India’s gross domestic product surged 8.4% in the last three months of 2023 compared with a year earlier. The feat led Prime Minister Narendra Modi to laud “the strength of the Indian economy and its potential” in his post on X (formerly Twitter).

But despite the rosy picture the numbers might have painted, the unemployment situation in the country is grim. And there’s one section that has been hit the hardest: The youth.

According to the “India Employment Report 2024” by the International Labour Organization and the Institute for Human Development, “While the economic growth has had some positive impact on the country’s labour market conditions, it has not led to a radical structural transformation in employment conditions.” The report looks at employment trends and patterns in India’s labour market over two decades from 2002 to 2022.

Where are the jobs?: The report highlights that despite reasonably high growth, India has not seen corresponding expansion in productive job opportunities.

In 2022, at least 8 out every 10 jobless people were youths. The proportion of educated youths among the unemployed section also increased from 54.2% in 2000 to 65.7% in 2022.

The unemployment rate among graduates (at 29.1%) was 9x those who cannot read and write (at 3.4%).

And what’s behind the problem? It is a crisis of employability, says the report, adding that there is a mismatch between education levels, skills and aspirations. Many workers in high- and medium-skill jobs are either underqualified or overqualified.

From the report: “Although educational attainment has increased overall, there appears to be sharp constraints on the demand side that are pulling down the employment rates (for highly educated and poorly educated youths) and thus pushing up the unemployment rates. This leads to even highly educated youths taking up a low-skill blue-collar job.”

Even among those employed, chances are greater that they have been in vulnerable occupations or in the informal sector: “There has been only a marginal gap between youth earnings from wage employment and self-employment, indicating poor conditions of work.”

Growth of the workforce over the years has also not been in line with growth in the labour force in absolute terms, resulting in a substantial rise in open unemployment (19.8 million people). Open unemployment is when skilled or educated workers are unable to find jobs—it is indicative of the lack of livelihood opportunities.

“In particular, open unemployment grew significantly (by 18.6 million persons) between 2012 and 2019, when the employment generation was virtually negligible (at 200,000 persons),” the report says.

Even though the workforce grew between 2019 and 2022 (the COVID-19 pandemic years), such improvement must be examined with caution as the slowdown may have led to workers accepting low-quality jobs or jobs with low wages, the report says.

Let’s also look at sector-wise data. Employment growth across sectors between 2000 and 2019 has been skewed. Jobs moved from agriculture to construction, manufacturing and services-led sectors but the transfer of labour from agriculture to non-farm sectors remained stagnant at 12-14%.

While the construction sector showed high employment elasticity—changes in employment in line with growth—jobs in this sector have largely been characterized by low wages, contractual nature and often informality.

Despite robust economic growth, employment in the manufacturing sector has been sluggish—expanding by only 1.7% per year between 2000 and 2019. Employment in this sector is particularly crucial because it is regular, formalized and has higher earnings and productivity compared to construction, agriculture and some services. A recent paper published in the Indian Journal of Labour Economics also said that there was a need for a conscious effort to identify and promote the labour-intensive manufacturing sector, which would in turn help accomplish inclusive growth.

Gender gap: The labour force participation rate—share of population aged 15 and above either engaged in work or actively looking—among youths declined from 54% in 2000 to 42% in 2022.

Additionally, women’s labour force participation rate was around 22% of the total female working-age population in 2022. In contrast, the labour force participation rate of young men was nearly 3x—the gap in gender inequality in employment has remained consistent over two decades. Bear in mind that women’s labour participation rate in India is among the lowest in the world.

“India’s low LFPR is largely attributed to the low female LFPR, which is much lower than the world average for 2022,” the report said.

And what are the reasons? Unequal education opportunities, underreporting of women’s work in official data, gender wage gap, social and cultural norms, domestic responsibilities and curbs on migration. Apart from that, mechanized farming, shift to commercial dairies, decline in household-level animal farming, occupational segregation and a decline in demand for labour-intensive tasks and the “discouragement effect”—where a lack of jobs is deemed more appropriate for the gender—also restrict women’s participation.

‘Diagnosis easier than solution’: Speaking at the unveiling of the report, chief economic advisor V. Anantha Nageswaran said it was wrong to assume that mere government intervention could solve every economic challenge, contending that diagnosis is far easier than solutions.

“In the normal world, it is the commercial sector who needs to do the hiring,” he was quoted as saying by The Hindu. He also pointed out that labour and employment fall in the concurrent list, and stressed the role of state governments in tackling unemployment.