Medium-skilled jobs, productivity of small firms to drive India’s employment growth: NCAER

The study, India’s Employment Prospects: Pathways to Jobs, led by Professor Farzana Afridi, finds that recent employment gains are driven largely by self-employment rather than high-quality wage jobs, and that India’s shift towards a skilled workforce remains sluggish.

Expanding labour-intensive manufacturing and services, the report argues, will be crucial for maintaining GDP growth around 8 percent, a key pillar of the Viksit Bharat vision.

Launching the report, NCAER Vice Chairman Manish Sabharwal noted that India is poised to become the world’s third-largest economy but still ranks 128th in per capita GDP.

"This highlights valuable opportunities to prioritise employment and inclusive growth,” he said.

Prof Afridi underlined that India’s dominance of self-employment is rooted in economic necessity, not entrepreneurial vitality.

“Like small farmers, most small enterprises operate at subsistence levels. India’s employment future is tied to the productivity of its smallest enterprises,” she said.

Low capital investment, limited technology use, and weak credit access continue to constrain productivity.

The report highlights strong gains from technology and finance adoption: enterprises using digital tools employ 78 per cent more workers, while even a 1 per cent increase in credit access can raise hiring by 45 per cent.

Despite India’s demographic advantage, the workforce remains insufficiently prepared for a technology-driven economy. Medium-skilled jobs, especially in services, are expected to dominate employment growth, while manufacturing remains heavily low-skill.

A 12-percentage point increase in the share of formally skilled workers could boost employment in labour-intensive sectors by more than 13 per cent by 2030, the report estimates.

Under a moderate growth scenario, raising the skilled workforce by 9 percentage points could create 9.3 million new jobs.

NCAER Senior Advisor Dr G.C. Manna said the study identifies high-potential sectors for job growth, while Professor Aditya Bhattacharjea noted that it places India’s employment landscape in a global comparative context.

The report projects substantial job creation from moderate growth in labour-intensive industries. By 2030, employment could rise 53 per cent in textiles, garments and related manufacturing, and 79 per cent in trade, hotels and allied services.

To unlock this potential, the study recommends reorienting production-linked incentives (PLI) toward labour-intensive manufacturing segments such as textiles, footwear and food processing. In services, targeted policy support for tourism, education and healthcare could generate large-scale, inclusive employment.