Labour reform 2.0: India's digital blueprint for jobs and inclusion

The Ministry of Labour and Employment’s draft national labour policy, Shram Shakti Niti, has the right intentions. It aims to build a fair, inclusive, and future-ready system where every worker — formal, informal, or gig — has access to dignity, protection, and opportunity. The ministry’s role is redefined as an “employment facilitator”, using digital tools and artificial intelligence (AI) to connect workers, employers, and training institutions seamlessly. It recognises that India’s labour market is experiencing structural shifts, driven by digitisation, green transitions, and new employment forms such as gig work and platform work, and in this direction, the plan to expand the National Career Service (NCS) into a Digital Public Infrastructure for Employment shows a shift toward a data-driven, worker-centred approach to bridge the gap of information asymmetry. 

In terms of shifts in the labour market, the “South Asia Development Update” (October 2025), released by the World Bank, painted a complex picture of how AI is reshaping India’s labour landscape. While fears of job losses from automation dominate public debate, the report argues that AI’s impact will be uneven, bringing both opportunities for productivity growth and challenges for inclusion. Only about 7 per cent of jobs in South Asia are highly exposed to automation. However, around 15 per cent are “AI-human complementary”, meaning they could become more productive when paired with technology. AI-related jobs command nearly a 30 per cent wage premium over other white-collar positions. Indian firms are moving from business process outsourcing to knowledge process outsourcing, creating higher-skill opportunities but narrowing entry-level openings. 

To harness this shift, the Shram Shakti Niti draft outlines a series of interventions to bridge the divide between skill and opportunity. It calls for targeted skilling and reskilling programmes, especially in semiurban and rural areas, aligning the training of supply with industry demand. Additionally, the draft also promotes AI-enabled job matching, digital credentialling, and entrepreneurship support for the youth and women. In this regard, as reported by this newspaper earlier this month, the Central Board of Secondary Education plans to introduce AI in the school curriculum from Class III onwards. Simultaneously, efforts are being made to integrate AI and data science into undergraduate programmes across disciplines to build an AI-ready workforce. 

The draft report also proposed universal and portable social security, simplified compliance for micro, small, and medium enterprises, and support for green and technology-led transitions. Together, these measures form a forward-looking framework. However, there are challenges. First, the dominance of informality complicates social-security implementation and compliance monitoring. Second, gender disparities persist where women’s labour force participation remains low. Third, coordination between the Centre, states, and districts, which is often not very smooth, will determine how quickly reforms translate into results. If implemented well, the Shram Shakti Niti could help in improving labour-market conditions. Nevertheless, the broader challenge for the Indian economy remains creating gainful employment for its large and growing workforce, while maintaining a balance between protecting workers’ rights and ensuring flexibility for businesses.