Can India achieve double-digit growth and create enough jobs in the next decade?
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India's labour participation rates are still low by international standards, and many workers are stuck in low-productivity jobs. Today, 180 mn people are below the international poverty line. This trend of underemployment has been exacerbated by the Covid shock, given that the bulk of the increase in employment since FY20 has been driven — somewhat counterintuitively — by the primary sector. About 42% of the workforce is employed in the primary sector, even though it accounts for only 18% of GDP.
In the next 10 years, the working-age population will continue to grow at a rapid pace. If participation rates stay low at the current level of 60%, India's labour force is projected to grow by at least 85 mn. This number will be close to 150 mn if the participation rate rises to around the global average of 66%. If growth is maintained at 6.5% over the medium term, we estimate there will be a shortfall of 40 mn jobs, assuming a 60% participation rate (in other words, 40 mn will be unemployed). This shortfall increases to 110 mn jobs if the participation rate rises to 66%.
To make up for this jobs shortfall, we estimate that GDP growth rates would need to be between 8-11%. If we want to address underemployment, then the economy would need to grow at a rate of 12-14% for a certain period.
The numbers highlight
