India's 900 Million Labor Engine Has Stalled... Labor Participation Rate Stands at 40%

Only 9% of Women Are Employed or Job-Seeking
Many Give Up Job Search Due to Lack of Proper Opportunities

Passengers are waiting for the train on the platform of Dadar railway station in Mumbai. (Photo by Bloomberg News)

[Asia Economy Reporter Kim Hyunjung] In India, where the working-age population reaches about 900 million, the labor force participation rate has significantly declined, hampering the economy. Especially, as women continue to face difficulties finding proper jobs, only 9% of adult women are either employed or actively seeking employment, according to a recent survey.

On the 24th (local time), Bloomberg reported, "As India's job problem worsens, many are not even looking for work." The news agency cited data from the Centre for Monitoring Indian Economy (CMIE), a private research institute in Mumbai, stating that millions of Indians, particularly women, are completely leaving the labor market due to the inability to find suitable jobs. It analyzed this as "an ominous sign for the world's fastest-growing Indian economy."

India's labor force participation rate, which was around 46% in 2017, has sharply dropped to 40% as of 2022. During the same period, 21 million women exited the labor market, resulting in only 9% of adult women currently being employed or seeking jobs.

According to CMIE, India's adult population legally eligible to work reaches 900 million, but more than half of them do not even want jobs. This number is equivalent to the combined populations of the United States and Russia.

The decline in labor force participation is expected to make it difficult for India to grow from a developing country into an advanced economy. Kunal Kundu, an economist at Societe Generale, predicted, "India's K-shaped growth path will further fuel inequality, trapping India in the 'middle-income trap' (a phenomenon where developing countries experience slowed economic growth or remain stuck at middle-income levels due to lack of growth drivers)."

India's labor force participation rate has been continuously declining. (Source: India Economic Monitoring Center · CMIE)

The biggest problem is fierce 'competition.' In India, where about two-thirds of the population is in the working-age bracket (15 to 64 years old), competition for good jobs is intense. Even gaining admission to the top engineering colleges in India is considered a 'futile effort' as it does not guarantee stable employment.

According to McKinsey's 2020 report, to keep pace with the surge in youth population, at least 90 million new non-agricultural jobs need to be created in India by 2030. To achieve this, the annual Gross Domestic Product (GDP) growth rate must be between 8% and 8.5%.

Most unemployed Indians are students, women (housewives), and others. The majority of them sustain their livelihoods through rental income, pensions from elderly household members, or government transfer incomes. The report also assessed that they are falling behind in acquiring marketable skills due to rapid technological advancements. Although women make up 49% of India's population, their contribution to economic productivity is estimated at only 18%, which is half the global average.

India has raised the minimum marriage age to 21 to address women's employment issues, and the State Bank of India (SBI) released a report suggesting that this measure could improve women's higher education and career conditions, thereby increasing labor force participation.

This content was produced with the assistance of AI translation services.