of Applied Economic Research (NCAER). The study emphasizes the need for the country to address existing bottlenecks to enhance workforce participation and labor productivity. It identifies skilling and small enterprises as vital components for job creation. The report, titled “India’s Employment Prospects: Pathways to Jobs,” reveals that while self-employment has increased, the transition to a skilled workforce remains sluggish. Strengthening employment in labor-intensive sectors could sustain India’s GDP growth at around 8 percent, aligning with the vision of a developed India.
Challenges in Workforce Participation
The NCAER report underscores significant challenges in India’s workforce participation. Despite a favorable demographic advantage, the country struggles with low levels of capital, productivity, and technology adoption in unincorporated household enterprises. According to Professor Farzana Afridi, the lead author of the study, the dominance of self-employment stems from economic necessity rather than entrepreneurial spirit. Many small enterprises operate at a subsistence level, which limits their potential for growth. The report stresses that India’s employment future is closely linked to improving the productivity of these small businesses.
Furthermore, the report highlights that enterprises leveraging digital technologies can hire significantly more workers compared to those that do not. A mere 1 percent increase in access to credit can lead to a 45 percent rise in the number of hired workers. This indicates that enhancing access to technology and financial resources is crucial for boosting employment opportunities.
Skilling as a Key Driver
The report emphasizes the importance of skilling in addressing persistent employment challenges. As new technologies and artificial intelligence reshape the job landscape, upskilling the workforce becomes essential. Currently, medium-skilled jobs dominate employment growth, particularly in the services sector, while manufacturing remains largely low-skill intensive. The study suggests that increasing the share of the skilled workforce by 12 percentage points through formal skilling initiatives could result in a more than 13 percent increase in employment in labor-intensive sectors by 2030.
Simulations conducted in the study indicate that enhancing the formally skilled workforce could lead to substantial job gains. Specifically, increasing the skilled workforce by 9 percentage points could generate approximately 9.3 million jobs by 2030. This potential for job creation underscores the necessity of investing in education and training programs to prepare the workforce for future demands.
Opportunities for Employment Growth
The NCAER report identifies key sectors with strong potential for driving employment growth in India. G C Manna, a Senior Advisor at NCAER, points out that the findings highlight areas where targeted efforts could yield significant results. The report places India within an international context, showcasing unique opportunities for improvement and alignment with global benchmarks.
Professor Aditya Bhattacharjea from the Institute for Studies in Industrial Development notes that the report provides valuable insights into how India can enhance its employment landscape. By focusing on sectors with high growth potential and investing in skill development, India can better position itself to meet the challenges of a rapidly changing global economy. The report serves as a call to action for policymakers and stakeholders to prioritize employment and inclusive growth as the country moves towards becoming the world’s third-largest economy.
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