NCAER Report Highlights Lack of Stable, Productive Jobs for Youth
New Delhi: The December 2025 report 'India’s Employment Prospects: Pathways to Jobs', released by the National Council of Applied Economic Research (NCAER), opens with an unambiguous warning: India is not creating enough stable and productive employment for its rapidly expanding working-age population, particularly its youth and women.
The executive summary stresses that unless India simultaneously stimulates labour demand in manufacturing, services and MSMEs, and overhauls its fragmented vocational training ecosystem, the country risks watching its demographic dividend narrow significantly by the 2040s.
NCAER was founded in 1956 and regarded as India’s oldest and most respected economic policy research institute.
Political narrative vs. labour-market realities
Its report situates its concern against a political narrative that routinely celebrates India’s youth bulge as a strategic economic strength. Prime Minister Narendra Modi has often framed India’s young population as one of the highest priorities of India, describing India’s talent pool as “the biggest beneficiaries and stakeholders of a developed India.”
NCAER’s data, however, highlights the widening gap between rhetoric and reality. In the past seven years, India added about 90 million people to the working-age group but created only 60 million jobs; a shortfall of roughly 5 million jobs each year. Labour-force participation remains stagnant at 50%, and young women’s participation remains well below global averages.
As labour economist Santosh Mehrotra told The Wire, “India is in a race against its own demographics. High growth without high employment is a treadmill; lots of movement, very little progress.” The report cautions that the demographic window begins to narrow after the late 2040s, leaving policymakers with a limited period for corrective action.
Growth rising, hiring dipping: the demand-side disconnect
A large share of the report is devoted to the demand-side challenge, which it describes as a structural disconnect between economic growth and employment growth. Firms in both manufacturing and services are becoming increasingly capital-intensive, with investments tilting toward machinery and automation rather than labour.
NCAER India’s Employment Prospects: Pathways to Jobs 2025 - Figure 4.8: Correlation between hired workers and GVA (2022 - 24). Photo: NCAER Report
India’s labour-to-capital ratio is now lower than that of countries at comparable income levels, and even sectors traditionally known for labour absorption, such as garments, textiles and electronics, are shifting toward more automated production models. Services remain the largest employer, but their labour intensity, too, is declining. Meanwhile, agriculture continues to employ about 45% of the workforce while contributing just 15% of GVA, a distortion that has resisted correction for decades.
Former chief statistician Pronab Sen summed up the structural imbalance succinctly when he said: “India industrialised too little, too late, and too capital-intensively. We leapfrogged into services without building the wide manufacturing base that pulls millions out of low-productivity work.” NCAER identifies this as a case of premature deindustrialisation.
A weak skilling pipeline undermines labour supply
On the supply side, the report details a severe skills deficit. Only 4% of India’s workforce has received formal vocational training. While informal apprenticeships are widespread, they seldom translate into stable, skilled or upwardly mobile work.
International comparisons present an even starker picture: other countries with similar vocational training rates manage far higher high-skill employment, indicating that India’s challenge lies not just in access but in quality.
Skill-development expert Anita Rajan told The Wire: “The training ecosystem is chronically underpowered. Vacant instructor posts, weak industry linkages, poor placements; India trains millions but prepares very few.” Productivity levels reflect this long-standing weakness: despite improvements over the last three decades, India continues to lag significantly behind China and other fast-transforming economies.
Where the jobs could come from if policy aligns
NCAER’s projections identify where substantial job creation could occur. If manufacturing expands at 8.2% and services at 9%, the Indian economy can maintain 8% GVA growth through 2030. Under this scenario, manufacturing could create roughly 71,543 jobs annually and services about 279,130 jobs. With targeted policy support for labour-intensive industries, employment could rise sharply: 53% in textiles, garments and footwear, and 79% across trade, hotels and restaurants.
Figure 4.9: Distribution of GVA by type of enterprise (2022-24). Photo: NCAER Report
The report’s most notable finding is that a nine-percentage-point increase in formally trained workers could generate 9.3 million additional jobs by 2030, while a twelve-percentage-point rise could boost employment in labour-intensive sectors by 13%. However, achieving this requires deep reforms to India’s VET ecosystem, including a substantial expansion of qualified instructors, stronger industry linkages, earlier integration of vocational education in schools and higher public investment.
Former NITI Aayog vice-chairman Rajiv Kumar put the challenge in simple words to The Wire: “We cannot build a 21st-century economy with a 20th-century skilling system.”
Micro-enterprises hold untapped employment potential
The report also highlights India’s vast informal non-agricultural sector; over six crore micro-enterprises, most of them one-person establishments, as a dormant employment engine. Two findings stand out: digital-tech-using micro-enterprises employ 78% more workers than non-tech users, and a 1% increase in credit access leads to a 45% rise in the number of hired workers. Encouraging Own Account Enterprises (OAEs) to transition into Hired Worker Enterprises (HWEs), particularly in manufacturing, could significantly expand employment. This transition, however, hinges on improving access to credit, technology and market linkages, along with simplifying compliance burdens.
Figure 4.10: Problems faced by HWEs and OAEs in their operation during the last 365 days. Photo: NCAER Report
A dual strategy for a sustainable employment future
In its policy roadmap, the report argues that no single reform can address India’s employment challenge. Instead, it recommends a dual strategy: stimulating labour demand while simultaneously strengthening the supply of skilled workers. On the demand side, the report calls for redirecting PLI schemes toward labour-intensive sectors, easing credit for MSMEs, developing industrial clusters and textile parks; citing Tamil Nadu’s model, and introducing Employment Linked Incentives that reward not only hiring but worker retention and performance. On the supply side, the report emphasises integrating vocational subjects within school curricula under the NEP 2020 framework, operationalising the National Credit Framework to facilitate movement between vocational and higher education, modernising National Skill Training Institutes, filling instructor vacancies, expanding apprenticeships through public–private partnerships and ensuring industry participation in curriculum design and assessments.
The final section of the report returns to its central message: India’s employment trajectory is shaped by policy choices, not demographic destiny. The country still has the opportunity to convert its demographic moment into expanded productivity and job creation, but the window is closing. As Prof Mehrotra reminded us, “Demographic dividends don’t wait. Either you convert them, or you lose them.”
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