India Needs Double Growth to Solve Jobs Crisis: Morgan Stanley Report

Unemployment in India Latest News

• Morgan Stanley (a global financial services firm) warns that India must nearly double its growth rate to meet rising employment needs and tackle underemployment.
• The analysis projects that a 7.4% average GDP growth is required to maintain stable unemployment, assuming steady labour participation. 
• If participation rises to 63%, growth of 9.3% would be necessary. To meaningfully reduce underemployment, growth must reach 12.2%.
• Currently, GDP growth averages 6.1% over the past decade, with the RBI projecting 6.5% for this fiscal year, though recent data shows a stronger 7.8% in April-June 2025.

India’s Youth Unemployment Challenge

• Despite being the fastest-growing major economy, India struggles with high youth unemployment, a concern flagged by Morgan Stanley in its latest note.
• According to the Periodic Labour Force Survey (PLFS), the all-India unemployment rate fell to 5.1% in August, but youth unemployment (ages 15–29) stood much higher at 14.6%.
• In urban areas, the female youth unemployment rate surged to 25.7%, over 10 percentage points higher than that of young urban males, which fell to 15.6% from 17.1%. 
• This pushed overall urban youth unemployment down slightly to 18% from 19%.
• In rural India, female youth unemployment rose to 14.3%, while male youth unemployment declined to 12.6%. Both figures were at 13% in July.

Demographic Pressure

• India’s median age is 28.4 years, making it one of the youngest countries globally. 
• However, its youth unemployment rate is the highest in the region, creating a mismatch between demographic advantage and job creation.

Weak Employment Creation

• Over the last two years, employment creation has been subdued, with only modest improvements recently. 
• Morgan Stanley cautions that GDP growth averaging 6.5% over the next decade—though among the fastest globally—will still fall short of creating sufficient jobs.

The Workforce Surge Ahead

• Even without rising participation rates, India’s workforce is expected to grow by at least 8.4 crore in the next decade. 
• Without stronger job creation, this surge will deepen the unemployment and underemployment crisis.

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Unemployment and Underemployment Crisis

• India faces a dual challenge of high unemployment and widespread underemployment. 
• Youth unemployment has surged to 17.6%, the highest in South Asia, while a return to agriculture has pushed farm employment to a 17-year high. 
• Much of this reflects underemployment, where skills and time remain underutilised. 
• India’s broad definition of employment — counting even one hour of work a week, including unpaid family labour — further masks the true scale of labour underutilisation.

Poverty Adds to the Challenge

• With about 603 million Indians living below the $3.65 per day income threshold, the urgency of job creation and economic transformation is amplified. 
• Solving unemployment and underemployment is not just an economic priority but also a social imperative to prevent rising tensions and ensure inclusive growth.

Asia’s Growing Youth Unemployment Crisis

• Youth unemployment is not unique to India; it is a regional challenge across Asia. 
• According to Morgan Stanley, Asia’s youth unemployment rate stands at 16%, far higher than the 10.5% in the US.
• For the three most populous economies — China, India, and Indonesia — the problem is especially severe. 
• Despite falling headline unemployment rates, joblessness among youth has remained stubbornly high.
• The challenge is expected to intensify with the growing adoption of artificial intelligence (AI), which could displace jobs unless reforms boost investment and reskilling. 

Way Forward for India

• The report warns that if joblessness worsens, governments may need to adopt redistributive measures to maintain social stability.
• For India, while reforms have been undertaken to promote growth, a bigger push is needed in the industrial and export sectors. 
• The report highlights that every manufacturing export job creates two additional jobs in related fields like transport and logistics. 
• Yet, India’s share in global exports is just 1.8%, far below its weight in GDP and working-age population — showing significant untapped potential for job creation.
• The report stresses urgent reforms in industrial and export growth, infrastructure expansion, and workforce skill upgrades. 
• Without stronger investment in advanced manufacturing and technology, India risks falling behind in providing meaningful work for its young population.

Source: IE | TN | BS