Noida, with its high-rise buildings, wide roads, industrial and information technology (IT) hubs, is a testament to India’s rapid economic transformation. Yet, factory worker protested in the city last month, exposing the cracks in India’s growth story. What lies at the heart of the disconnect is India’s transformation that skipped the manufacturing sector, which usually absorbs a large, low-skilled workforce. The country's unique shift from agriculture to services directly kept the job crisis alive, with low wages and poor working conditions.
Noida, with its high-rise buildings, wide roads, industrial and information technology (IT) hubs, is a testament to India’s rapid economic transformation. Yet, factory worker protested in the city last month, exposing the cracks in India’s growth story. What lies at the heart of the disconnect is India’s transformation that skipped the manufacturing sector, which usually absorbs a large, low-skilled workforce. The country's unique shift from agriculture to services directly kept the job crisis alive, with low wages and poor working conditions.
Data shows that only about a fourth of workers are engaged in regular wage or salaried employment. Their wages remain extremely low, with average monthly earnings less than ₹20,000 per month in as many as eight states in the country. Uttar Pradesh is one of them.
Data shows that only about a fourth of workers are engaged in regular wage or salaried employment. Their wages remain extremely low, with average monthly earnings less than ₹20,000 per month in as many as eight states in the country. Uttar Pradesh is one of them.
Moreover, average real wages, adjusted for inflation, have barely grown in the last few years, a Mint analysis of data from the Periodic Labour Force Survey (PLFS) showed. Average monthly real wages went up from ₹19,316 in 2022 to ₹20,031 in 2025. Ultra-low inflation helped push real wages in 2025 to some extent, but stagnation in previous years does not signal an improving situation. With inflation rising again in 2026, the situation could worsen.
"Wages themselves have not grown as fast as GDP (gross domestic product). In fact, in many cases, wages have not grown at all," says Amit Basole, professor of economics at Azim Premji University. In fact, real wage growth has not kept pace with productivity either. An analysis of data from the Annual Survey of Industries shows that real output per worker grew at a compound annual growth rate (CAGR) of 1.49% between 2011-12 and 2023-24—far less than 6-7% GDP growth. Real wage growth was a meagre 0.87% during the same period.
“India has a large surplus of labour, which takes away their bargaining power to translate productivity gains into wage gains,” Basole adds. Moreover, a large part of India’s workforce operates without a written job contract (58%), without social security eligibility (52%), and without paid leave (47%). Of the three categories, India has only managed to expand social security eligibility, pulling down the share of those without it from nearly 54%.
Stage skipping
A traditional growth story often follows the script of a shift from farm work to manufacturing to services. The US and the UK followed this model. China, South Korea, Taiwan, and Vietnam leveraged high-tech manufacturing and rapid export growth to drive economic growth. India skipped the middle step, creating a disconnect between its increasing GDP dominance and general unrest among job seekers and the working class.
An analysis of official jobs data by Azim Premji University shows that manufacturing remains a small share in the labour market. Over the last four decades, the share of young male workers in the manufacturing sector remained stagnant at 14-16%, even as the share of farm jobs declined dramatically from 57% to 27%. Services and construction absorbed most of these labourers. For young women, the situation is slightly better, with the manufacturing share rising from 12% to 17%.
The services sector offers better jobs and improved working conditions, but experts believe it does not have the capacity to absorb India’s large labour surplus, especially a largely unskilled or low-skilled workforce.
Growth gaps
India’s GDP, powered by its large young population, is leaving an increasingly significant global footprint. Manufacturing, on the other hand, has faltered. Merchandise exports have stagnated. Data from the World Bank shows India’s share in global GDP doubled from around 1.4% in the early 2000s to roughly 3.5% in 2024. The share in manufacturing kept pace with the GDP rise until 2012-13 before beginning to falter. Its share remained shy of 3% in 2024. The goods export share, which helps power the domestic manufacturing sector, has barely increased in the last 15 years.
India’s manufacturing value added in the country’s GDP remains significantly less than many of its emerging market peers, particularly China and Vietnam.
“India’s growth story has clearly come from the services sector and not from the manufacturing sector,” Sakshi Gupta, principal economist at HDFC Bank, said. She, however, also noted that while there is nothing that fundamentally stops both manufacturing and services from coexisting and flourishing at the same time, goods exports and manufacturing have remained low value-added. With the world turning more protectionist, India’s chance to capitalize on labour-absorbing manufacturing growth is shrinking. The disconnect between economic growth and workers is likely to persist unless corrective steps are taken.
India has made a push through the production-linked incentive (PLI) scheme and is giving a push to high-tech manufacturing like electronics, smartphones, and semiconductors, among others. The speed and scale will have to match a rapidly growing working-age population.