Demography Is Destiny: Can India Find Jobs For Its Young Workforce?
With an estimated 12 million young people entering the workforce annually and despite impressive economic growth in recent years, the correlation between rising GDP and job creation remains weak

New Delhi: One afternoon in May, in a tiny, derelict welding workshop among the dozens of labyrinthine lanes in New Delhi’s Wazirpur Industrial Area, two welders discussed the past and future of their line of work, and their place in it. Makhan Singh, the owner of the workshop, in his early fifties, and his employee, 21-year-old Mohamed Mahroof, migrated to Delhi in 2001 and 2024 respectively to become welders, harboured ambitions to excel at it and leverage their skills to earn higher wages.
But after half an hour into the conversation, there was a sense of generational reckoning with the country’s economic performance and its ability to reward skilled blue-collar work.
Singh was lucky. He came of age as a welder in the early 2000s, a time when the global economy was booming and India registered its most consequential economic performance since it liberalised its economy in 1991. Between 2003 and 2008, the economy grew by an average annual rate of about 9% as foreign capital poured in and ended up in industries such as automobiles and pharmaceuticals.
“When I started to work, somebody advised me to learn and practice welding as much as I could. I spent two years; I worked very hard. Later I got a job in a car factory and my salary increased by more than two times because I could weld better than many other workers,” Singh said, with pride.
Mahroof, who is baby-faced, leaned against a pillar with his head slightly inclined to one side, and fell silent. Last year, he migrated to Delhi from Mumbai, where he briefly worked as a mason setting tiles in residential construction sites. Masonry was his first job at the age of 19; it was a necessity borne out of his family’s financial difficulties, Mahroof told IndiaSpend. He was born, brought up, went to school and dropped out of school in Bihar’s Darbhanga district. “Majboori thi… warna padhai chhodne ka mann nahi tha,” he said. “It was a compulsion...Otherwise, I did not want to leave my studies.”
Yet, in this big metropolis, he is determined to learn Gas Tungsten Arc Welding from Singh, who he respectfully calls “Ustadji”. Gas Tungsten Arc Welding is a modern process that uses the noble gas argon to shield the welding pool from atmospheric contaminants such as oxygen, and requires focus, agility and precise hand-eye coordination when working with the filler rod and welding torch. But Mahroof’s determination is met with grim economic realities: slowing consumption growth in the economy, which is bearing signs in Wazirpur’s stainless steel-making factories; lower wages for welding technicians; and increasing influx of China-made automated welding machines.
“I have work for another 10-15 days this month; there are no orders beyond that,” Singh said. “These young welders earn about Rs 8,000-10,000 per month in Wazirpur, depending on our order flow. So they dream of taking up welding jobs in the Gulf countries, where they get paid about Rs 50,000 per month. It’s difficult for them here.”
Singh lamented that irrespective of one’s skills, a welder could not earn more than Rs 15,000-16,000. Only a few lucky ones, one in 100, Singh said.
Mahroof said that he will continue to be a welding technician and try to become successful. “Saudi [Arabia], Kuwait, Oman…I will go anywhere if I am able to earn more.”
‘Crores of hands, crores of brains’
Two years ago, prime minister Narendra Modi invoked a prized comparative advantage of the Indian economy. “India has the highest population under the age of 30. This is what we have in my country, the youth below the age of 30 years; my country has crores of hands, crores of brains, crores of dreams, crores of resolutions!” Modi said, noting that while other global economic behemoths like China, Japan and the United States were growing older, India has a young population with tens of millions of workers like Mahroof entering the workforce every year.
Economists refer to this phenomenon as “demographic dividend”: a youthful shift in the population--a boom in the working age population followed by decline in fertility rates--that could propel economic growth for decades and help a nation attain prosperity. The Economic Survey in 2019-20 estimated that the demographic dividend will peak in the year 2041, while the “population in the 0-19 age bracket has already peaked due to sharp declines in total fertility rates (TFR) across the country”.
