We are awaiting the latest GDP quarterly figures today. Consensus estimate is 8.3%, making it close to 8% for FY26. Against this backdrop, the headline narrative is one of economic momentum and resilience. India appears firmly on track toward the aspirational vision of Viksit Bharat, powered by digital infrastructure, financial deepening, and high-end services. Yet beneath this impressive macroeconomic performance lies an uncomfortable contradiction: employment generation has failed to keep pace with growth. Employment elasticity is now at its lowest level in decades, creating a paradox where rapid expansion coexists with persistent job insecurity. To understand why India’s growth increasingly feels “jobless,” one must look beyond topline numbers and examine the structural imbalances shaping the economy.
The core problem is sectoral divergence. India’s growth is being driven by sectors that create relatively few jobs, while sectors that absorb large numbers of workers are either stagnating or growing too slowly. Services, which account for over half of GDP, are expanding at more than 9%, but employ barely a third of the workforce. Much of this growth is concentrated in capital-light, skill-intensive segments such as technology, finance, and professional services, where entry barriers remain prohibitively high for the average young job seeker. Manufacturing, long touted as the bridge between low-skill labour and higher productivity, continues to disappoint. Despite growing at around 7%, its share of GDP has remained stuck near 14% for over a decade, and automation has allowed firms to increase output without proportionate increases in employment. Agriculture presents the starkest imbalance: it absorbs nearly 45% of India’s workforce while contributing barely 16% to GDP and growing at just over 3%. In effect, it has become a holding pen for surplus labour, masking underemployment rather than resolving it.
These domestic structural issues are compounded by India’s weak performance in global labour-intensive exports. The much-discussed “China+1” opportunity should have been a windfall for employment, yet India has largely failed to capitalise on it. While policy attention has focused on high-technology manufacturing through production-linked incentive schemes for semiconductors and smartphones, countries like Vietnam have quietly captured the labour-intensive segments that generate mass employment. Vietnam’s exports exceed 90% of its GDP, compared to India’s roughly 22%. Over the past decade, Vietnam’s electronics exports have surged several-fold, while India’s apparel exports—traditionally one of the country’s strongest job creators—have actually declined in real terms. Structural disadvantages play a role: logistics costs remain significantly higher in India, with container shipments from Mumbai costing more and taking longer than from competing ports in Southeast Asia. Equally important is scale. Vietnam’s labour regime allows for large factory clusters employing tens of thousands of workers, whereas India’s manufacturing ecosystem remains fragmented, with the vast majority of textile firms employing fewer than 50 workers. The result is a perverse trade pattern in which India exports raw cotton while importing finished fabric, effectively exporting jobs along with raw material.
Equally troubling is the growing gap between policy intent and execution, a failure rooted less in design than in India’s fractured model of cooperative federalism. Grand schemes are announced at the Centre, but implementation rests with states that control land, labour administration, and last-mile delivery. Nowhere is this clearer than in skilling. Despite millions being certified under flagship programmes, placement rates under PMKVY remain below 45%. A system designed centrally but administered locally has fostered a culture of certification over employment, with weak employer linkage and minimal accountability for outcomes. A similar erosion is visible in rural employment. MGNREGA, once a stabilising safety net, has seen an estimated double-digit decline in person-days generated over the past year. The transition toward productivity-oriented frameworks such as the Viksit Bharat–Rozgar Mission reflects a legitimate policy ambition, but design choices—such as restricting work availability during peak agricultural seasons—have drawn criticism for constraining the poor’s right to employment precisely when income insecurity is highest.
Labour market reform, long recognised as essential, remains trapped in political limbo. The consolidation of 29 labour laws into four modern codes was intended to simplify compliance and encourage scale, yet implementation remains uneven. A handful of states, notably Gujarat and Tamil Nadu, have moved ahead, while large parts of the heartland remain paralysed by political sensitivity. The result is regulatory fragmentation that deters investment in labour-intensive sectors and perpetuates informality.
This divergence is increasingly visible in state-level outcomes. High investment inflows do not automatically translate into jobs. Andhra Pradesh, for instance, has attracted a significant share of recent capital expenditure, yet continues to struggle with relatively high unemployment, reflecting the capital-heavy nature of incoming projects. Gujarat, by contrast, combines moderate investment with dense MSME networks and superior industrial absorption, resulting in consistently low unemployment. Uttar Pradesh presents a different challenge altogether: it leads in enrolments under training and skilling schemes, yet youth unemployment remains alarmingly high, underscoring the gap between training and actual private-sector hiring.If India is to prevent its demographic dividend from turning into a demographic liability, a strategic pivot is unavoidable. Labour-intensive manufacturing must move to the centre of industrial policy, not the margins. India needs large, genuinely plug-and-play textile and footwear clusters with minimal regulatory friction and world-class logistics, explicitly designed for export competitiveness. Incentives must reward employment creation—particularly for women—rather than merely subsidising capital investment. At the same time, the “missing middle” in India’s enterprise landscape must be addressed. An overwhelming majority of MSMEs remain trapped at the micro level, deterred from scaling up by compliance costs and regulatory thresholds. Simplifying GST and labour compliance for firms that cross employment benchmarks could unlock significant job creation. The private sector, too, must shoulder greater responsibility. Complaints about unemployable youth ring hollow without a parallel commitment to training. Mandating structured apprenticeship programmes for large listed companies would help bridge the gap between education and employability.
Equally critical is addressing India’s “missing middle” of enterprises. An overwhelming majority of MSMEs remain trapped at the micro level, deliberately avoiding scale to escape compliance shocks. A credible escalator policy—such as time-bound compliance holidays for firms that expand employment—could unlock growth without reviving inspector-raj anxieties. Finally, skilling must be decentralised to where demand actually exists. The private sector cannot remain a passive critic of employability gaps. Mandatory, structured apprenticeships for large listed firms, supported by government-subsidised stipends, would create a direct pipeline from education to employment.
In the end, 8% growth is a hollow achievement if it does not translate into broad-based opportunity. With female labour force participation stagnating near one-third and youth unemployment entrenched in double digits, the challenge before India is not merely to grow faster, but to grow wider. Until growth once again becomes a generator of dignified work, India’s economic success will remain impressive on paper—and incomplete on the ground.
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