Mains Practice Questions

Introduction

India has experienced high economic growth (6.4% in FY25), but this has not translated proportionally into job creation. The phenomenon of jobless growth is a major concern, where GDP expansion has been driven by capital-intensive industries, automation, and technology-led productivity, rather than labor-intensive sectors.

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Structural Factors Responsible for Growth-Employment Mismatch

• Capital-Intensive Growth and Automation
  • Rise of AI and automation in industries like manufacturing, banking, and governance has substituted low-skilled jobs with high-tech, productivity-driven operations.
    • Example: IndiaAI Mission and BharatGen (2024), which promote AI-driven governance, can reduce demand for traditional service-sector jobs.
• Skill Gaps and Mismatch Between Education and Industry Needs
  • India has a predominantly unorganized workforce (90%), with only 20% of the workforce formally skilled.
    • Tech-driven industries such as semiconductor fabrication, AI, and quantum computing face a shortage of skilled professionals.
• Digital Divide and Unequal Job Creation
  • While urban India is benefiting from 5G rollout and the startup ecosystem, rural India lags in internet penetration and digital literacy.
    • 45% of India’s population (665 million people) lacks internet access (2023), limiting their participation in the digital economy and e-commerce sector.
• Weak MSME Ecosystem and Credit Constraints
  • MSMEs contribute 30% to GDP and 40% of exports, but only 20% have access to formal credit, restricting expansion and job creation.
    • CRISIL estimates that only 2.5 crore out of 6.3 crore MSMEs have availed formal credit, highlighting a significant financing gap.
• Regulatory Bottlenecks and Rigid Labor Laws
  • Complex compliance requirements discourage labor-intensive industries such as textiles, construction, and food processing from expanding.
    • India’s four labor codes have been passed but not fully implemented, delaying labor market flexibility.

Strategic Interventions to Ensure Employment-Intensive Growth

• Skilling and Workforce Transformation for Emerging Industries
  • Expand PMKVY (Skill India Mission) with a focus on AI, robotics, semiconductor design, and green energy.
  • Strengthen vocational education in schools and colleges, integrating Industry 4.0 skills.
• Strengthening MSMEs and Entrepreneurship
  • Expand ECLGS and MUDRA loans to improve MSME liquidity and reduce collateral requirements.
  • Promote technology adoption in MSMEs through cluster-based development.
• Boosting Labor-Intensive Manufacturing and Domestic Value Chains
  • Implement PLI schemes for labor-intensive sectors (textiles, food processing, leather, and handicrafts) to generate large-scale employment.
    • Expand plug-and-play industrial zones to simplify business setup and encourage investment.
• Promoting Rural Digital Inclusion and Gig Economy Jobs
  • Accelerate PM WANI Wi-Fi implementation for rural areas to improve digital job accessibility.
  • Integrate e-commerce and gig work opportunities for rural entrepreneurs through platforms like ONDC and UPI-linked fintech services.
• Reforming Labor Laws for Greater Flexibility
  • Fast-track implementation of the four labor codes to encourage formal job creation.
  • Introduce flexible hiring models (gig economy regulations) to support digital and platform-based employment.
• Incentivizing Green Jobs and Sustainable Growth
  • Expand National Green Hydrogen Mission job training programs to enable workforce transition.
  • Promote circular economy-based industries such as recycling, waste management, and sustainable packaging.

Conclusion

To ensure inclusive and employment-intensive growth, India must bridge the digital divide, reform labor policies, invest in workforce reskilling, and strengthen MSMEs. By focusing on labor-intensive manufacturing, domestic value chains, and green jobs, India can achieve sustainable and equitable economic growth.