Skilling, inter-sectoral linkages are key to boost employment in India: NCAER paper

The report on “The Landscape of Employment in India: Pathways to Jobs”, presented by Prof. Farzana Afridi at NCAER’s India Policy Forum 2025, says increasing the share of skilled work force by 12 percentage points through investment in formal skilling could lead to more than 13% increase in employment in the labour-intensive sectors by 2030.

Medium-skilled jobs dominate employment growth, especially in services, while manufacturing remains low-skill intensive. As of 2024, only 4% of workers have received formal training, says the paper.

Outlining some of the policy prescriptions, Prof Afridi and her co-authors say there is need for a multi-pronged approach to increase production capacity in labour-intensive manufacturing and services sectors, including stimulating domestic demand through higher government expenditure and lowering of taxes; policy incentives to stimulate foreign and domestic investment; loosening of labour regulations; credit expansion and ease of doing business with lower formal interest rates.

It also lays stress on the adoption of international best practices and the implementation of national quality benchmarks for training and re-skilling or upskilling existing workers.

Referring to the Production-Linked Incentive (PLI) scheme, the paper points out that it is primarily focused on expanding production of high-value products with backward linkages that require high-skilled labour, but the highest number of jobs under the scheme has been created in the food processing and pharmaceutical industries.

This reflects a mismatch between budgetary allocation under PLI and the potential for employment creation.

The paper’s simulations show that productivity and the quality of the workforce have to be increased significantly to improve labour quality.

It cites the Future of Jobs Report 2025, which highlights that 63% of India’s workforce will need reskilling or upskilling by 2030 to remain competitive.

Among others, the paper suggests incorporating soft skills, digital literacy and Information and Communication Technology (ICT) skills into training programmes to enhance employability, particular within services sub-sectors. Improving training quality, along with increasing the share of formally trained workers, can lead to higher employment gains, it adds.

Since labour-intensive manufacturing and services sectors account for over half of total employment in India currently, the paper advocates significant policy focus on expanding labour-intensive manufacturing and services, along with a systemic overhaul of our education system to enhance the human capital of the labor force.