Employment: India’s PLFS report shows seven ways in which its labour market is undergoing a structural shift

First, while agriculture remains India’s largest employer, engaging nearly 43% of the country’s workforce in 2025, its share in total employment has steadily declined from 66% in 1987-88, indicating a broad and long-term shift of workers towards non-agricultural activities.

Second, in 2025, 14.5% of India’s workforce had access to substantial capital and scale economies through employment in firms with more than 20 workers. Encouragingly, this represents a notable improvement from 10.8% in 2024, reflecting the government’s emphasis on strengthening the manufacturing sector and expanding formal job generation.

Recent policy initiatives, especially the production-linked incentive scheme covering 14 critical sectors and provisions for skill acquisition and upgradation, represent important steps in this direction.

Third, skill development and training are playing a major role in improving employment quality and expanding economic opportunity. Specifically, government-funded training for women, relative to other paths of sharp development, is associated with a 5.8% increase in their probability of self-employment.

This suggests that public investment in skill development is not only improving employability but also enabling women to participate actively in entrepreneurial and income-generating activities.

Fourth, government initiatives aimed at strengthening women’s participation in the economy is paying dividends. Our estimates indicate that women who are household heads are associated with a 4.4% higher probability of being employed in regular wage work.

The rural–urban decomposition makes this trend even more pronounced, with female headship in rural areas reducing the probability of casual labour by nearly 5%. It is no coincidence that women account for nearly 69% of Mudra loans and 55% of Jan Dhan accounts, while under the PM Awas Yojana (urban) 2.0, about 96% of sanctioned houses are in the name of a female head of the household or under joint ownership.

Fifth, while the global youth (15-24 age group) unemployment rate is estimated at about 12.6% in 2025, according to the International Labour Organization, the youth (15-29 age band) unemployment rate in India is 9.9%, as found by PLFS 2025.

However, the conventional measurement of youth unemployment in the 15-29 age group as done by the PLFS does not capture the underlying structural transformation taking place in India’s economy. A large proportion of individuals in this age bracket continue to pursue higher education, technical training and skill development, which temporarily keeps them out of employment.

According to the All India Survey on Higher Education (AISHE), more than 44 million students are enrolled in higher education. The PLFS report notes that in the 15-29 age group, 37.9% of India’s population was in formal or non-formal education or training over the previous 12 months.

Interestingly, once we estimate the unemployment rates for the country’s 30-plus population, for rural males, it declines to 0.78% compared to the PLFS joblessness rate of 2.6%; for urban males, it falls from 11.8% in the PLFS to about 2.26%.

Sixth, among all social categories, Scheduled Caste (SC) women emerge with a statistically significant lead on regular wage employment, with a 5.4% higher probability of being engaged in regular work. This points to a gradual broadening of access to formal and stable employment opportunities across sections.

Female participation in regular wage employment within the transport sector is significantly higher relative to men, which indicates the emergence of new occupational opportunities beyond traditional sectors.

Seventh, despite gradual improvement in employment generation and workforce diversification, interstate disparities persist in minimum wage compliance among casual workers. The evidence suggests that a significant proportion of workers in several states still receive wages below the statutory minimum levels. Thus, states must implement the Minimum Wages Act strictly.

It is heartening that India has implemented the four Labour Codes passed by Parliament. Stringent labour laws have for long deterred Indian entrepreneurs from entering labour-intensive industries, which are crucial for creating a vast volume of job opportunities at decent wages. With these laws being implemented, it would be feasible for states to undertake further reforms in this area.

To conclude, India’s labour market today reflects an economy in transition; it is gradually moving from agricultural dependence to a more diversified and skill-oriented employment structure. The PLFS evidence suggests that while challenges related to informality, wage compliance and employment quality persist, important positive shifts are simultaneously underway.

India’s employment landscape is not static. Rather, it is evolving in response to changing aspirations, rising educational participation and the country’s ongoing structural reforms, laying the foundation for a more resilient and opportunity-driven workforce in the years ahead.

These are the author’s personal views.

The author is a member of the 16th Finance Commission, member of the Economic Advisory Council to the Prime Minister, and group chief economic advisor, State Bank of India.