| Introduction: Contextual Introduction Body: What reforms are needed in the labor market and industrial growth? Conclusion: Way forward |
India’s demographic advantage, with 63% of its population in the working age group and a median age of around 28, presents a significant opportunity to propel economic growth. However, the country’s labor force participation rate, which stood at 55.2% in 2022, coupled with challenges in employment generation, particularly in the manufacturing sector, necessitates a series of reforms to fully harness the demographic dividend.
Reforms in Labour Market and Industrial Growth
- Labor law reforms: India’s current labor laws, which are often considered outdated, impose high compliance costs and discourage businesses from expanding. The delay in implementing the new labor codes, despite being approved by Parliament, has created uncertainty for investors and businesses.
- Boosting manufacturing through MSMEs: Micro, Small, and Medium Enterprises (MSMEs) are the backbone of employment in India, but their reluctance to scale due to regulatory and financial barriers needs to be addressed. Easing compliance burdens and providing better access to credit will allow MSMEs to grow and absorb more workers.
- Upgrading vocational training and lifelong learning: The Economic Survey of 2023-24 highlighted that only 4.4% of the workforce in the age group of 15-29 is formally skilled, presenting a major dichotomy of labor surplus and skill shortages. Skilling is not a one-time effort but a continuous process. The New Education Policy (NEP) 2020’s focus on foundational skills, critical thinking, and higher-order cognitive skills is a step in the right direction but needs regular review to stay aligned with the rapidly changing economic landscape.
- Public-private partnerships in skill development: Meaningful public-private partnerships are essential to bridge the gap between the skills provided and the skills required by the industry. By involving industries in curriculum design and offering on-the-job training, India can create a workforce that meets the demands of a modern, technology-driven economy. This partnership would also help align the educational sector with emerging sectors like AI/ML, data analytics, and biotechnology.
- Fostering labor-intensive industries: Sectors such as textiles, construction, and food processing have the potential to absorb large sections of the workforce. Policies encouraging investment in such industries, including incentives for domestic manufacturing under Make in India, can boost job creation.
Conclusion
A combination of technological adaptation, state-centric reforms, and enhanced productivity in both agriculture and non-agricultural sectors will ensure that India remains on track to leverage its demographic advantage and emerge as a global economic leader.
