India has seen higher employment growth in capital-intensive sectors than in labor-intensive sectors, a Goldman Sachs report observed. According to the report, capital-intensive industries in India have performed relatively well in terms of export growth, with the government focusing on promoting the assembly of electronics, machinery and pharmaceuticals.
He observed that over the past decade, capital-intensive sub-sectors of manufacturing, including chemicals and machinery, have seen significant growth in both exports and employment.
The focus on capital-intensive industries has yielded impressive results, with exports to developed markets experiencing double-digit growth. This reflects India’s progress in building a strong export base for high-value products.
« Over the past 10 years, capital-intensive subsectors (which we define as sectors with a capital income share of 0.65 or more) within the manufacturing industry, such as chemicals, machinery, etc., experienced higher employment growth on average than labor-intensive sectors such as textiles and footwear, food and beverages,” the report adds. .
The report also highlights that despite impressive growth in the capital-intensive sector, labor-intensive sectors account for a higher share of employment in the country.
According to the global investment firm, around 67 percent of manufacturing jobs are in labor-intensive sectors such as textiles, food processing and furniture.
According to data from the Annual Survey of Industries (ASI) which covers the organized manufacturing sector of the economy, 17 million workers (28 percent of total manufacturing sector employment) were employed in the organized manufacturing sector in during fiscal year 22.
Government production-linked incentive (PLI) programs have primarily targeted capital-intensive industries to boost growth.
There has been a recent shift towards labour-intensive sectors as well, with PLIs expanding to cover areas such as textiles, footwear, toys and leather products, which are traditionally more labor-focused.
Labor-intensive sectors, including food products and textiles, remain the largest employers, accounting for 11 percent and 10 percent of employment, respectively. The construction sector, meanwhile, stands out as a major employment generator, providing employment to around 13 percent of the workforce.
Construction is a major large-scale employment generation sector in India, accounting for 13 percent of total employment. During the previous construction cycle, 2004-2008, 40 percent of additional non-agricultural jobs were created in this sector, thanks to increased capital investment in real estate and infrastructure.
Construction also has the highest share of labor income among broader sectors, making it important not only for job creation but also for improving incomes.
Business services and retail trade led the growth of the services sector, which accounts for 34 percent of total employment. However, in FY23, this percentage is still lower than the sector’s 54 per cent contribution to gross value added (GVA).
A significant number of service sector jobs are found in retail and wholesale trade, with additional growth in business and transportation services, which account for 15 percent and 12 percent of service jobs, respectively. .
Technological advancements and the expansion of e-commerce have transformed retail, with nearly 41% of offline sellers creating new positions as they move online. This shift has created demand for digital skills, logistics and warehousing across the country.
The IT industry has also played an important role in India’s employment landscape in the business services sector.
According to NASSCOM, India’s IT sector has reached $245 billion in revenue by FY23, accounting for around 7% of the country’s nominal GDP.
Over the past eight years, the IT industry has created about 1.9 million jobs, bringing the total workforce to about 5.4 million, according to the company.