“Some people think that low dependency ratio is a way for demographic dividend; but it is only a young labour force that is behind it,” Yi Fuxian, an expert on China’s demography and scientist at the University of Wisconsin-Madison in the United States, told IndiaSpend. Fuxian, who predicted China’s economic slowdown and blamed it on an ageing population, said that a young workforce had a huge role to play in China’s economic transformation. About a quarter of the economic growth in China between 1978 and 2010 is attributed to its demographic dividend, with about a third coming from labour productivity, according to economists Cai Fang and Yu Lang at the Chinese Academy of Social Sciences.
In the 20th century, Japan, China, Ireland, South Korea, Taiwan and Singapore successfully leveraged demography to increase economic growth by way of industrialisation and investments in education, health and workforce skilling. “Such incidents change the fate of the country. This power changes the destiny of the country,” Modi had said in his 2023 speech.
Even as India has grown faster than its peers during most of the last decade, and this year became the fourth largest economy after the US, China and Germany, economists have warned that growth rates of 6-7% would not be enough to provide employment to about 12 million young workers who enter the workforce every year. A report by Azim Premji University in 2023 found that, over a longer term, gross domestic product (GDP) growth and employment growth have been uncorrelated in India; and last year, IndiaSpend reported on another uncorrelatedness, which economists noted is a rarity: a decade-long stagnation in real rural wages during a period of impressive GDP growth.
“A weak correlation between growth and jobs is not a uniquely Indian phenomenon. Apart from really successful emerging economies like say, China, or before it South Korea and Japan, and now Vietnam, countries do struggle with this problem. And unlike most countries that do not even witness growth, India at least has a growth story,” Amit Basole, a professor of economics at Azim Premji University and the lead author of the report, told IndiaSpend. “Our problem is that our growth story has not translated into a jobs story.”
Last year, the International Labour Organization (ILO) and the Institute of Human Development (IHD) released the India Employment Report 2024. The report was launched by V. Ananth Nageswaran, the chief economic advisor to the government, and its findings were bleak: young people comprised about 83% of the unemployed workforce and the share of ones with education in the total unemployed went up from 54.2% in 2000 to 65.7% in 2022. Additionally, about 90% of the total workforce was informally employed, and underemployment, which economists say is difficult to measure, persisted.
During the press conference, Nageswaran said that the government had already taken actions and brought policies to increase employment generation, and further intervention would not fix unemployment in the country. He said that in a market economy, creating employment is largely the private sector’s job, and questioned whether welfare policies, and young people’s attitude and willingness to work were also reasons behind their plight.
However, according to the International Monetary Fund (IMF), the economy needs further government intervention and structural reforms to benefit from a demographic shift.
“Near-term priorities should include implementation of the labor codes; deepening economic integration, including reduction of trade restrictions, opening up of new markets through bilateral trade agreements, and reforms to attract FDI [foreign direct investment]; a continued public investment push and higher R&D spending; [and] streamlining of business regulations,” IMF’s India office told IndiaSpend in an email.
IndiaSpend wrote to the chief economic advisor’s office for a response, asking whether the economy needs further reforms and the government’s assessment of the uncorrelatedness between jobs and growth. We will update the story when we receive a response.
“The mental and emotional struggles…nobody talks about it,” Nekibur Rahman, a 27-year old from Guwahati, said. He has a soft voice, and speaks with a certain calm about him, as if it were a reflex action. Yet it masks so much disillusionment in him.
After a diploma in civil engineering, Rahman failed to secure a job; then, a lockdown during the pandemic made him drop out of a B.Tech programme in Mohali, in Punjab. For the next three years, he went around in circles, working odd jobs: a few months at a company in Gurgaon, then in Guwahati, and later a company selling vouchers and harbouring a toxic work environment. Pay was always irregular and low, and Rahman felt slighted, confused. Today, he has clarity about his future.
