Services generates bulk of India's jobs, increases gap with manufacturing

Services employment creation has been robust in FY25 amid concern over impact of artificial intelligence

Amid the doom and gloom about the impact of artificial intelligence (AI) on the software industry, the services sector still carries the burden of job creation in India.

 

For every job created by the manufacturing sector in FY25, services generated nearly three, shows a Business Standard analysis of data from the Centre for Monitoring Indian Economy surveys. Manufacturing jobs are important because they are seen as a way to provide gainful employment to a large number of individuals who may have low education levels. The gap between the share of services and manufacturing jobs is increasing. 

 

More than 700,000 jobs were added in information technology (IT) and related fields in FY25. The industry comprises less than one per cent of overall employment. But the services sector extends beyond IT. Health care, for example, accounted for a slightly larger share of employment and added over 830,000 new jobs. Other additions were in wholesale and retail trading (17.1 per cent of total employment; added 1.9 million new jobs), and personal and non-professional services (8.1 per cent of total employment; added 4.6 million new jobs). 

 

The share of manufacturing in India’s total employment is lower than many of the country’s peers, like China and Russia. That’s going by the government figures used by the International Labour Organization. India also trails Viet Nam and Indonesia, and lower-middle income group countries. 

 

Indian manufacturing added 4.5 million jobs in FY25. The largest additions were in the metal industry (1.3 million jobs) and machinery manufacturing (1.2 million). Manufacturing segments which saw job losses include footwear, chemical industries, handicrafts, cement, and tiles and related materials. The decline ranged between 40,000 to 250,000 jobs lost over the previous year.

 

India needs to create around 8 million jobs a year for its growing working age population, according to calculations in Economic Survey 2023-24. That is the equivalent of creating as many jobs as the entire population of Switzerland (8.88 million people), every year repeatedly for the next ten years. 

 

As many as 15.4 million jobs were added in FY25, similar to the previous year. But net addition since FY17, after accounting for job losses including during the pandemic, is 13.7 million.