India's employment challenge: 20 million jobs need to be created each year

We have spent more than a century telling ourselves that India cannot do industries and big manufacturing.
We have spent more than a century telling ourselves that India cannot do industries and big manufacturing.


  • This asking rate for job creation may sound daunting, but it’s both necessary and possible to achieve with reforms.

A number of analysts attribute the Bharatiya Janata Party’s (BJP) underperformance in the general election to voter unhappiness with the Narendra Modi government over unemployment, job reservations and farmer livelihoods. 

The Agnipath scheme of military recruitment came in for criticism during the election campaign and many political commentators expect that the new government will be compelled to make changes to it. We should view interpretations of election results with some scepticism, but it does appear that the issue of inadequate employment opportunities has bubbled up to the surface of our political ocean.

India’s growing economy is creating livelihoods and employment, but not fast enough. We need to create 20 million jobs every year (to cater to the 12 million young people entering the workforce and to transition around 8 million farmers languishing in rural areas). This is the required run rate. 

Even if our current run rate is 5 million a year, we are still falling short of the target. To put this in perspective, India must create more jobs per year than the entire population of the Netherlands, Sri Lanka or Taiwan. It’s a scary number. Yet, India cannot become Viksit Bharat without pulling off such an unprecedented feat.

Also read: Develop human resources for a Viksit Bharat by 2047

Economic growth is the fundamental engine—the only engine—that can power this quest. High growth is a necessary condition, but it needs to be supplemented with a concerted programme to boost employment generation. So what can be done?

Before we get there, it’s important to disabuse ourselves of the notion that government jobs and military recruitment should be employment generation schemes. Yes, there are a huge number of unfilled vacancies in the Union and various state governments, and these should be filled to capacity. 

Beyond that, they will constitute an unwarranted drain on the economy. Similarly, there is a case to reform the Agnipath scheme so that personnel can move laterally into security forces, but it is dangerous to view the exercise from the lens of an employment programme.

Here are some ideas on how we can achieve a quantum jump in employment across the country.

Also read: India Inc has exciting opportunities to tap in its Viksit Bharat journey

First, create new well-planned, sustainable cities. There are many good reasons why India needs new cities. Existing cities are highly congested and their growth comes at the cost of quality of life and the environment. New cities can be green cities, with everything from layout, building materials, natural resources and public services designed to emit lower carbon than if existing cities were to grow. 

I have previously argued that India can create new cities by building new state capitals, shifting military stations, founding new universities and innovation campuses. Construction and infrastructure industries can create millions of jobs—from unskilled to highly-skilled—at a scale few other sectors can.

Second, attract large-scale manufacturing. Yes, it’s still possible in the age of robotics and artificial intelligence. We have spent more than a century telling ourselves that India cannot do industries and big manufacturing. A look at India’s economic history shows how Mahadev Govind Ranade and B.R. Ambedkar debunked the naysayers and called for industrialization in the 1890s and 1920s, respectively. 

Today, we must debunk the argument that Indians can directly jump from agriculture to services, skipping manufacturing. I’m sure there will be millions of people who will make such a jump, as can be seen from the number of people from villages and small towns who work in service industries. 

But if we have to provide for hundreds of millions of livelihoods, it cannot be done without large-scale manufacturing. A job-hungry India-sized player can transform global economics, just as China did over the past three decades or so. To believe otherwise is either escapism or defeatism.

Third, get more women into the workforce. Across income levels, every employed woman creates at least one other job. Female workforce participation has been declining and it is still unclear why this is so and how it can be addressed. Deeply entrenched social mores might have something to do with it, at least to some extent. These will be hard to change directly. 

Also read: Towards a Viksit Bharat: The farm sector must play a bigger role in our economy

But we do know what we can do to make it easier for women to work from home or at workplaces. Toilets, public transport, safety, street lights, home appliances, child care facilities and anti-harassment policies are low-hanging fruit that will show results at the margin. The government has instruments and the mandate to push each one of these levers.

Fourth, champion globalization. Free trade and movement of people is crucial for India’s development agenda. The West can perhaps afford to retreat behind tariff walls, but India cannot. Of course, reversing the de-globalization currently underway is a great task, but great nations undertake great tasks.

These are some examples of the kind of thinking we need to address the jobs challenge. So far, growth, migration and democracy have helped India avoid the kind of social unrest that accompanies widespread unemployment. There are limits to these buffers and it is best that we don’t take them for granted. The government has its job cut out.

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