Skilling rural India: India’s economic rise has been impressive, but it lags behind its South Asian peers on a crucial area – job creation in non-agricultural sectors. Data from the World Bank’s South Asia Development Update report reveals a worrying trend. While India’s working-age population employed in agriculture has decreased from 63.9% in 2000 to 53.8% in 2019, the shift towards non-agricultural sectors like manufacturing and services has been slower compared with Bangladesh, Bhutan, Sri Lanka, and Nepal. This indicates a need for India to accelerate its economic development by creating more opportunities outside agriculture.
Despite India’s relative lag, most of its neighbours have experienced a lesser decline or even an improvement in the new millennium.
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Economist Santosh Mehrotra recently pointed out that an increasing number of Indians are returning to agricultural jobs, a trend he deems undesirable for a developing economy. Ideally, people should move away from agriculture as this shift signifies development, with industry and services sectors growing. The COVID-19 pandemic led to a temporary spike in agricultural employment as many returned to their farms during lockdowns, but this is expected to be a short-term trend.
A study conducted by the National Skill Development Corporation (NSDC) in 2023 highlights the importance of education and vocational training. The study found that only 24% of India’s workforce possesses the skills required for jobs in the growing manufacturing and services sectors. To counter the trend of reverting to agriculture, India must prioritise skilling initiatives. Improved educational programs and targeted vocational training aligned with evolving industry demands are essential. Equipping the workforce with the necessary capabilities will facilitate a smooth transition from agriculture to higher-paying jobs in non-agricultural sectors, ultimately contributing to economic diversification and growth.
Skilling rural India
To counteract the trend of Indians reverting to agricultural employment, enhancing education and vocational training is critical. Improved educational programmes and skill development initiatives are essential for equipping the workforce with the necessary capabilities to transition from agricultural to non-agricultural sectors. Tailored training that aligns with the evolving demands of the manufacturing and services sectors can facilitate this shift, contributing to economic diversification and growth. Therefore, investing in education and vocational training in rural areas is paramount to prepare the population for better-paying and more sustainable job opportunities in these sectors.
While India’s economy is growing rapidly, the benefits are not widely shared, leaving the poor marginalised. In rural India, which houses 60% of the country’s 1.4 billion people, economic slowdowns are starkly felt, contrasting with the urban economic boom. The lack of meaningful employment, exacerbated by the pandemic, has forced many back into agriculture, with wages stagnating or falling compared with pre-pandemic levels.
India’s economic boom story often masks the stark realities of rural India. Here, the economic slowdown and lack of quality employment opportunities are acutely felt. A 2024 report by the Centre for Monitoring Indian Economy (CMIE) reveals that while urban unemployment has hovered around 7% in recent months, rural unemployment remains stubbornly high at nearly 12%. The pandemic exacerbated these disparities, with many returning to their farms due to lockdowns. While this might be a temporary trend, it highlights the urgent need to address the challenges plaguing rural India. The current economic trajectory risks widening the gap between rural and urban economies, hindering inclusive growth.
India’s rapid growth, driven by sectors such as construction and finance, casts a shadow over the struggling rural sector, which employs over 40% of the workforce and contributes 15% to the GDP. The rural job programme’s growing demand, weak agricultural performance, and rising inflation are concerning, with industries dependent on rural labour also suffering.
The World Bank report also noted that despite productivity gains since the 2000s, job growth has been minimal or even declined in places like Bhutan, India, Maldives, and Nepal. In contrast, Bangladesh, Pakistan, and Sri Lanka have seen better employment trends. South Asia’s economic growth has thus relied more on worker productivity and population increases than on new job creation.
The World Bank report also highlights the need to look beyond productivity gains in agriculture for meaningful economic growth. To achieve sustainable development in rural India, strategic government intervention and robust infrastructure development are crucial. Policies aimed at encouraging industrial development in rural areas can create vital job opportunities, reducing the overdependence on agriculture. A 2024 report by NITI Aayog, the government’s think tank, emphasises the importance of focusing on labour-intensive industries like food processing and textiles, which can leverage the existing rural workforce and agricultural produce.
Additionally, significant investments in rural infrastructure, including transportation, electricity, and digital connectivity, are essential. Improved infrastructure can enhance productivity, facilitate market access for agricultural goods, and create a more conducive environment for business growth. This approach can attract investments and ultimately lead to sustainable economic development in rural areas, fostering a more equitable and inclusive growth trajectory across the country.
The World Bank report also sheds light on differing gender trends in employment between India and Bangladesh. While male employment rates in India have been dropping, female rates have shown a slight increase. Bangladesh’s booming garment industry is likely a factor in their higher female economic participation. However, in India, the rise in women’s self-employment might be more a result of economic hardship than true opportunity. The State of Working India (2023) report by Azim Premji University suggests that this self-employment is often a sign of distress rather than a path to economic security, leading to heightened competition and lower earnings for women. India’s economic transition from agriculture to other sectors needs to be more inclusive.
India’s economic transition from agriculture to other sectors has not been ideal, with many leaving agriculture but not moving into higher-paying jobs. Instead, they end up in low-wage informal services or construction, with many rural families maintaining small landholdings alongside non-farm jobs.
To meaningfully alter the rural employment landscape, growth in manufacturing jobs is essential, as this sector could absorb the rural workforce transitioning from agriculture. Until then, many will remain in construction and informal services, highlighting the need for a strategic focus on job creation in higher-paying sectors.