“I am preparing for a government job either in the Assam public service commission or somewhere else. If this works out, it will be okay. Or I will go out of India to find work,” Rahman said.
Wazirpur is an industrial area in New Delhi, largely known for its stainless steel industry. Credit: Rohit Inani
Factory dreams
When Modi took on the country’s helms in 2014, the economy was afflicted with high inflation, economic slowdown and insufficient jobs for its growing workforce. That year, the government launched the Make In India initiative, its then flagship economic policy, in an attempt to create manufacturing jobs for its vast workforce, thus following in the footsteps of every successful economy since the end of World War II.
Evidence from Asia’s economic history backed the policy: a large and dynamic manufacturing base creates labour-absorbing industries such as textiles, cars and consumer durables, shoots up productivity and provides a demographic dividend. Over a period of time, the share of manufacturing in the economy goes up as more workers get skilled and enter factories; income inequality rises, too, but per capita incomes also rise, like in China, Japan, Vietnam and South Korea.
While the China-plus-one business strategy took hold in multinational boardrooms, Modi doubled down, and, in his second term, announced production-linked incentives to firms moving production to India. One big success has been Apple’s investments, largely in the southern states. In 2024, the company is believed to have made 14% of global iPhones in India, marking a significant shift away from China. Earlier this year, Reuters reported that Apple airlifted about 1.5 million iPhones from India to the US, in an effort to beat Trump’s tariffs after authorities in Chennai granted the company a green corridor to fast track customs clearance.
And a report in the New York Times on a new Apple factory in Bengaluru noted the effects in the region, calling it transformative, with wages rising by 10-15% around the facility.
Yet, India’s share of manufacturing in GDP slid to 13% in 2023 from about 15% in 2014. Earlier this year, finance minister Nirmala Sitharaman noted that the share was 12% in 2025. In 2000, a year before China entered the World Trade Organisation, manufacturing’s share of its GDP was 32%, which declined to 25% in 2024 as it pivoted toward high-skilled services. As a result, its per capita income has jumped four times to $13,700. In comparison, India’s per capita income is about $2,880. Consider factory employment.
Only 18.5 million Indians were employed in factories in 2023, which is just 3% of the total employment in the economy, even as about 55-60 million workers were employed in the manufacturing sector, thus showing trends of fragmentation and informalisation in the sector.
Josh Felman, principal at JH Consulting and formerly IMF’s mission chief for India in the 2000s, said that Asian industrialisers grew rich by absorbing their young labour in manufacturing, which provided scale in job creation. “India really, really needs to do the same and this is why you've had these successive Make In India programs,” Felman told IndiaSpend.
“India was handed the golden opportunity to convince the world to make in India. First in the early 2010s when China began giving up market share in things such as toys and textiles. The next opportunity came in the late 2010s and particularly after the pandemic when people began to increasingly get worried about the world’s dependence on China. We missed the boat as investments out of China went to Vietnam, Cambodia and Indonesia. Today [while President Donald Trump wages a tariff war against China and envisions a resetting of global trade] India has been given a third opportunity, which is just unbelievable luck,” Felman said. “There is no guarantee that it will come for a fourth time.”
And at a time when there is increased competition among Asian factory hubs for investments, India remains at another disadvantage--lack of clarity on economic policy and rules such as retrospective taxation on firms and abrupt bans on agricultural exports, which Felman says, discourages investments.
“One of the ways China built the confidence needed to convince the world was building special economic zones (SEZ) in Guangdong in 1980. They set it up and it wasn't about any incentives. The virtue of that zone was the rules were clear and consistent…the government knew that firms did not want to venture into most of China after the cultural revolution. But within the SEZs, they had a very clear, consistent liberal system and firms responded to that,” Felman said.
Felman cautioned that, with time, once most firms diversify away from China, it will be the end of India’s manufacturing ambitions. “Manufacturing will probably be dispersed. If it's not India, it's probably going to be dispersed among 20 different countries. And then it'll be very hard to gain a meaningful share,” he said.
