Near jobless growth in India: An anomaly or an outcome of economic reforms.

Growth That Forgot the Worker

Every year a young graduate from a district town in Bihar or Uttar Pradesh fills forms for a few thousand railway posts alongside lakhs of others, while the newspapers report that India is among the fastest-growing large economies in the world. Both facts are true at the same time, and their coexistence is the puzzle this question names. In 2015, when India's GDP was growing above seven per cent, the Labour Bureau's quarterly survey found that eight labour-intensive sectors had added only about 1.35 lakh jobs in the whole year, the lowest in six years. Growth was visible in the stock market and the airports, but much less in the payroll. Was this a strange accident, or the logical child of the path India chose in 1991? India's near jobless growth is neither a pure anomaly nor an inevitable outcome of reform: it is the outcome of a partial reform, one that liberalised capital and services but left labour, land, skills and manufacturing behind.

The phrase first needs decoding. Jobless growth does not mean that no jobs are created; it means that output rises much faster than decent employment, so that the employment elasticity of growth, the percentage rise in jobs for each percentage rise in GDP, keeps falling. The State of Working India 2018 report of Azim Premji University estimated that in recent years a ten per cent rise in GDP was bringing less than a one per cent rise in employment. The deeper problem is quality. When work grows, it grows mostly as self-employment, casual labour and unpaid family help, not as the regular, protected jobs a young person aspires to. The National Commission for Enterprises in the Unorganised Sector, chaired by Arjun Sengupta, found in 2007 that more than nine in ten Indian workers were informal, a share that years of high growth barely dented.

Those who call it an outcome of reform have a serious case. The reforms of 1991 opened the economy to global capital and technology, and global technology is labour-saving by design. Indian firms competing with the world automated, outsourced and kept permanent rolls thin, preferring contract labour. Growth itself came from services such as software, finance and telecom, which are skill-intensive and absorb few people: the entire IT industry employs about five million workers in a country that adds roughly a crore of young people to its working-age population every year. Economists Santosh Mehrotra and Jajati Parida estimated that total employment actually fell in absolute terms between 2011-12 and 2017-18, a period of healthy growth. On this reading, the market did exactly what markets do: it rewarded capital and skill, and the surplus labour of the countryside was simply not invited to the party.

Yet calling it purely an outcome of reform ignores history. The structure that makes Indian growth labour-light was built long before 1991. The Mahalanobis strategy of the Second Plan put scarce capital into heavy, capital-intensive industry, while the licence raj reserved hundreds of products for small units and discouraged the large labour-intensive factories that made East Asia rich. The Industrial Disputes Act of 1947, after its amendments, required government permission to lay off workers in units with a hundred or more employees, so firms learnt to stay small or to use machines instead of people. In this sense the jobless pattern is an anomaly only for those who expected reform alone to undo four decades of design.

The comparison with East Asia sharpens the point. The Lewis model of 1954 predicted that development would draw surplus workers out of low-productivity farming into higher-productivity factories. China, South Korea and later Bangladesh followed this script through garments, electronics and assembly, employing millions of women in export factories. India skipped the step and leapt from agriculture to services. Dani Rodrik has called this premature deindustrialisation: manufacturing's share of India's GDP stayed stuck at around fifteen to seventeen per cent, far below the twenty-five per cent target that the Make in India programme set in 2014. A worker cannot move from a paddy field to a software firm, but she can move to a garment line. India removed that ladder before most people could climb it.

Moreover, reform did create work, and that weakens the charge of joblessness. Construction absorbed millions of rural workers through the 2000s, the telecom and retail booms created small entrepreneurs in every town, and platform work now employs delivery riders and drivers. The Periodic Labour Force Survey shows the unemployment rate falling from 6.0 per cent in 2017-18 to 3.2 per cent in 2023-24, and the worker population ratio rising from 46.8 to 58.2 per cent. But the same data tell a sobering story about quality. Azim Premji University's 2026 study of labour productivity shows that by 2023-24 a higher share of the workforce was in agriculture than in 2018, and that labour productivity actually shrank by about half a per cent in 2023-24 even as GVA per capita grew 6.2 per cent. Jobs have returned, but largely as low-productivity work in farms and family enterprises. The problem has shifted from jobless growth to growth with poor jobs, which is the same disease showing a different symptom.

Building upon this, the human costs are clear. A demographic dividend unused becomes a demographic burden. Educated unemployment breeds frustration, visible in agitations for reservation by relatively prosperous communities and in the rush for government posts. Women's employment, which rose recently mostly as unpaid helpers in household enterprises, shows that participation is not the same as empowerment. Regionally, jobs cluster in a few southern and western states, sending migrants from the east on long journeys whose fragility the 2020 lockdown exposed when millions walked home. Jobless growth is therefore not an economic statistic alone; it is a question of dignity, social peace and the legitimacy of the reform project itself.

What, then, follows if the cause is a partial reform rather than reform itself? The answer is to complete the reform, not to reverse it. The four Labour Codes, passed in 2019 and 2020 and brought into force in 2025, can make formal hiring easier if states implement them with real social security for gig and contract workers. Labour-intensive sectors such as textiles, leather, footwear, food processing and tourism deserve the priority that capital-intensive sectors receive under production-linked incentives. Small firms need credit and freedom to grow, rather than incentives to stay small. Skilling must be tied to employers through apprenticeships, as Germany's dual system shows, and the Employment Linked Incentive scheme of the 2024-25 Budget is a step towards paying for jobs rather than only for output. Urban employment and investment in care work, health and education can create millions of jobs that also raise human capital.

Growth is a means; the human being is the end.

That idea, at the heart of Amartya Sen's capability approach, gives the final answer to the question. Near jobless growth was an anomaly only to those who believed that GDP would automatically become jobs. It was an outcome of reform only in the sense that reform was left half done: capital was freed, but labour, land and learning were not. The young aspirant filling railway forms is not evidence that reform failed; she is evidence that it has not yet reached her. India's goal of becoming a developed nation by 2047 will be judged less by the size of its economy than by whether its growth finally learns to employ its people.