In the context of India’s economic development, expanding the total number of jobs is crucial for fostering long-term economic prosperity and stability. Despite the progress made over the years, the country still faces significant challenges in terms of employment structure. The transition from agriculture to non-farm sectors has not gained the momentum needed to drive a sustainable economic shift. A primary factor for this is the low percentage of workers in manufacturing, which currently accounts for only 11.4% of the nation’s nearly 56.5 crore workforce, contrasted with the large proportion of self-employed individuals, a staggering 57.3% of the workforce. Alongside this, the vast majority of new jobs created over the past two decades have been in the informal sector, which comes with its own set of productivity constraints and limits on career progression. To truly realise the potential for economic prosperity, a strategic approach focusing on job creation in formal, high-productivity sectors is necessary.
Addressing the Structural Challenges in Employment
Increasing the overall number of jobs is essential, as the transition from farm to non-farm employment won’t speed up until we raise manufacturing employment from its current 11.4% of total jobs and reduce the dominance of self-employment. Informal, self-employment perpetuates modern-day exploitation and hampers productivity by fostering small-scale enterprises that lack access to credit and don’t create career growth opportunities.
Strengthening Infrastructure to Support Manufacturing
The primary objective remains boosting the total number of jobs. To achieve this, the first step is improving the infrastructure necessary for manufacturing, such as reliable electricity, highways, deep-sea ports, and a revitalised rail system.
Promoting Urbanisation for Efficient Job Creation
The second priority should be urbanisation. India only has 50 cities with populations over a million, whereas China has 400. With 600,000 villages, 200,000 of which have fewer than 200 people. Our policymakers often focus on creating jobs in rural areas, which is good in principle, but job creation in 600,000 villages is far more difficult than building large urban centres, which become the hub for surrounding villages. This will help to bring people closer to where the jobs are. Encouraging such movement could help facilitate growth.
Simplifying Regulations to Encourage Entrepreneurship
Third, tackling regulatory barriers is crucial. India remains a difficult environment for entrepreneurship due to burdensome regulations that make starting and running a business complex and costly. Data indicates that setting up a large production centre requires compliance with over 1,500 laws and more than 69,000 compliances across central and state governments. This is further substantiated by the high number of small businesses—77% of Indian firms employ fewer than 40 employees. Small businesses in India are likely to remain small as growth comes with increased complexity of regulations. This negatively impacts the overall growth and productivity numbers of the country. While India has jumped 14 ranks to 63rd position in 17th edition of World Bank Ease of Doing Business 2020 report, the Global Trade Research Initiative (GTRI) review found the business registration system in India to be time-consuming and lacking complete digital integration, unlike countries like Singapore that achieve one-day online registration with minimal costs. In order to kick-start the job creation engine, it is imperative that we further improve our EoDB score by simplifying procedural complexity and reducing processing times. As of today, setting up a business takes about 0.5 days in New Zealand, 1.5 days in Singapore, and 10–15 days in India.
Ensuring Regulatory Stability to Attract Investments
The fourth priority is ensuring regulatory stability. A stable and predictable regulatory environment is critical for attracting long-term investments that create jobs. Inconsistent tax policies and regulatory uncertainty can deter investors, disrupting the capital flows necessary for building employment-intensive industries. For example, foreign-invested enterprises still account for around 58–60% of India’s exports, and this export activity has historically supported large-scale job creation, both directly and through broader consumption. However, with global trade dynamics shifting and competition intensifying, India must prioritise regulatory clarity and simplification to encourage private sector expansion and generate employment at scale.
Maintaining Macroeconomic Stability for Long-Term Growth
Finally, macroeconomic stability is vital for sustained economic growth and job creation. India’s retail inflation moderated to 3.34% in March 2025, driven largely by a sharp decline in food prices. In response, the Reserve Bank of India (RBI) lowered the repo rate to 6% in April, adopting an accommodative monetary policy stance. Despite these measures, the World Bank has revised India’s GDP growth forecast for the fiscal year 2025/26 to 6.3%, down from 6.7%, due to global economic uncertainties and subdued private investment. These factors underscore the need for targeted policies to stimulate job-rich sectors and bolster economic resilience.
In conclusion, addressing these interconnected priorities—job creation, infrastructure development, urbanisation, regulatory reforms, and macroeconomic stability—will be essential for India’s economic growth. The country has immense potential to transform its labour market and foster sustainable employment opportunities, but it requires concerted efforts in these key areas to unlock this potential. By focusing on expanding both formal employment and industrial growth, India can take advantage of emerging opportunities, address structural inefficiencies, and pave the way for a more inclusive and dynamic economy in the future.
