Shram Shakti Vs systemic shackles: India’s job policy needs more action than Intent

The government’s intent to augment employment generation is outlined in Shram Shakti Niti-2025, the draft national labor and employment policy, which was released on Wednesday. The Union Labour Ministry’s draft emphasizes green and technology-driven career opportunities.

The policy ‘repositions the Ministry of Labour & Employment (MoLE) as an Employment Facilitator, enabling convergence among workers, employers, and training institutions through trusted, AI-driven systems.’ It also strives to prioritise female workforce participation, social-security benefits for gig and platform workers, and expedite a raft of job-market reforms.

The draft policy is in tune with Prime Minister Narendra Modi’s Independence Day announcement to roll out a Rs1 lakh-crore scheme for new job seekers. In her Budget 2024-25, Finance Minister Nirmala Sitharaman had also announced the PM Internship Scheme 2025.

Evidently, no one can doubt the government’s earnestness in boosting employment generation; the problem, however, is systemic, which can be solved only if the solutions too are systemic.

At the heart of the issue is the government’s—to be precise, the political class’—statist approach to anything related to the economy.

Take the case of the implementation of GST 2.0; a large part of the government machinery mandated to protect consumer interests started micromanaging the passing on of the reduction in GST to consumers—a dangerous proclivity reminiscent of the price controls of the pre-1991 dark ages.

Just as competition brings down prices, a favourable business climate attracts investment. Here, too, the government has failed to instill enough confidence in investors to convince them that India is a good place for their money to grow.

This is apparent in the flight of high-net-worth individuals and increased repatriation and outward foreign direct investment (FDI). For instance, net FDI inflows into India dropped sharply, by 96 per cent, to $353 million in 2024-25. Unsurprisingly, India has been unable to capitalize much on the China+1 policy of developed nations and global majors.

The flight of capital and talent is symptomatic of a deeper malaise: a sense that India’s policy environment remains uncertain, its bureaucracy unpredictable, and its enforcement arbitrary.

Investors crave policy stability and administrative consistency—both of which India continues to struggle with despite decades of reform rhetoric.

It is this failure to build a truly enabling ecosystem that has prevented India from fully leveraging the China+1 opportunity. In theory, given its sprightly entrepreneurs, competent professionals, and large English-speaking populace, India should have been a natural magnet for global manufacturing shifting away from China due to geopolitical tensions and supply-chain diversification.

In practice, however, Vietnam, Indonesia, and Mexico have fared better. Their business ecosystems, though smaller, are perceived as more efficient, more predictable, and less entangled in red tape.

India’s high logistics costs, cumbersome land acquisition processes, and rigid labour regulations have further deterred large-scale manufacturing investments—the very ones that could generate millions of jobs.

The government’s Production-Linked Incentive (PLI) schemes have helped to some extent, especially in electronics and pharmaceuticals, but they remain limited in scale and reach. For every Foxconn or Samsung facility that comes up, dozens of small and medium enterprises—India’s real job creators—continue to struggle with compliance overload, delayed payments, and regulatory uncertainty.

Therefore, while Shram Shakti Niti-2025 can help our workforce, unless structural constraints are removed, neither economic development will be robust nor job creation adequate.