India’s economic landscape is set for rapid growth, but sustaining this momentum comes with a critical requirement that is job creation. According to a recent Goldman Sachs report, India will need to generate around 10 million new jobs each year from FY25 to FY30 to maintain an annual average Gross Value Added (GVA) growth rate of 6.5%. Meeting this demand for jobs will not only support India’s economic expansion but also ensure more inclusive development across the country. Several sectors and strategic measures have been identified to aid in this ambitious goal.
Affordable Housing: Boosting Employment in Construction
One of the key recommendations from the report is to incentivize affordable housing projects. The real estate and construction sector is vital in India by employing more than 80% of its labour force. By promoting affordable housing, the government can stimulate growth in real estate by subsequently creating job opportunities across a range of skill levels. Such initiatives would benefit both skilled and unskilled labourers by allowing people from different backgrounds to find employment in a growing industry.
Expanding IT Hubs to Smaller Cities
The report also highlights the importance of decentralizing IT hubs and establishing Global Capability Centres (GCCs) in tier-2 and tier-3 cities. Currently, India’s major IT hubs are concentrated in large, tier-1 cities which is leading to urban overcrowding and competition for limited resources. By expanding IT operations to smaller cities, India can reduce pressure on its largest urban centres and create jobs in areas where opportunities are relatively rare. This shift would help balance regional development by bringing growth to underserved parts of the country.
Targeting Labor-Intensive Manufacturing
Goldman Sachs suggests that India’s job creation strategy should include a shift in fiscal policies to support labour-intensive industries such as textiles, food processing, and furniture manufacturing. These sectors have significant potential to employ low- to middle-skill workers. By focusing on industries that demand more hands-on labour, the government can effectively address the employment needs of a large portion of India’s workforce that might not possess advanced skills.
Emphasizing Labour-Intensive Sectors in Production-Linked Incentive (PLI) Schemes
India’s Production-Linked Incentive (PLI) schemes have traditionally focused on capital-intensive industries, which are more machinery-dependent and employ fewer workers per unit of investment. However, there is an encouraging shift towards labour-intensive sectors with PLI benefits now extending to industries like textiles, footwear, toys, and leather goods. This adjustment in focus could drive employment growth in industries that have a high capacity for absorbing a large number of workers including those with basic skills.
Comprehensive Approach to Sustainable Growth
To sustain India’s economic growth trajectory by creating 10 million jobs annually will require a multi-layered approach. This includes incentivizing affordable housing by expanding IT hubs to smaller cities, focusing on labour-intensive manufacturing and strategically adjusting PLI schemes to include more worker-dependent sectors. By implementing these strategies, India can support a balanced, inclusive, and sustainable path to economic prosperity through FY30.
This approach seeks to connect India's manufacturing sector with broader employment objectives, given that around 67% of manufacturing jobs are in labour-intensive industries. Over the last 20 years, India has added about 196 million jobs with two-thirds created in the past decade. A significant transformation has occurred as many workers have moved from agriculture to construction and service sectors.
Employment Growth in Construction
Construction is a major contributor to employment in India, representing approximately 13% of total jobs. Investments in real estate and infrastructure have not only generated jobs but also improved income levels for low to medium-income households. As these sectors expand, they provide essential opportunities for workers transitioning from agriculture and thereby enhancing overall economic stability and growth. Aligning manufacturing with employment goals is vital for sustaining job growth and improving living standards across India.
The Rise of India's Services Sector and Labour Force Participation: A Window of Opportunity
The services sector has emerged as a vital part of India’s economy by employing roughly 34 percent of the nation's workforce. This sector has seen impressive growth over recent years which is driven in part by digital transformation. The retail trade segment, in particular, has experienced notable benefits as businesses increasingly move online. This shift to digital platforms has opened up a wide range of job opportunities especially in support roles like inventory management, packaging, and delivery services. As e-commerce expands, these new roles are helping to meet the demands of a modern economy by making the services sector a major contributor to employment growth.
Rising Labor Force Participation
India's Labor Force Participation Rate (LFPR) has seen a steady increase by moving from 50 percent in the fiscal year 2018 to 60 percent by 2024. A significant factor in this rise has been the growing involvement of women which is particularly seen in rural areas where female participation has seen remarkable growth. This trend reflects a positive shift towards inclusivity and empowerment in the workforce.
Several factors contribute to this increased participation. First, there has been an improvement in how labour data is measured by allowing for a more accurate picture of workforce involvement. Additionally, financial inclusion efforts have made a substantial impact with targeted credit schemes enabling more women to access financial resources, start businesses, or join the workforce. The development of small and micro-enterprises has also played a crucial role as these businesses often provide flexible employment opportunities that appeal to many in rural areas including women.
A Demographic Advantage for India’s Future
India’s demographic profile is currently positioned to offer a rare opportunity for economic growth. The country is experiencing a demographic transition that has led to a low dependency ratio, meaning that there are fewer dependents (such as children and elderly people) relative to the working-age population. Over the next 20 years, a large number of people will enter the labour market by presenting a unique chance to connect this young and dynamic workforce for national progress.
To maximize this opportunity, India needs to continue investing in sectors like services and promoting policies that encourage workforce participation. By creating a favourable environment for both urban and rural workers and fostering financial inclusion, India can strengthen its labour market, thereby ensuring sustainable growth and economic resilience.
The expansion of the services sector is coupled with a growing labour force driven by female participation and demographic advantages which sets a promising foundation for India's future. With strategic policies and continued support for digital transformation and financial inclusion, India stands ready to leverage its human capital to fuel economic development and build a robust and inclusive economy.
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