Creating meaningful employment opportunities for those who seek paid work among India’s nearly 900 million working-age individuals is a central concern for policymakers.
Along with the number of jobs, the job quality and distribution across the country are critical for ensuring widespread economic prosperity for most Indians.
Three of India’s four most populous states—Bihar, Uttar Pradesh and West Bengal (let’s refer to them as ‘BUB’)—account for one-third of the overall population, or about 452 million in 2021, as estimated.
If just UP and Bihar were a single country, estimates suggest that it would probably be the third most populated in the world by 2036. BUB states are also the poorest of India’s large states, with their per-person real income, proxied by per-person real gross state domestic product, below ₹5,000 per month in 2022-23.
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The working-age population of BUB was about 281 million in 2021. As per Census 2011, the latest data point available for state-wise migration, the number of people who migrated for work out of these states was 5 million. Even if it has increased rapidly in the past decade, most young people in these states must find meaningful jobs locally.
We calculated the sectoral employment to population ratio of 20-35-year-olds at the state level, using data from the first and latest Periodic Labour Force Survey, for agriculture and allied sectors, industry (mining, manufacturing and utilities, with manufacturing comprising the bulk of employment) and services, including construction.
UP saw no change in the share of industrial employment among 20-35-year-olds between 2017-18 and 2023-24; it remained at 6.4%. Bihar experienced a decline from 4.3% to 3.2% in the manufacturing employment share of this age group over the same period.
West Bengal has the highest proportion of people in this age group working in industry: 12.4% in 2023-24, up from 10.8% six years ago.
Other relatively less prosperous peer states focusing on manufacturing, such as Rajasthan and Madhya Pradesh, saw their share of manufacturing employment among 20-35-year-olds increase by 2-3% over this period, although the proportion remains relatively low.
Why has industrial employment continued to languish in BUB?
One of the primary economic policies in recent years has been the ‘Make in India’ campaign for the manufacturing sector. Its all-India target is a 25% share of manufacturing in the economy. The share of manufacturing in BUB economies must exceed the national target if the sector is to create sufficient jobs.
In BUB, the share of manufacturing in their economies has hovered around 12% since 2017-18. That means manufacturing growth in BUB has not outpaced other sectors. With a dismal share of manufacturing in their state output, it is no wonder that their share of employment in factories remains low.
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In 2023-24, in UP and Bihar, the proportion of the population aged 20-35 engaged in education surpassed those employed in industry. Bihar had 7.8% of its population in this age group in education, more than double the number employed in industry. Similarly, UP had 7.2% engaged in education, higher than those with industry jobs.
When people take higher education, they want to move beyond factory floors and low-wage jobs. Most will seek opportunities elsewhere in the economy, particularly in the services sector, opting for office-based employment in the private or public sector.
Indeed, the share of service employment (not counting high-skilled fields) among 20-35-year-olds has jumped in BUB. It rose from 20.2% to 23.7% in UP, while Bihar saw a sharp increase from 18.2% to 25.4%. Even West Bengal witnessed a significant rise from 24.3% to 33.3%.
So, even if manufacturing jobs are generated in BUB, who will take up those jobs? They would be mainly young people currently not seeking work, mostly women and those working in agriculture.
Around 33% of the BUB population in the 20-35 age group is not in the labour force. Around 23% are reported to be working on farms. Attracting women to take up jobs would require jobs to offer time flexibility and be created near homes.
The threats of automation and jobless manufacturing growth suggest that job creation will be slow. Also, note that Bihar and UP are landlocked and do not have ports, raising the transportation costs of accessing global markets and increasing logistical challenges.
India’s policymakers must tackle the pressing issue of creating jobs in BUB. But, first, we need to measure the outcomes of several ongoing policy initiatives by the central and state governments.
For example, UP provides a capital subsidy, stamp duty exemption and preferential land allotment, among other incentives, for private investment. The state has announced manufacturing clusters and hopes for investment in the semiconductor industry.
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The central government provides subsidies under its production-linked incentive schemes. Data on gross and net job creation by firms receiving subsidies and other government support needs to be released in the public domain.
Gross job data would tell us about the total number of jobs created, while net job additions are the number of jobs created minus the number of jobs lost in other industries in the same period. One can then assess the success of ongoing programmes before embarking on new ones.
Overall, India’s success in terms of shared prosperity would depend crucially on whether India’s economic policies succeed in transforming BUB—Bihar, Uttar Pradesh and West Bengal.