In my
November 2025 column in this paper1, I had written about why India should not be complacent about youth unrest, given similar movements in neighbouring Bangladesh and Nepal. Rising levels of education without adequate job opportunities are a dangerous mix. As the UNDP’s 2013 Human Development Report2 showed, this was a major contributor to the Arab uprisings at the beginning of this century.
The government initially cracked down on the protests but, as the movement gained momentum, acceded to the demand for a change in the education minister and set up a high-powered examination reform committee. But in addition to exam reforms, which are no doubt important, more widespread course corrections in governance, education and economic policies must be made.
Governance reforms to strengthen the institutions of democracy and the media are important. But in addition, India must also tackle the lack of jobs — especially youth unemployment. This will require fundamental changes in India’s development model. India’s GDP has grown, but the elasticity of employment-to-GDP growth — how much does employment go up for every percentage point of GDP growth — has been declining from around 0.5 in the 1980s to 0.3 in the 2000s to 0.16 today.
Its employment elasticity is now one of the lowest in the world, compared to over 0.3 for Bangladesh and Vietnam, 0.4 for China and Indonesia, and 0.5 for the Philippines. According to the International Labour Organization (ILO), Vietnam’s employment-to-population ratio is around 75 per cent, whereas India’s has hovered at around 50 per cent. If India’s employment-to-population ratio had been 10 percentage points higher, at 60 per cent, that would have meant 140 million more people in regular jobs. Imagine that.
India needs serious second-generation reforms in its labour and land laws, which make it difficult to hire labour formally and make land acquisition so costly. Lowering the costs of power, freight and capital, which are higher in India compared to its competitors, will also be necessary. These must also be accompanied by moving away from its crony-capitalist, big-business-friendly, capital-intensive economic model.
Indian industry is becoming increasingly concentrated with the Big 5. Its strategy of relying on big business to spearhead its industrial development by providing them with huge subsidies and tariff protection might be having the opposite effect, and we are witnessing “premature de-industrialisation” and jobless growth. It is this fear of big business that also derailed the farm reforms earlier — even though India needed those reforms badly. And, of late, even the high-performing service sector, which generated considerable jobs, has seen substantial layoffs, hit by the artificial intelligence revolution.
Forget China, which has leapfrogged well ahead of India and will by next year become a high-income country. Now even Vietnam, which was behind India in 2010, has, in 16 years, moved into the upper-middle-income category, with a gross national income (GNI) per capita of $4,650 in 2025, while India remains a lower-middle-income country, with a GNI per capita of $2,760.
The level of investment in Vietnam is not that different from India. Where it differs is that, like China in its initial development phase (see chart), Vietnam relied heavily on export-led foreign direct investment, which in turn created more jobs. In Vietnam, net foreign direct investment (FDI) averaged well over 7 per cent of GDP and, in its early years, reached 10-12 per cent of GDP. In India’s case, net FDI never reached even 4 per cent of GDP, averaging closer to 1-2 per cent of GDP, and has been declining as even those who invested in India are pulling their money out.
Being part of key trade and investment agreements such as the Asean Free Trade Area , the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Regional Comprehensive Economic Partnership and the European Union’s (EU’s) FTA is a big reason for Vietnam’s success in attracting FDI. Vietnam has used these agreements to drive domestic reforms. India has shown no intention of joining any broader trade and investment agreement and has even weakened existing bilateral investment treaties. India has started down the path of bilateral trade agreements but is still struggling to finalise one with the US and ratify the one with the EU.
Vietnam, again like China, has also focused on tourism, attracting over 20 million tourists in 2025, compared with India’s 10 million tourists — not counting non-resident Indian home visits. China received around 40 million tourists. India, with its huge cultural heritage, could easily attract 50 million tourists a year if it were to make a concerted effort and use tourism to create lots of jobs. It’s a low-hanging fruit for generating employment, which India must focus on.
History shows that most GenZ movements have not led to lasting change. The Arab Spring revolts were largely crushed, with not much change. Recent GenZ revolts in India’s neighbourhood have seen changes in regimes but not meaningful reforms. Even in China, major reforms stalled after the brutal crushing of a student-led revolt in Tiananmen Square in 1989 and restarted only in 1992.
India can and should take a different path. Let’s hope these protests lead to major course correction in India’s jobless growth model and to the wider economic reforms the government has promised. Otherwise, social tensions will persist, and India may find it harder to move into the upper-middle-income category in the coming decade and escape the middle-income trap as it approaches 100 years of independence.
The writer is a distinguished visiting scholar at George Washington University, and former country director for Vietnam at the World Bank
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