Indian Narendra Modi has a problem: high economic growth, but few jobs

Kiran VB, 29, a resident of India’s tech capital Bangalore, hoped to work in a factory after graduating from high school. But he struggled to find work and started working as a driver, eventually saving up over a decade to buy his own taxi.

“The market is very tough; everyone is at home,” he said, describing relatives with engineering or business backgrounds who also couldn’t find good jobs. “Even college graduates don’t get jobs and sell things or do deliveries.”

His story points to a lingering problem for India and a growing problem for Prime Minister Narendra Modi’s government seeking re-election in just over a year: The country’s booming economy is failing to create enough jobs, especially for young Indians, leaving many jobless or hard workers who do not match their skills.

IMF forecasts Indian economy will grow 6.1% this year — one of the fastest rates of any major economy — and 6.8% in 2024.

However, the number of unemployed continues to grow. Unemployment stood at 7.45% in February, down from 7.14% in the previous month, according to the Indian Economy Watch Center.

“The growth we’re getting is driven mostly by corporate growth and corporate India doesn’t have many employees per unit,” said Pronab Sen, an economist and former chief adviser to India’s Planning Commission.

“On the one hand, you see that young people are not getting jobs; on the other hand, you have companies complaining that they cannot find qualified people.”

Government positions coveted as a ticket to a lifetime job are few compared to India’s population of nearly 1.4 billion, Sen said. Availability of skills is another issue: many companies prefer to hire older candidates who have skills that are in demand.

“Most 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 Asim Premji University in Bangalore. “These are fast-growing sectors, but they don’t create jobs.”

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

The government of India and states such as Karnataka, of which Bangalore is the capital, are pledging billions of dollars in incentives to attract investors to manufacturing industries such as electronics and advanced battery manufacturing under the Modi government’s Make in India initiative.

State also recently relaxed labor laws imitate China’s working methods after lobbying from companies including Apple and its manufacturing partner Foxconn, which plans to make iPhones in Karnataka.

However, manufacturing is growing at a slower pace than other sectors, so it is unlikely to become a leading job generator anytime soon. According to the latest household survey conducted by CMIE from January to February 2023, the sector employs only about 35 million people, while IT accounts for just 2 million of India’s formal labor force of about 410 million people.

According to a senior official in the state of Karnataka, highly qualified candidates with higher education apply for jobs as police constables.

The Modi government has shown signs of attention to this issue. In October, the Prime Minister held chalk burnor an employment campaign in which he handed out letters of appointment to 75,000 young people designed to demonstrate his government’s commitment to creating jobs and “educating India’s youth for a brighter future”.

But some opposition figures ridiculed the gesture, with Congress Party President Mallikarjun Harge saying there were “too few” appointments. Another politician called the fair “a cruel joke on unemployed youth”.

Rahul Gandhi, a descendant of the family behind the Congress party, has signaled his intention to make unemployment a target in the upcoming elections, in which Modi is on track to win a third term.

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

“I don’t believe that a country like India can hire all of its people in the service industry,” he added.

Ashoka Modi, an economist at Princeton University, used the word “timepass,” an Indian slang term for wasting time unproductively, to explain another phenomenon that’s poisoning the job market: people taking part-time jobs that don’t match their skills.

“There are hundreds of millions of young Indians who travel through time,” said Modi, author of the book India is broken, 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 Seh, 21, moved to Bangalore after completing a computer programming course at a high school in Kolkata.

After losing a fierce competition for a government position, he ended up working at Bangalore Airport for a ground handling company that helps passengers in wheelchairs, for which he is paid about 13,000 rupees ($159) a month.

“The job is good, but the pay is bad,” said Seh, who dreams of saving enough money to buy an iPhone and give his parents a helicopter flight.

“There is no good place for young people,” he added. “People who have money and connections are able to survive; the rest must keep working and then die.”

Additional reporting by Andy Lin from Hong Kong and Jotsna Singh from New Delhi.