High growth rate of 7% not enough for India to create enough jobs: Citibank

By:
on Jul 7, 2024
Listen
  • Official unemployment rate of 3.2% "underestimated" the scale of joblessness in the country.
  • Quality of jobs also a challenge.
  • Unemployment played a significant role in the recently concluded general elections in India.

Follow Invezz on Telegram, Twitter, and Google News for instant updates >

Even a rapid growth rate of 7% will not be enough for India to create enough jobs for its growing workforce over the next decade, Citigroup said in a report as reported by Bloomberg. 

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

The American investment banking major said the second most populous country in the world will need more concerted steps to boost employment and skills. 

Unemployment was a major issue in the country’ recently concluded general elections and is seen to have played a significant role in preventing the ruling Bhartiya Janata Party from gaining an absolute majority. 

What are the estimates

Copy link to section

According to the Bloomerg report, Citi estimated that India will be required to create 12 million jobs every year over the next decade to absorb the number of new entrants to the labour market. 

A 7% growth rate will only help the country generate 8-9 million jobs. 

Citi said the official unemployment rate of 3.2% “underestimated” the scale of joblessness in the country. Economists instead relied on data from the Centre for Monitoring Indian Economy (CMIE), a private research firm which put the joblessness rate at 9.2% in May, highest in eight months. 

For those aged 20-24, the rate was more than 40%, according to CMIE. 

Quality of jobs also a challenge 

Copy link to section

According to the report, 46% of the workforce was still employed in agriculture even though the sector contributed less than 20% to the country’s gross domestic product (GDP), followed by 11.4% engaged in manufacturing in 2023 which was lower than the share in the year 2018. 

Also, the share of people employed in the formal sector fell to 25.7%, lowest level in at least 18 years, Citi said. 

Share of people who have jobs that pay a salary or wages has also gone down from before the pandemic. Only 21%  of the workforce — or about 122 million people in India have jobs that pay a salary or wages, compared with 24% before the pandemic. More than half of the 582 million workers in India are self-employed, figures showed. 

Measures to boost jobs in India

Copy link to section

Citi suggested that strengthening the export potential of manufacturing sectors, extending incentives to attract foreign companies and filling up about 1 million government jobs vacancies. 

It said he government would also need to consolidate multiple employment generation programs for better impact. 

India Asia World