NCAER study highlights skilling, small firms as key to India’s job growth

Speaking at the launch, NCAER Vice Chairman Manish Sabharwal said that India is on track to become the world’s third-largest economy.

A comprehensive study titled “India’s Employment Prospects: Pathways to Jobs” was released on 11 December 2025 by the Vice Chairman of the National Council of Applied Economic Research (NCAER), Manish Sabharwal. Authored by Professor Farzana Afridi and her research team at NCAER, the report provides an in-depth analysis of India’s evolving employment landscape and identifies skilling and small enterprises as the most critical drivers of future job creation.

The study highlights that while employment levels in India have increased in recent years, much of this growth has been driven by a rise in self-employment rather than wage-based or high-productivity jobs. The transition towards a skilled workforce has been slow, limiting gains in labour productivity and quality employment. According to the report, addressing these structural challenges is essential to increasing workforce participation and sustaining long-term economic growth.

The report argues that strengthening employment opportunities in labour-intensive manufacturing and services sectors could help India maintain GDP growth of around 8%, in line with the vision of Viksit Bharat. It notes that India’s demographic advantage can only be fully realised if accompanied by improvements in skills, productivity, and enterprise growth.

Speaking at the launch, NCAER Vice Chairman Manish Sabharwal said that India is on track to become the world’s third-largest economy. However, he pointed out that the country’s per capita GDP ranking of 128th globally underscores the urgent need to prioritise employment generation and inclusive growth alongside headline economic expansion.

Professor Farzana Afridi, the lead author of the study, emphasised that India’s dominance of self-employment reflects economic necessity rather than entrepreneurial dynamism. She noted that most small and unincorporated household enterprises operate at subsistence levels, similar to small farmers, with limited capital, low productivity, and weak adoption of technology. “India must confront the reality that its employment future is tied to the productivity of its smallest enterprises,” she said.

The report provides strong evidence on the role of technology and finance in job creation. Enterprises that use digital technologies employ 78% more workers compared to those that do not, while even a 1% increase in access to credit raises the expected number of hired workers by 45%. These findings underline the importance of digital adoption and improved credit access for micro and small enterprises.

On the supply side, the study highlights persistent challenges in generating quality employment despite India’s demographic advantage. It stresses the urgent need for upskilling, particularly in the context of rapid technological change and the growing influence of artificial intelligence. While medium-skilled jobs are driving employment growth—especially in services—manufacturing remains largely low-skill intensive.

The study estimates that increasing the share of skilled workers by 12 percentage points through greater investment in formal skilling programmes could result in more than a 13% increase in employment in labour-intensive sectors by 2030. Under a moderate growth scenario, simulations suggest that a 9 percentage point rise in the formally skilled workforce could generate approximately 9.3 million additional jobs by 2030.

Discussing the findings, Dr G.C. Manna, Senior Advisor at NCAER, said the report clearly identifies sectors with strong potential to drive employment growth and offers actionable insights for policymakers. Professor Aditya Bhattacharjea, Visiting Professor at the Institute for Studies in Industrial Development, noted that the study places India in an international context and highlights opportunities to better align domestic policies with global benchmarks.

The report also analyses multiplier effects across sectors, projecting that moderate growth in output within labour-intensive sub-sectors could lead to significant job creation by 2030. Employment in textile, garment, and related manufacturing industries could rise by 53%, while trade, hotel, and related service sectors could see job growth of up to 79%.

To unlock this potential, the study recommends targeted policy interventions. In manufacturing, it suggests reorienting production-linked incentive schemes toward labour-intensive industries such as textiles, garments, footwear, and food processing. In the services sector, enhanced policy support for tourism, education, and healthcare could generate large-scale, inclusive employment opportunities across regions and skill levels.

Overall, the report underscores that India’s employment challenge is not just about creating more jobs, but about creating better jobs through skilling, productivity enhancement, and targeted support for small enterprises.