India's Job Conundrum

Despite economic growth, India struggles with job creation due to skills gap and an education system misaligned with industry needs

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Recently, a rush at a walk-in interview at Air India in Mumbai created a mini stampede as over 25,000 people assembled to apply for airport loader jobs. This was similar to incidents regularly reported all over the country where an army of youths chase very few jobs, especially the government ones, whenever they are advertised.

However, the fact that it happened in Mumbai, the land of opportunities, took many by surprise and underscored the acute problem of unemployment in the country.

BUT HOW STARK IS THE SITUATION?

According to a recent Citigroup report, India will struggle to create enough jobs for its growing workforce over the next decade, even with a 7% economic growth rate. It estimates that the country needs 12 million new jobs annually but can only generate 8-9 million with the projected growth.

Job quality is another issue, with 46% of the workforce in agriculture, which contributes less than 20% to GDP. The manufacturing sector, employing 11.4% of the workforce in 2023, hasn’t rebounded since the pandemic, and formal sector employment has fallen to 25.7%, the lowest in 18 years. Only 21% of the workforce holds salaried or wage-paying jobs, down from 24% pre-pandemic.

Unemployment, especially among youth, remains a significant concern, affecting voter support for the ruling Bharatiya Janata Party. The official 3.2% unemployment rate is considered an underestimate, with the Centre for Monitoring Indian Economy reporting a 9.2% jobless rate in May, the highest in eight months, and over 40% for those aged 20-24.

Amid the job scarcity, there is an intriguing paradox in the talent market: despite high unemployment rates, the industry bemoans that there is a shortage of people with the right skills. Each year, over 10 million people enter the job market, yet companies across the board are struggling to find qualified talent.