Unemployment may increase in India over next decade: Report

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Citigroup Inc. has highlighted significant challenges in India’s job market, projecting that the country will struggle to create enough jobs for its growing workforce over the next decade, even if the economy grows at a rapid pace of 7%.

Job Creation Needs and Economic Growth:

  • Citigroup estimates that India will need to create about 12 million jobs a year over the next decade to absorb the number of new entrants to the labor market. However, based on a growth rate of 7%, India can only generate 8-9 million jobs a year.

Quality of Jobs and Sectoral Distribution:

  • The quality of jobs being created in India is a concern, with about 46% of the workforce still employed in agriculture, despite the sector contributing less than 20% to the gross domestic product. Additionally, manufacturing accounted for 11.4% of total jobs in 2023, a lower share than in 2018, indicating a lack of significant growth in this sector since the pandemic.
  • Furthermore, the share of people employed in the formal sector has decreased, with only 21% of the workforce having jobs that pay a salary or wages, compared with 24% before the pandemic. More than half of the 582 million workers in India are self-employed.

Unemployment Rate and Concerns:

  • The official unemployment rate of 3.2% underestimates the scale of the problem, with most economists relying on data from the Centre for Monitoring Indian Economy, which put the jobless rate at 9.2% in May, the highest in eight months. For those aged 20-24, the rate is more than 40%.

Proposed Measures:

  • Citigroup’s economists have proposed a series of measures to boost jobs in India, including strengthening the export potential of manufacturing sectors, extending incentives to attract foreign companies, and filling up about 1 million government vacancies. They also emphasize the need to consolidate multiple employment generation programs for better impact.

The analysis underscores the pressing need for India to address its job creation challenges and take concerted steps to boost employment and skills in the coming years.

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