Industry is growing, but isn’t creating jobs

India's formal manufacturing sector is experiencing steady growth, with output increasing by 7.8 percent and employment up by 7.2 percent in 2024-25, according to the Annual Survey of Industries. However, wage growth lags behind profit increases, and output per worker has remained stagnant. With invested capital on the rise, these trends have implications for consumption, investment, and productivity across the economy.

While the sector now employs over 2 crore people, formal manufacturing and services still fall short of providing sufficient job opportunities. The majority of non-farm workers, 73.1 percent, remain in the informal economy, as indicated by the Periodic Labour Force Survey 2025. Despite the growth in the formal sector, it remains dominated by small firms.

Bigger factories, employing over 100 workers, tend to provide higher wages and productivity. Despite government efforts, manufacturing has not become a major source of mass employment in India, unlike in economies such as Korea and China. Consequently, each year, millions entering the labor force and those seeking to exit agriculture lack viable alternatives, leading many to either remain on farms or take up gig work. The lack of alternative employment avenues underscores India's ongoing employment challenge.