Last year, former central bank governor Raghuram Rajan called on the government to prioritise its dominant services sector over manufacturing. Services contribute about 55% to the country’s GDP, and retain a competitive advantage in high-skilled, high-paying jobs. However, the sector has limited job creation potential in India, where nearly half of the workforce is still engaged in agriculture.
For instance, India has emerged as the top destination for Global Capability Centres (GCCs), units that help multinational businesses manage operations, including research and development. About 1.3 million Indians are said to be employed in thousands of GCCs, which analysts estimate will increase to more than 2.5 million by 2030. But this is only about a fifth of the annual jobs demand.
“Services are very fleeting; it's a market that moves around a lot because it takes very little investment to set up. And you can move services jobs out of the country more easily than you can move manufacturing jobs. So I think we need a trade off somewhere,” Sonalde Desai, professor of sociology at University of Maryland and senior fellow at National Council of Applied Economic Research (NCAER) in New Delhi, told IndiaSpend.
Desai said that factories could be the fix to India’s low female labour force participation rate, a reversal of which would lift aggregate employment in the economy. “A lot of women are employed in Apple’s factories in Tamil Nadu. And there was a similar trend if you look at Bangladesh, 80% of the [garment] factory workers were women and there's even a slightly similar trend in Vietnam.”
“Male migrants from northern Hindi-speaking states, they migrate to the southern states for work. And it's difficult for women from, say Bihar or Uttar Pradesh to do the same, right? This is where this distributed industrialization comes: there should be growth of domestic industry in these states. Indian women's education is almost on par with men's and there is a trend of declining fertility…this is an opportunity,” Desai said.
In April 2025, Foxconn, Apple’s top contract manufacturer, announced plans to set up a facility in Greater Noida, its first in north India. “We must create jobs and these shouldn’t necessarily be the highest paying jobs, but jobs which are sort of stable, with reasonable living wages for this growing young population that kind of eradicate underemployment,” Desai said.
A new world economic order
When US president Donald Trump announced the liberation day tariffs in April and ignited a trade war, he shattered the prevailing global economic order whose building blocks were free trade, unfettered globalisation, geopolitical stability and an endless American appetite for cheap goods and services. And it was under this prevailing order that China grew at an annual rate of 9.3% continuously for 30 years.
“It was very easy for China to enter the American market; and this helped it become the factory of the world. However, it will be difficult for India to do so now, when America is becoming closed. India's manufacturing sector has to blossom and create jobs on the strength of its own market. It will take time but it has to happen,” Fuxian said. Today, India’s share of global manufacturing is 3% compared to China’s 35%.
Basole said that India is faced with a different and new world economic order; that deglobalisation, artificial intelligence and climate change have huge implications if India were to follow in the footsteps of 20th century industrialisers. “So the question for the next 30 years is if we were to become a reasonably prosperous economy before we become an ageing economy, is there a way to do it without going through the same route?” he said.
IndiaSpend asked NITI Aayog, the government’s economic policy body, on retrospective taxation, policy uncertainty, and the challenge of job creation and prospects of a demographic dividend in the new global economic reality. We will update the story when we receive a response.
Between hope and despair over the question of whether the world’s most populous nation will become prosperous, and between competing ideas for future economic policy among policymakers, analysts and economists, lies the future of a once in a generation cohort of young Indians, whose anxieties and quiet desperation remain shadowed by official statistics.
One day, over a phone call, Mahroof said that there was a lot of chatter about Bihar, his home state, in Wazirpur. There will be assembly elections later this year, but the campaign has already begun. Youth unemployment has emerged as one of the top election issues. Chief minister Nitish Kumar has announced the formation of the Bihar Youth Commission to provide employment opportunities to the young; the Congress has said that it will organise a large job fair in Patna.
“This is good,” Mahroof said, and fell silent. “I don’t know what to say about the elections. I don’t think about it. I only hope that I become a very good welder and earn more.”