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Introduction

India’s demographic dividend depends not merely on creating jobs, but on ensuring productive, inclusive, and quality employment. While PLFS 2025 shows improving labour indicators, structural gaps like NEET youth and gender exclusion continue to constrain growth.

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Structural Bottlenecks in India’s Labour Market

• NEET Youth: A large share of youth remain outside employment, education, or training, weakening demographic gains.
• Gender Gap: Female labour force participation remains constrained despite gradual improvements in employment indicators.
• Informal Jobs: A large workforce remains trapped in low-productivity informal employment without social security or stable wages.
  Eg: Agriculture and informal services still absorb a major share of workers despite urbanisation.
• Skill Mismatch: Education levels have improved, but job-ready skills remain weak, causing unemployment among educated youth.
  Eg: Average schooling reached 10 years nationally, but employability remains limited.
• Low Quality Work: Employment growth often comes in self-employment or vulnerable work rather than regular salaried jobs.
  Eg: Regular salaried employment amounts to ~24%, informal work still dominates.

Factors Responsible

• Weak Manufacturing: Labour-intensive manufacturing has not expanded enough to absorb millions entering the workforce annually.
  Eg: Around 7–10 million youth enter the labour market every year, but formal sector absorption remains slow.
• Social Norms: Patriarchal restrictions, unpaid care work, and safety concerns reduce women’s workforce participation.
• Poor Skilling: Training systems remain disconnected from industry demand, creating educated but unemployable youth.
• Rural Dependence: Excess dependence on agriculture hides underemployment and suppresses labour productivity.
  Eg: Many workers remain in low-income farm jobs despite declining agriculture’s GDP share.
• Limited Formalisation: Small enterprises struggle to scale, limiting regular wage jobs and social security coverage.
  Eg: MSMEs employ millions but often remain outside formal labour protection systems.

Policy Measures for Productivity-Led Growth

• Manufacturing Push: Expand labour-intensive sectors like textiles, food processing, and electronics for mass employment generation.
  Eg: Production Linked Incentive (PLI) schemes aim to boost manufacturing competitiveness.
• Gender Inclusion: Improve childcare, transport safety, flexible work, and workplace equality to raise women’s participation.
  Eg: Maternity Benefit Act and creche provisions support retention of women workers.
• Skill Alignment: Align skilling with local industry demand and apprenticeships for smoother school-to-work transition.
  Eg: PMKVY and National Apprenticeship Promotion Scheme support industry-linked training.
• Formalisation Drive: Strengthen MSMEs and simplify compliance to generate more regular salaried employment.
  Eg: Udyam registration and E-Shram portal support formalisation and worker visibility.
• Urban Job Policy: Develop urban employment strategies for youth through services, green jobs, and digital economy expansion.
  Eg: Gig economy and digital services can absorb educated urban youth with proper safeguards.

Conclusion

India’s labour market challenge is not only unemployment but underutilisation of human potential. Converting demographic advantage into productivity-led growth requires quality jobs, gender inclusion, and skill-driven formal employment that transforms workers into growth engines.

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