India must focus on key sectors to sustain and improve on past strong momentum

There is no denying the fact that India must focus on labour-intensive sectors such as trade, transportation and storage, and hotels and restaurants, and knowledge-intensive sectors including communication and broadcasting, information technology (IT) and business-process management (BPM), financial services, education, healthcare, and other professional services will collectively have to sustain and improve on their past strong momentum. As per various estimates, nearly 30 million farm jobs could move to other sectors by 2030 as part of a high-growth strategy. To achieve 1.5 per cent employment growth and 6.5 to 7 per cent productivity growth, India needs to leapfrog ahead.

Going by a recent McKinsey study, for the time frame of 2023-30, creating sufficient numbers of gainful and productive non-farm jobs would require GDP growth (measured as the sum of employment and productivity growth) of between 8 and 8.5 per cent annually. This rate of economic growth is needed for India to generate 60 million net new jobs by 2030 and 90 million non-farm jobs, the equivalent of 1.5 per cent annual growth in net employment from 2023 to 2030. This would be in line with the employment growth achieved by India between 2000 and 2012—and almost double the 0.8 per cent historical employment growth over the past 20 years.108 At the same time, India will need to maintain productivity growth at 6.5 to 7 per cent per year, the same as it achieved from 2013 to 2018-19. The two objectives are not contradictory; indeed, employment cannot grow sustainably without high productivity growth, and vice versa. In the high-growth path, India's GDP could expand at 8.0 to 8.5 percent per year, with a sharp rise in employment and sustained productivity growth; the low-growth path implies negligible job creation.

Manufacturing could contribute one-fifth of incremental GDP by 2030, while construction could add one in four of the incremental non-farm jobs required. Labour- and knowledge-intensive services sectors also need to maintain their past strong growth momentum. Across all sectors, three growth booster themes spanning 43 frontier businesses have potential to create $2.5 trillion of economic value and 30 per cent of India's non-farm jobs in 2030.

Over the decade to 2030, India needs to create at least 90 million new non-farm jobs to absorb the 60 million new workers who will enter the workforce based on current demographics, and an additional 30 million workers who could move from farm work to more productive non-farm sectors. To absorb this influx, the country will need about 12 million additional gainful nonfarm jobs every year starting in fiscal-year 2023 - triple the four million nonfarm 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 even greater. By some estimate, India would need to create 145 million incremental non-farm jobs by 2030. That's a big number.