Economic Policy Think-Tank NCAER Highlights Need for Skilling Amid Job Demand

India has the potential to significantly enhance employment in labor-intensive sectors by over 13% by the year 2030, according to a recent study conducted by the National Council of Applied Economic Research (NCAER). The report emphasizes the importance of targeted investments in formal skill development to improve workforce quality and address the existing employment gap. Titled “The Landscape of Employment in India: Pathways to Jobs,” the paper outlines strategies for increasing job creation, particularly in manufacturing and services.

Investment in Formal Skilling

The NCAER study highlights that increasing the share of skilled workers by 12 percentage points through formal training could lead to a substantial rise in employment within labor-intensive sectors. Currently, these industries represent a significant portion of the job market, accounting for 44.1% of manufacturing jobs and 54.2% of employment in the services sector. The report suggests that a focused approach to enhancing the skills of the workforce is essential for bridging the employment gap. By investing in formal skilling, India can not only increase job opportunities but also improve the overall quality of its labor force.

Addressing the Employment Gap

The paper’s authors conducted demand-side simulations, revealing that expanding the manufacturing and services sectors, particularly in labor-intensive industries, could significantly reduce the employment gap. Farzana Afridi, the paper’s author, advocates for a multi-faceted strategy to boost production capacity and stimulate job creation. This includes increasing government spending, implementing tax cuts, and fostering domestic demand. The findings suggest that a comprehensive approach is necessary to maximize employment potential in these vital sectors.

Mismatches in Government Initiatives

The study also critiques existing government initiatives, particularly the Production-Linked Incentive (PLI) scheme. While the PLI focuses on high-skilled, high-value sectors, the report notes that the majority of job creation has occurred in food processing and pharmaceuticals. This discrepancy indicates a misalignment between budget allocations under the PLI and the actual potential for job creation. The report calls for a reevaluation of these initiatives to ensure they effectively address the needs of labor-intensive industries.

Enhancing Human Capital

To fully realize the employment gains outlined in the report, the NCAER study recommends adopting global best practices and implementing national quality standards. Revamping education systems to improve human capital is crucial, along with integrating digital literacy, information and communication technology (ICT) skills, and soft skills into vocational training programs. The study references the Future of Jobs Report 2025, which estimates that 63% of India’s workforce will require reskilling or upskilling by 2030 to remain competitive. By improving training quality and increasing the number of formally trained workers, India can achieve higher employment gains and better prepare its workforce for future challenges.

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