India needs 90 mn non-farm jobs in 2023-2030: McKinsey

29 Aug '20

3 min read

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India needs to create 90 million non-farm jobs between 2023 and 2030 to absorb new workers and an additional 30 million workers who could move from farm work to more productive non-farm sectors, according to a report by the McKinsey Global Institute, which said annual gross domestic product (GDP) growth of 8-8.5 per cent will be required after the pandemic with continued strong productivity growth and faster employment growth than in the past.

“To absorb this influx, the country will need about 12 million additional gainful non-farm jobs every year starting in fiscal-year 2023, triple the four million non-farm jobs created annually between 2012 and 2018. If an additional 55 million women enter the labour force, at least partially correcting historical underrepresentation, India’s job creation imperative would be greater," said the report titled ‘India’s Turning Point: an economic agenda to spur growth and jobs’.

“Choosing a high-growth path that creates 90 million gainful jobs requires India to simultaneously increase its rate of employment growth sharply and maintain its historically strong productivity growth. To achieve 8 per cent to 8.5 per cent GDP growth, net employment would need to grow by 1.5 per cent per year from 2023 to 2030, similar to the average net employment growth rate of 1.5 per cent that India achieved from 2000 to 2012, but much higher than the flat net employment (growth rate) experienced from 2013 to 2018," it said.

India will also need to maintain annual productivity growth at 6.5-7 per cent, which it achieved from 2013 to 2018, the report said. The two objectives—employment generation and growth—are not contradictory and “indeed, employment cannot grow sustainably without high productivity growth and vice versa", the report noted.

In the absence of urgent steps to spur growth, “India risks a decade of stagnating incomes and quality of life", the report said. Besides, in the high growth path, the manufacturing and construction sectors can accelerate the most.

A focused and enabling environment could potentially create 11 million new jobs in manufacturing, 24 million in construction, 22 million in the labour-intensive service sectors and 30 million in the knowledge-intensive service sectors, the report said and clarified that McKinsey looked beyond the pandemic with scenarios beginning in fiscal 2023, “assuming India takes steps to transition out of the covid-19 recession by then".

“If India fails to put in place measures to address pre-pandemic trends of flat employment and slowing economic growth and does not manage the crisis adequately, its economy could expand…with a decadal growth of just 5 per cent," it said underlining that in such a situation, the economy would absorb only six million workers compared to 60 million in the high-growth path, marking a decade of lost opportunity.

The McKinsey report said sector-specific policies for improving productivity in manufacturing and real estate, reducing the cost of doing business, unlocking supply in land markets, creating flexible labour markets, privatizing 30 or so of the largest state-owned enterprises can raise productivity and competitiveness.

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