By Prof. NVR Jyoti Kumar
Due to increasing mechanisation and capital use, the employment generation in India has become more and more capital-intensive, with a reduced number of workers employed since 2000 than in the 1990s. While India is keen to create an average of 78.5 lakh jobs annually in the non-farm sector by 2030 (Economic Survey -2024-25), it is also facing the threat of huge job losses in many industries due to the displacement of humans with Artificial Intelligence (AI). This is high time to give primacy to labour-intensive manufacturing employment to absorb the abundant unskilled and semi-skilled workforce.
India is one of the fastest-growing economies of the world and is poised to continue on this path, with an aspiration to emerge as a developed nation by 2047. The economic growth over the past two decades has also led to India making remarkable progress in reducing extreme poverty. However, this prosperity has been associated by a disturbing rise of “severe underemployment” as confessed by NITI Aayog in many of its reports from time to time. Such a phenomenon is often led some of the economists to describe India’s growth story as “jobless”, which is characterised by huge income inequality among its people.
A recent study of the World Inequality Database reveals that India’s richest 10% citizens’ share of total income was nearly 60%, and the bottom 50% were getting only 15% of the country’s national income in 2022-23. The study also notes that India’s top one per cent's income share of 22.6% is not only the highest since 1922 but also among the very highest in the world, higher than even South Africa, Brazil and the US. With caste, gender and regional disparities, the marginalised communities continue to suffer from severe economic disadvantages.
Shifting towards Capital-intensive Industries
A variety of factors must have contributed to India’s rising underemployment, which is a more serious problem than unemployment. One of the most significant factors is India’s deliberate shift towards capital-intensive growth. India has been at a disadvantageous position compared to top manufacturing countries like China, South Korea and Taiwan for a long time. As a result, there has been a declining demand for medium- and low-wage workers in booming capital-intensive industries. Moreover, new technologies like Artificial Intelligence (AI) and automation replaced the personnel doing routine tasks. Indian firms are adopting AI and robotics at a faster rate than global peers, according to a study conducted by the World Economic Forum (WEF) in 2025. Moreover, the effects of this trend are augmented by the declining performance of labour-intensive industries that are known for absorbing displaced workers. Consequently, job creation pauses behind workforce growth, keeping wages mollifies and unemployment high, especially for less-educated workers. In the long-run, such workers face serious barriers in improving their economic status and upward mobility over their lifetime and over generations. Unless the effective interventions are deployed immediately, this phenomenon will not only reinforce structural inequalities but also pose grave risks to long-term economic stability and social cohesion.
Strengthen Labour-intensive Industries
India needs to utilise its core competence which is in the form of demographic dividend by prioritising labour-intensive industries that can generate employment for the vast majority of workers. Construction, food products and textiles remain the largest employment generating sectors in India, accounting for 13%, 11% and 10% of total employment, respectively. The India Employment Report 2024, jointly released by the International Labour Organization (ILO) and Institute for Human Development, also underscored the urgent need for India’s growth model to shift towards labour-intensive manufacturing.
Crafting the policies that boost women’s participation in the employment market with decent work is need of the hour. Despite some improvements in specific sectors, India remains a country wherein the workforce participation rate among females is only about 37%. The policies should aim for improved public transport, improved amenities and enhanced workplace safety, and adaptable work arrangements. In addition, we need to embrace different strategies to tackle the problems of youths Not in Employment, Education or Training (NEET).
Through its Make in India initiative in 2014, India envisioned to incentivise dedicated investments into manufacturing sector. NITI Aayog since then has been stressing the need for key policy interventions in manufacturing sector to enable India improve its ecosystem for creating conducive environment for investments. Under this programme, the share of manufacturing in India’s Gross Domestic Product (GDP) was projected to reach 25% by 2022. In fact, the GDP share of manufacturing has actually fallen from 16.7% in 2013-14 to 15.9% in 2023-24. In NITI Aayog surveys, it is revealed that labour regulations are a bigger constraint for labour-intensive firms which create proportionately more jobs per unit of capital investment. The labour-intensive industries are still suffering from restrictive
labour regulations, and easing such regulations and streamlining bureaucratic hurdles is important. Enhancing infrastructure like electricity and marketing support, and expanding access to credit for Small and Medium Enterprises (SMEs) play a critical role in employment generation. 92% of SMEs have no access to finance in India despite certain initiatives of the government and fintech firms.
Thus, India needs to ensure that capital-intensive sector adopt a balanced approach to automation – for achieving global competitiveness and also to mitigate its impact on job losses and wage stagnation. We need to reward generously the companies that invest in workforce expansion and skill development alongside automation. Broader economic benefits to society should outweigh the corporate profiteering.
(Disclaimer: The opinions expressed in this article are those of the writer. The facts and opinions expressed here do not reflect the views of ETV Bharat)
