Elevator pitch
The Indian economy entered an ongoing process of trade liberalization, domestic deregulation, and privatization of public sector units in 1991. Since then, per capita output has increased significantly, while the overall unemployment rate has remained moderate. However, labor force participation rates fell sharply, though recovering for women since 2020. Youth unemployment remains high, an overwhelming proportion of the labor force continues to work in the informal sector, labor movement out of agriculture is slow, and there is little evidence of a sustained rise in wages for either unskilled rural or factory workers.
Key findings
Strengths
Presently, per capita real GDP and real GDP per person employed are about 4.5 and 3.7 times their respective levels in 1991.
The overall unemployment rate has remained below 8% for almost the entire period since 1991.
Agriculture and related activities now absorb less than 45% of the labor force and generate about 16% of GDP, down from over 60% and almost 30%, respectively, in 1991.
Weaknesses
For young workers (aged 15 to -24), unemployment has remained at over 20% for most of the period; better educated youths have higher unemployment rates.
Since 2005, the labor force participation rate has fallen sharply for both young male and female workers; also the female to male labor force participation ratio fell, before recovering since 2020.
The output per person employed in agriculture and related sectors has fallen to less than 40% of the economy-wide average, even as more than 40% of the labor force remains in these sectors.
Almost 90% of the labor force continue to be in the informal sector, with no job security or protective labor legislation, while only about 25% earn regular wages or salaries.
The share of wages in net value-added by organized manufacturing firms fell from about 26% to about 16% over the 1990-2022 period, while the share of profits increased from about 22% to about 52%.
