India’s Narendra Modi has a problem: high economic growth but few jobs

Kiran VB, 29, who lives in India’s technology capital Bangalore, had hoped to work in a factory after graduating from high school. But he struggled to find a job and started working as a driver, eventually saving for over a decade to buy his own cab.

“The market is very tough; Everyone is sitting at home,” he said, describing relatives with engineering or business degrees who were also unable to find good jobs. “Even people with college degrees don’t get jobs and sell things or deliver.”

His story points to a deadlocked problem for India and a growing challenge for Prime Minister Narendra Modi’s government, which is seeking re-election in just over a year: The country’s high-growth economy is not creating enough jobs, especially for younger Indians, many without leaving work behind or struggling with work that does not match their abilities.

The IMF forecasts India’s economy will grow 6.1 percent this year – one of the fastest rates of any major economy – and 6.8 percent in 2024.

However, unemployment figures continue to rise. The unemployment rate was 7.45 percent in February, up from 7.14 percent in the previous month, according to data from the Center for Monitoring the Indian Economy.

“The growth we’re getting is mainly driven by corporate growth, and companies in India don’t employ that many people per unit of output,” said Pronab Sen, an economist and former chief adviser to the Indian Planning Commission.

“On the one hand you can see that young people don’t get jobs; On the other hand, companies complain that they don’t get qualified employees.”

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Government jobs, coveted as a ticket to lifelong employment, are few compared to India’s population of nearly 1.4 billion, Sen said. Skill availability is another issue: Many companies prefer to hire older applicants who are have developed required skills.

“Much of the growth in India is driven by finance, insurance, real estate, business process outsourcing, telecom and IT,” said Amit Basole, economics professor at Azim Premji University in Bangalore. “These are the high-growth industries, but they don’t create jobs.”

If India is to reap a demographic and geopolitical dividend, it needs to figure out how to achieve greater employment growth, particularly for young people. The country has a young population that will overtake China as the largest in the world this year. More and more companies are trying to redirect supply chains and sales away from reliance on Chinese suppliers and consumers.

The Indian government and states like Karnataka, whose capital is Bangalore, are promising billions of dollars in stimulus to attract investors in manufacturing industries like electronics and advanced battery production as part of the Modi government’s “Make in India” campaign.

The state also recently relaxed labor laws to mimic labor practices in China after lobbying by companies including Apple and its manufacturing partner Foxconn, which plans to produce iPhones in Karnataka.

However, manufacturing output is growing at a slower pace than other sectors, making it unlikely to become a leading job generator any time soon. According to CMIE’s latest household survey from January to February 2023, the sector employs only about 35 million, while IT accounts for just under 2 million of India’s formal workforce of about 410 million.

According to a senior official in Karnataka, high-quality applicants with university degrees apply to work as police officers.

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The Modi government has shown signs of adjusting to the issue. In October, the Prime Minister presided a rozgar melaor a jobs drive where he presented certificates of appointment to 75,000 young people to demonstrate his government’s commitment to job creation and “skilling India’s youth for a better future”.

However, some opposition figures scoffed at the gesture, and Congress Party President Mallikarjun Kharge said the appointments were “simply not enough”. Another politician called the fair “a cruel joke about unemployed youth”.

Rahul Gandhi, the scion of the family behind the Congress party, has signaled that he intends to make unemployment a target for the upcoming elections, in which Modi is on course to win a third term.

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

“I don’t think a country like India can employ all of its people in services,” he added.

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Ashoka Mody, an economist at Princeton University, invoked the word “timepass,” an Indian slang term for unproductive pastime, to explain another phenomenon plaguing the job market: underemployment of people who don’t match their skills.

“There are hundreds of millions of young Indians doing Timepass,” said Mody, author of India is broken, a new book criticizing the economic policies of successive Indian governments since independence. “A lot of them do this after multiple degrees and colleges.”

Dildar Sekh, 21, immigrated to Bangalore after completing a high school computer programming course in Kolkata.

After losing intense competition for a government job, he ended up working at Bangalore Airport at a ground-handling company helping passengers in wheelchairs, for which he earns about 13,000 rupees (US$159) a month.

“The work is good but the salary is not good,” said Sekh, who dreams of saving enough money to buy an iPhone and treat his parents to a helicopter ride.

“There is no good place for young people,” he added. “The people who have money and connections can survive; the rest of us have to keep working and then die.”

Additional reporting by Andy Lin in Hong Kong and Jyotsna Singh in New Delhi