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Introduction

India’s economy grew at 6.5% in FY 2024-25, yet challenges persist as 45% of workers remain in agriculture and nearly 90% in informal jobs. With labour force participation at around 50% and weak productivity growth, rapid GDP expansion risks becoming jobless and unequal, raising concerns over sustainable, inclusive development.

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Productivity-led growth as a driver of jobs and equity

• Enhanced output per worker: Higher productivity increases the output per unit of labor, potentially raising wages and overall economic efficiency.
  Eg: Mechanisation in agriculture boosts per-acre yield, raising farm incomes.
• Sectoral expansion: Productivity improvements in key sectors can spur new industries and ancillary jobs.
  Eg: IT and pharmaceuticals growth in India created high-skilled employment opportunities.
• Demand-driven growth: Productivity-led growth can create jobs when higher incomes generate wider consumption demand.
• Labour participation boost: By increasing productivity through skill upgrades, more workers can be absorbed in high-value sectors.

Productivity-led growth causing jobless growth and inequality

• Labor displacement: Capital-intensive technology can replace low-skilled workers, reducing employment.
  Eg: Automated textile factories employing fewer workers despite higher output.
• Concentration of income: Productivity gains benefit only entrepreneurs and skilled elites, leading to inequality.
• Erosion of demand: Meagre wages from jobless growth reduce effective demand, curtailing long-term growth.
• Short-term unsustainability: Labour-saving productivity raises output briefly but demand collapse follows.
  Eg: The labour-substitution creates unsustainable growth, harming long-run stability.

Way forward to resolve the growth-joblessness-inequality paradox

• Jobs drive growth: Increasing employment boosts overall output more than just increasing production alone.
• Encourage inclusive sectoral growth: Prioritize growth in sectors that generate employment across skill levels, such as manufacturing, agro-processing, and services, to create broad-based opportunities 
• Balanced technology adoption: Encourage labour-friendly mechanisation instead of purely capital-intensive growth.
  Eg: Substitution of labour via mechanisation is shown to be unsustainable without demand growth.
• Strengthen social protection: Implement robust safety nets, wage support mechanisms, and retraining programs for workers displaced by automation or productivity-driven shifts

Policy measures which align productivity with inclusive, sustainable jobs

• Wage-linked productivity policies: Productivity gains must be shared with workers through wage hikes.
  Eg: The wage augmentation alongside employment growth for long-term demand stability.
• Skill development programs: Strengthen schemes like PMKVY to equip workers with skills for emerging productivity-driven sectors, aligning labor supply with industry demands.
• Incentivize labor-intensive innovation: Provide tax benefits or subsidies for productivity-boosting technologies that also maintain or create jobs.
• Promote MSME growth: Support micro, small, and medium enterprises, which are often labor-intensive, to adopt moderate productivity improvements without causing job losses.
• Integrate social equity in productivity policy: Ensure productivity gains lead to fair wages and inclusive opportunities for all social and economic groups.

Conclusion

India’s growth cannot hinge only on capital-intensive productivity, which risks joblessness and inequality. As the article shows, employment growth drives output stability by sustaining demand. Aligning productivity with wage rises, skill development, and equity-focused policies is vital to ensure that rapid GDP expansion translates into inclusive, sustainable development for all.

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