India: A 20-Year Job Creation Surge Amid Demographic Shifts

India needs 10 million new jobs annually from FY25 to FY30 for 6.5% GVA growth. Boosting affordable housing and IT hubs in smaller cities can drive job creation. Labor-intensive sectors show promise due to a shift in fiscal incentives, with construction and services playing key roles as employment drivers.

According to a report by Goldman Sachs, India requires approximately 10 million new jobs each year from the fiscal year 2025 to 2030 to sustain an average Gross Value Added (GVA) growth rate of 6.5 percent annually. Stimulating affordable housing developments may invigorate the real estate sector, which already employs over 80 percent of the construction workforce. This strategy could significantly enhance job creation across diverse skill levels.

Developing Information Technology hubs in tier-2 and tier-3 cities, as well as setting up Global Capability Centers (GCCs) in smaller urban areas, could mitigate the burden on Tier-1 cities while opening up job prospects in under-resourced regions. Redirecting fiscal incentives towards labor-intensive manufacturing industries, such as textiles, food processing, and furniture, could foster employment for workers with low to middle-skill levels.

Despite the government's Production-Linked Incentive (PLI) schemes initially benefiting capital-intensive sectors, a promising shift towards labor-intensive industries, including textiles, footwear, toys, and leather goods, is noteworthy. This move targets aligning India's manufacturing sector with broader employment objectives, given that about 67 percent of manufacturing jobs are in labor-intensive domains.

Over the past twenty years, India has generated approximately 196 million jobs, with a notable two-thirds of these positions arising in the last decade. There has been a substantial shift as workers migrate from agriculture to construction and services. The construction industry remains a key employment driver, contributing to nearly 13 percent of total jobs. Investments in real estate and infrastructure projects have boosted job creation and positively influenced income levels among low- to medium-income families.

Likewise, the services sector, responsible for around 34 percent of total employment, has witnessed remarkable growth. The retail trade, in particular, has thrived due to digitization, with retailers adopting online platforms, thus generating new roles in inventory management, packaging, and delivery. The increase in India's Labor Force Participation Rate (LFPR) from 50 percent in FY18 to 60 percent in FY24 is largely attributable to rising female participation, especially in rural areas.

The factors driving this increase include enhanced measurement techniques, increased financial inclusion through women-targeted credit schemes, and expanding opportunities within small and micro-enterprises. India's demographic transition presents a unique 20-year opportunity to benefit from a low dependency ratio, with a substantial working-age population expected to enter the labor market. (ANI)

(With inputs from agencies.)