Skilling, small enterprises key to boost employment growth in India: NCAER

New Delhi: An increase in skilled workforce and productivity of small enterprises can act as key drivers of job creation in the country, according to a report by the National Council of Applied Economic Research (NCAER).

The report authored by Professor Farzana Afridi and her team of researchers at NCAER highlights the need to overcome bottlenecks in increasing both the quality and quantity of workforce participation and labour productivity.

The increase seen in employment is primarily due to the rise in self-employment, while the transition to a skilled labour force has been slow.

Strengthening employment opportunities in labour-intensive manufacturing and services sectors could help sustain GDP growth at around 8 per cent, consistent with the vision of Viksit Bharat, the report said.

“India is on track to become the world’s third largest economy, and while its per capita GDP currently ranks 128th, this highlights valuable opportunities to prioritise employment and inclusive growth,” said Manish Sabharwal, Vice Chairman, NCAER, at the launch of the report.

Afridi called the dominance of self-employment in India an “economic necessity rather than entrepreneurial dynamism”.

“Just like small farmers, most of the small enterprises function at the subsistence level. India must confront the reality that its employment future is tied to the productivity of its smallest enterprises,” Afridi said.

The main challenge is that the unincorporated household enterprises operate with low levels of capital, productivity, and technology adoption.

Further, the report suggested that India’s workforce could benefit greatly from upskilling, particularly with the advent of new technologies and AI.

Medium-skilled jobs dominate employment growth, especially in services, whereas manufacturing remains low-skill intensive.

“Increasing the share of skilled workforce by 12 percentage points through investment in formal skilling could lead to more than a 13 per cent increase in employment in the labour-intensive sectors by 2030,” it said.

Simulations in the report also showed that increasing the formally skilled workforce under the moderate growth scenario could lead to significant job gains in the labour-intensive sectors.

“Increasing the share of skilled workforce by 9 percentage points could generate 9.3 million jobs by 2030,” it said.