With 7% growth in 2025-26, India is one of the fastest-growing major economies and a bright spot on the global economy (IMF). A major driver of this performance has been the expansion in labour activity.
Economic growth attributed to labour activity
Demographic dividend – Median age of 28 and 65% working-age population (65%) has increased labour supply and productive capacity.
Shift towards labour-intensive sectors: Growth in construction, retail, transportation, tourism, gig and platform economy
Surge in self-employment – from 52% (2017) to 58% in 2024 (PLFS data)
The government’s skilling push through Kaushal Vikas Yojana and the Skill India Mission improved workforce capabilities.
India becoming the 3rd largest start-up ecosystem has generated new entrepreneurship-led employment.
Rise of gig economy- Platform-based work has widened job opportunities.
Labour Code reforms- consolidation of labour laws has improved hiring flexibility and EoDB.
Other reasons
GST reforms
Ease of Doing Business reforms
IBC
PLI schemes
However, this growth pattern is problematic due to
Low productivity trap: Most new jobs are in informal, low-wage, low-productivity sectors.
Disguised employment rising: Higher labour supply masks underemployment.
Limited wage growth: High labour participation has not translated into better wages.
Structural transformation incomplete: Manufacturing’s share in jobs and GDP remains stagnant.
Suggested Growth Pattern to Create More Jobs Without Compromising Productivity
Manufacturing-led, technology-enabled growth
Expand labour-intensive manufacturing such as textiles, toys, leather, electronics assembly. Eg: PLI schemes for electronics, textiles.
Use AI, robotics, lean production to improve productivity while expanding scale.
MSME upgradation – Enable cluster-based development, digitalisation, easier credit. Eg: MSME Champions Scheme, ONDC for market linkages
Skill-based job creation through programs like Skill India, PMKVY 4.0.
Boost food processing, millets, horticulture, and FPO-based value chains.
Employment in solar manufacturing, EV ecosystem, recycling, energy efficiency can raise both jobs and productivity.
Strengthen urban employment ecosystems – Invest in urban infrastructure, housing, logistics, and city industrial clusters.
Improve FLFPR through childcare support, flexible work, safety, and skilling.
India’s recent growth has been driven more by labour mobilisation than by labour productivity. A shift towards manufacturing-led, technology-driven, and green growth is essential for Viksit Bharat 2047.