Days before Budget 2024, a note of concern for Finance Minister Nirmala Sitharaman

India faces a tough challenge in creating enough jobs for its rapidly growing workforce over the next decade, even if the economy grows at a brisk 7% annually, Citigroup has said in a report. 

India, according to the report, needs to generate around 12 million jobs annually over the next decade to accommodate new entrants to the labor market. However, with a 7% growth rate, India is projected to create only 8-9 million jobs each year, economists Samiran Chakraborty and Baqar Zaidi said in the report.

The quality of jobs is another pressing issue. Official data reveals that about 46% of the workforce is still employed in agriculture, which contributes less than 20% to the GDP. Manufacturing jobs accounted for only 11.4% of total employment in 2023, a decline from 2018, indicating the sector has not fully recovered post-pandemic.

Finance Commission chairman Arvind Panagariya in an earlier interview had said India's primary challenge is reallocating capital to more labor-intensive sectors rather than merely creating jobs.

He pointed out that too much capital is tied up in industries that don't hire many workers.

"The problem lies in the industry's composition, especially manufacturing," Panagariya told NDTV. "You have sectors like machinery, pharmaceuticals, and petroleum refining that absorb a lot of capital but don't employ enough workers. The focus needs to shift towards industries that can generate more jobs per unit of capital."

Panagariya emphasized restructuring the industrial landscape to favor sectors that create more employment opportunities. He suggested that the government should prioritize industries that employ more workers per unit of capital.

The main problem, he explained, is under-employment, where multiple workers are doing jobs that could be done by one, reflecting low productivity per worker. Panagariya mentioned the upcoming Budget as a crucial test for Finance Minister Nirmala Sitharaman. He highlighted the need for a clear economic policy roadmap that unites various constituencies.