Need For Productive, Better-Paying And Formal Employment

Source: Indian Express
GS III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

Why in the News?

India has made significant progress in reducing poverty, but the lack of productive, high-paying non-farm employment remains a major obstacle to achieving inclusive growth and becoming a high-income economy.

News in Brief

• According to the World Bank, India’s extreme poverty rate declined to 2.6% in 2023, while poverty at the $4.20 per day threshold fell from 57.7% in 2011 to 16.1% in 2023.
• India’s Labour Force Participation Rate (LFPR) increased to around 59% in 2025, partly driven by rising women’s participation in the workforce.
• However, around 43% of India’s workforce remains dependent on agriculture, while nearly three-fourths of non-farm workers are employed in informal enterprises, characterized by low productivity and limited social security.
• India’s manufacturing sector has failed to generate sufficient employment for low-skilled and unskilled workers, resulting in greater employment concentration in low-productivity services.

Poverty Reduction and Improvement in Living Standards

• India has made considerable progress in reducing poverty and improving living standards across rural and urban areas.
• Extreme poverty declined to 2.6% in 2023 from higher levels in previous years.
• At the $4.20 per day poverty threshold, the poverty rate fell from 57.7% in 2011 to 16.1% in 2023.
• Despite these achievements, poverty reduction alone is insufficient to ensure sustained economic prosperity without productive employment opportunities.

Rising Labor Force Participation but limited job quality

• India’s Labour Force Participation Rate increased to approximately 59% in 2025 for the population aged 15 years and above.
• Increased participation of women has contributed significantly to this improvement.
• However, a considerable proportion of the workforce is engaged in agriculture or self-employment, which may involve low and unstable earnings.
• Therefore, the challenge is not merely increasing workforce participation but ensuring access to productive and better-paying jobs.

Excessive Dependence on Agriculture

• Agriculture continues to employ around 43% of India’s workforce, despite its relatively lower labour productivity.
• In comparison:
  • China: 21.68% of the workforce is engaged in agriculture.
  • Vietnam: 25% of the workforce is engaged in agriculture.
• This indicates that India has been relatively slow in shifting its workforce from agriculture to more productive sectors such as manufacturing and modern services.

Large Informal Employment Sector

• Nearly three-fourths of non-farm workers in India are employed in informal enterprises.
• Informal employment is generally associated with;
  • Low productivity and wages.
  • Limited social security coverage.
  • Employment insecurity.
  • Poor working conditions.
• This restricts income growth and the ability of workers to move towards better living standards.

Weak Employment Generation in Manufacturing

• Unlike several other Asian economies, India’s manufacturing sector has not generated sufficient employment opportunities for low-skilled and unskilled workers.
• Employment has increasingly expanded in low-end services rather than productive manufacturing activities.
• This limits the potential for large-scale employment generation and structural transformation of the economy.

Regional Concentration of Poverty

• According to the World Bank, approximately 57% of India’s poor are concentrated in the northern belt stretching from Uttar Pradesh to West Bengal.
• These regions generally have:
  • Lower per capita incomes than the national average.
  • Fewer productive employment opportunities.
  • Greater dependence on low-income occupations.
• Migration to higher-income regions has become an important means of accessing better non-farm employment opportunities.

Major Challenges

• Agricultural dependence: A large share of the workforce remains concentrated in agriculture, where labour productivity and incomes are relatively low.
• Informalisation of employment: A significant proportion of workers lack stable employment, adequate wages and social security.
• Weak manufacturing base: Insufficient labour-intensive manufacturing limits the absorption of low-skilled and semi-skilled workers.
• Low-quality service sector jobs: Employment growth in low-end services does not necessarily translate into higher productivity or better earnings.
• Regional inequalities: Concentration of poverty and limited job opportunities in northern states encourage distress migration.
• Gender-related barriers: Although women’s labour force participation has increased, ensuring access to productive, secure and adequately paid employment remains important.

Way Forward and Conclusion

India should promote labor-intensive manufacturing, strengthen MSMEs, improve agricultural productivity and expand skill development to generate productive employment. Formalizing jobs, improving social security, encouraging women’s participation and addressing regional inequalities are equally important.

India must shift from poverty reduction towards creating secure, productive, and better-paying jobs to achieve inclusive growth and become a high-income economy.

Daily Current Affairs: Click Here

Rate this Article and Leave Feedback