Shifting employment into construction, services, and manufacturing can boost India’s GDP growth by 0.2-0.5%: IMF

New Delhi: A shift in employment into construction, services and manufacturing can boost India's GDP growth by as much as 0.2 to 0.5 percentage points, the International Monetary Fund (IMF) said.

In a new report titled Advancing India’s Structural Transformation and Catch-up to the Technology Frontier, the IMF said the country needs to create 143-324 million jobs by 2050 to enable its workers to shift towards more dynamic sectors and thus boost its economic growth.

The report said structural reforms can also help India create high-quality jobs and accelerate growth.

"India’s structural transformation still has some way to go. While the role of agriculture in terms of aggregate output has declined in India from over 40% in 1980 to 15% in 2019, it remains large in terms of employment, accounting for 42% of workers in 2019," the report said.

‘Depressed labour productivity’

"This has resulted in depressed labour productivity in the sector. In its place, economic activity in India has shifted over time mainly to services. Construction has also become an important employer, but as in agriculture, productivity in the sector is low and has not increased much since 1980," it added.

Recently, Citigroup Inc. said India will struggle to create enough jobs for its growing workforce over the next decade even if the economy grows at a rapid pace of 7%, suggesting the country will need more concerted efforts to boost employment and skills.

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Citi estimates India will need to create about 12 million jobs a year over the next decade to absorb the number of new entrants to the labour market because, based on a growth rate of 7%, India can only generate 8-9 million jobs a year.

However, in a rebuttal, the ministry of labour & employment said the report failed to account for the “comprehensive and positive employment data” available from official sources such as the Periodic Labour Force Survey (PLFS) and the Reserve Bank of India's KLEMS data.

"The PLFS data shows that during the last five years, more employment opportunities have been generated compared to the number of people joining the labour force, resulting in a consistent reduction in the unemployment rate. This is a clear indicator of the positive impact of government policies on employment," the ministry said in a statement.

"The EPFO data suggests that more and more workers are joining formal jobs. During 2023-24, more than 13 million subscribers joined EPFO which is more than double compared to 6.1 million who joined EPFO during 2018-19," it added.

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The Reserve Bank of India (RBI) recently said India added 2.5 times more jobs in FY24 compared with the previous year, citing provisional data.

According to the RBI, the total additions to the workforce at 46.7 million in FY24 were the highest since 1981-82.

The RBI data shows as many as 108.9 million jobs were created between FY20-24, significantly higher than 76.8 million jobs created between FY2004-FY20.

The IMF report said that along with continuing with the public investment push, structural reforms can help create high-quality jobs and accelerate growth in India. These include strengthening education and skilling, advancing labour market reforms, fostering trade integration, removing red tape and other obstacles to private sector growth, strengthening the social safety net and facilitating access to credit.

"India needs to create productive, well-paying jobs in labour-intensive sectors for its growing population," the IMF report said.

"Combined with a shift of workers towards more dynamic sectors, this could accelerate sustainable, inclusive growth and raise wages for India’s workers," it added.