India’s Narendra Modi has a problem: high economic growth but few jobs

Kiran VB, 29, a resident of India’s tech capital Bangalore, had hoped to work in a factory after finishing high school. But he struggled to find a job and began working as a driver, eventually saving over a decade to buy his own cab.

“The market is very tough; everyone is sitting at home,” he said, describing relatives with engineering or business degrees who also failed to find good jobs. “Even people who graduate from high schools don’t get jobs and sell things or deliver.”

His story points to an ingrained problem for India and a growing challenge for Prime Minister Narendra Modi’s government as it seeks re-election in just over a year: the country’s high-growth economy is failing to create enough jobs, especially for younger Indians, leaving many out of work or struggling in labor that does not match their skills.

The IMF predicts that India’s economy will grow by 6.1 percent this year – one of the fastest rates of any major economy – and 6.8 percent in 2024.

But the number of unemployed continues to rise. Unemployment in February was 7.45 percent, up from 7.14 percent the previous month, according to data from the Center for Monitoring Indian Economy.

“The growth that we are getting is primarily driven by corporate growth, and corporate India does not employ that many people per unit of output,” said Pronab Sen, an economist and former chief adviser to India’s Planning Commission.

“On the one hand, you see that young people do not get jobs; On the other hand, you have companies complaining that they cannot get skilled people.”

Government jobs, coveted as a ticket to lifelong employment, are few in number compared to India’s population of nearly 1.4 billion, Sen said. Availability of skills is another issue: many companies prefer to hire older applicants who have developed skills that are in demand.

“Much of the growth in India is driven by finance, insurance, real estate, business process outsourcing, telecommunications and IT,” said Amit Basole, professor of economics at Azim Premji University in Bangalore. “These are the high-growth sectors, but they are not job creators.”

Figuring out how to achieve greater job growth, especially for young people, will be critical if India is to capitalize on a demographic and geopolitical dividend. The country has a young population that will surpass China’s this year as the world’s largest. More companies are looking to redirect supply chains and sales away from dependence on Chinese suppliers and consumers.

India’s government and states like Karnataka, where Bangalore is the capital, are promising billions of dollars in incentives to attract investors in manufacturing industries such as electronics and advanced battery production as part of the Modi government’s “Make in India” drive.

The state has also recently loosened labor laws to mimic working methods in China following lobbying by companies including Apple and its manufacturing partner Foxconn, which plans to produce iPhones in Karnataka.

However, manufacturing output is growing more slowly than other sectors, making it unlikely to emerge as a leading generator of jobs anytime soon. The sector only employs around 35 million, while IT accounts for just under 2 million. out of India’s formal workforce of around 410 million according to CMIE’s latest household survey from January to February 2023.

According to a senior official in Karnataka, highly qualified applicants with university degrees are applying to work as police officers.

The Modi government has shown signs of being attuned to the problem. In October, the Prime Minister presided over a rozgar melaor an employment drive where he handed out employment letters to 75,000 young people to demonstrate his government’s commitment to creating jobs and “qualifying India’s youth for a brighter future”.

But some opposition figures derided the gesture, with Congress party president Mallikarjun Kharge saying the appointments were “just too few”. Another politician called the fair “a cruel joke about unemployed youth”.

Rahul Gandhi, the scion of the family behind the Congress party, has signaled his intention to make unemployment a point of attack for the upcoming election, where Modi is on course to win a third term.

“The real problem is the unemployment problem and that generates a lot of anger and a lot of fear,” Gandhi said in a question-and-answer session at Chatham House in London last month.

“I don’t believe a country like India can employ all its people with services,” he added.

Ashoka Mody, an economist at Princeton University, invoked the word “timepass,” an Indian slang term meaning to spend time unproductively, to explain another phenomenon plaguing the labor market: the underemployment of people in jobs that don’t match their skills .

“There are hundreds of millions of young Indians doing time passes,” said Mody, author of India is devastated, a new book criticizing the economic policies of successive Indian governments since independence. “A lot of them do it after multiple degrees and colleges.”

Dildar Sekh, 21, migrated to Bangalore after completing a high school course in computer programming in Kolkata.

After losing out in intense competition for a government job, he ended up working at Bangalore’s airport with a ground handling company that assists passengers in wheelchairs, for which he is paid about Rs 13,000 ($159) a month.

“The work is good, but the pay is not good,” said Sekh, who dreams of saving enough money to buy an iPhone and treat his parents to a helicopter ride.

“There is no good place for young people,” he added. “The people who have money and connections are able to survive; the rest of us must continue to work and then die.”

Additional reporting by Andy Lin in Hong Kong and Jyotsna Singh in New Delhi