India's labour market is undergoing a structural shift

The latest Periodic Labour Force Survey (PLFS), a much-improved version from earlier ones, reveals how India’s labour market is undergoing a structural transformation.

- SOUMYA KANTI GHOSH

Many defining features emerge from the latest annual report using the unit level data to estimate for the first time.

First, while agriculture remains India’s largest employer, engaging nearly 43% of the country’s workforce in 2025, its share in total employment has steadily declined from 66% in 1987-88, indicating a broad and long-term shift of workers towards non-agricultural activities.

Second, in 2025, 14.5% of India’s workforce had access to substantial capital and scale economies through employment in firms with more than 20 workers. Encouragingly, this represents a notable improvement from 10.8% in 2024, reflecting the government’s emphasis on strengthening the manufacturing sector and expanding formal job generation. Recent policy initiatives, especially the production-linked incentive scheme covering 14-critical sectors and provisions for skill acquisition and upgradation, represent important steps in this direction.

Third, skill development and training are playing a major role in improving employment quality and expanding economic opportunity. Specifically, government-funded training for women, relative to other paths of sharp development, is associated with a 5.8% increase in their probability of self-employment. This suggests that public investment in skill development is not only improving employability but also enabling women to participate actively in entrepreneurial and income-generating activities.