India’s job market is under immense strain. The urban unemployment rate surged to 7.1% in June, up from 6.9% in May and 6.5% in April. It’s for that reason that youth unemployment rate is a national emergency. It shot up to close to 19% in June from 17.9% in May and 17.2% in April. The breadth and depth of this alarming trend raises grave questions. Indeed, what will job opportunities be like in a country that churns out more than 1.5 million engineering graduates annually?
The Indian Information Technology (IT) services industry is pumping up the country’s economy and in fiscal year 2023, it accounted for almost 7.5% of GDP. Right now, it’s taking a big hit from a slowdown. Companies like Tata Consultancy Services (TCS) have announced layoffs, citing limited deployment opportunities and skill mismatches rather than automation by artificial intelligence (AI). This shift highlights a critical issue: the labor market is struggling to keep pace with the evolving demands of the industry.
As urban unemployment rises, New Delhi is striving to boost labor-intensive manufacturing sectors such as electronics, textiles, footwear, and toys. The challenge remains daunting. Economists have called on the government to accelerate efforts in upskilling the workforce to bridge the skill gap and minimize the risk of job displacement.
Even with federal efforts to encourage AI-skilling programs, only one out of five young adults has received training in these skills. This disengagement made it all the more difficult to avoid creating or deepening long-standing employment and workforce issues. The reality is beyond shocking, it’s disturbing. Only 10% of the 150,000 plus engineers who graduate every year will ever realistically find a job that meets their skill set.
According to a new report released by Standard Chartered, India’s job market challenges may last for decades. The IT industry is undergoing a correction at this moment. This is no flash-in-the-pan fad; it could be a harbinger of a necessary paradigm shift. According to a senior economist at ANZ Research, it would be a mistake to underestimate this downturn. It might still be influencing job prospects in the early years to come.
Sonal Varma, an economist with Nomura, has warned that there could be permanent long-term consequences from such trends.
“If the economy is unable to adapt, this could lead to job losses, lower services exports, moderate urban consumption. It could risk India getting stuck in the middle-income trap.” – Sonal Varma
Varma further noted that AI adoption poses a significant challenge for India, stating:
“AI adoption is a major challenge for India. Entry-level routine jobs are being displaced, and mid-level jobs are transforming.” – Sonal Varma
India needs to urgently transition to more value-added and innovation driven services. Betting the farm on low-end routine work isn’t a viable long game either. Every day, companies of every size and industry are accelerating their adoption of AI technologies. Without strong proactive and reactive measures, the risk and scale of job displacement will grow astronomically.