Four years after COVID, India's labour market tells a story the headline numbers refuse to tell

The last time I wrote here, my two-month-old had just recovered from COVID, and I was watching, in real-time, as the second wave tore through everything we thought we understood about India's health infrastructure. That was July 2021. I had promised to return to writing about the economy, about the structural mess we had gotten ourselves into long before a virus decided to make things worse. Life, as it does, intervened.

My son is now in school. He reads, badly, and counts, enthusiastically. The world has moved on. Or has it?

In the pieces I wrote back then—on unemployment, stagflation, safety nets, and the peculiar art of making data disappear—I had argued that India had a jobs problem that nobody wanted to talk about. Four years on, the official data tells us that problem has been solved. Unemployment is down. Labour force participation is up. Women are joining the workforce in record numbers. The government's press releases practically glow.

And yet. Something doesn't add up. Let me explain.

The Numbers That Sparkle

Let us begin with what the official data—the Periodic Labour Force Survey, or PLFS—tells us. According to the latest annual report for 2023-24, India's labour force participation rate for persons aged 15 and above has climbed to 60.1 percent, up from 49.8 percent in 2017-18. The unemployment rate has fallen to 3.2 percent. The worker population ratio—the share of people actually employed—has risen to 58.2 percent.

These are, on the face of it, remarkable numbers. If you had told me in 2020 that by 2024 India would have an unemployment rate of 3.2 percent, I would have asked what you were smoking. Developed economies would kill for such numbers. Germany's unemployment rate hovers around 6 percent. The United States considers 4 percent to be more or less full employment.

The most celebrated figure has been the rise in female labour force participation. The FLFPR, as the acronym-happy policy world calls it, has jumped from 23.3 percent in 2017-18 to an astonishing 41.7 percent in 2023-24. This is an almost doubling in six years. In rural areas, the increase is even more dramatic: from 24.6 percent to 47.6 percent. Women, we are told, are finally entering the workforce.

The Economic Survey 2023-24 was practically triumphant. Graphs pointed upward. Ministers spoke of structural transformation. India, it seemed, had turned a corner.

Except the corner we turned may not lead where we think it does.

What the Headlines Miss

Here is a useful rule of thumb for reading economic data: when the numbers look too good to be true, check what's being counted and how. In the case of India's labour statistics, both deserve scrutiny.

Start with the composition of employment. Of the jobs being counted, where do they come from? The PLFS data for 2023-24 shows that the share of self-employment has risen sharply—from 52.2 percent in 2017-18 to 58.4 percent in 2023-24. Among women, this figure is even more stark: 73.4 percent of working women in rural areas are now classified as self-employed, up from 57.4 percent in 2017-18.

Now, self-employment is not inherently bad. A doctor running her own clinic, a successful entrepreneur building a business—these are self-employed people doing well. But in the Indian context, "self-employment" often means something very different. It frequently includes unpaid family workers—women helping on family farms or in family businesses without any wages. It includes own-account workers eking out a living selling vegetables or running tiny one-person enterprises. The ILO's India Employment Report 2024, which the government was so unhappy with that it reportedly considered filing a complaint, put it plainly: the informal sector in India is dominated by "low-quality jobs," with migrants and informal workers often facing "conditions similar to bonded labour."

Consider what has happened to regular salaried employment—the kind of job with a fixed wage, some degree of security, and perhaps even benefits. In 2017-18, regular salaried workers made up 22.8 percent of the workforce. By 2023-24, this had actually declined to 21.7 percent. In absolute terms, India is producing fewer quality jobs, not more. The PLFS itself reports that more than half of regular salaried women workers in 2023 did not have written job contracts and were not entitled to paid leave or social security benefits.

Then there is the agriculture question. One of the markers of economic development is a structural transformation away from agriculture toward manufacturing and services. People leave farms because factories and offices offer better wages and opportunities. India was on this trajectory—slowly, haltingly—until 2019. Then something peculiar happened. The share of rural women in agriculture actually rose from 71.1 percent in 2018-19 to 76.9 percent in 2023-24. This is a reversal of structural transformation. Women are moving back to farms, not away from them.

The Measurement Problem

Those of you who read my earlier piece on data obfuscation will remember my argument that one of the more creative things the Indian state has learned to do is to make inconvenient numbers disappear. Sometimes this is done by simply not releasing data—as happened with the 2017-18 consumption expenditure survey, which was shelved because it showed declining consumption. Sometimes it is done by changing methodologies in ways that make comparison difficult.

The PLFS 2023-24 has a measurement problem worth understanding. Researchers at the India Forum and elsewhere have documented a significant change in how field staff were instructed to classify certain activities. In previous surveys, women who spent most of their time on domestic duties but also collected firewood, vegetables, or other goods for household use were classified as "not in the labour force"—they were homemakers who happened to do some unpaid collection work. The 2023-24 survey instructions changed this. Now, if a woman collects goods for household use for at least one hour regularly, or for at least 30 days in the preceding year, she is counted as "self-employed."

This is not a small change. It means that activities that were previously invisible to the labour force statistics are now being counted as employment. The women doing this work have not changed what they do. They are not earning wages. They have not entered the market economy. But statistically, they have become "workers."

Similar changes were made for activities like making papads or muri at home while another family member sells them. Both household members are now counted as workers. Whether this better captures economic reality or inflates the numbers is a matter of interpretation. But it certainly makes comparing 2023-24 data with earlier years problematic.

The government's rebuttal—that this is simply a better measurement of women's work—is not unreasonable. Women's work has historically been undercounted. But the timing is convenient. And when we see real earnings falling even as participation rises, we should be suspicious.

Distress in Disguise

Here is the uncomfortable question that the cheerful headlines avoid: is the rise in labour force participation, especially among women, a sign of economic progress or economic distress?

The Azim Premji University's State of Working India 2023 report—one of the most rigorous independent analyses of Indian labour data—argued that the post-COVID increase in female work participation was driven substantially by declining household incomes pushing more women into work as a survival strategy. The ILO's India Employment Report 2024 made a similar observation: the improvement in labour force indicators "needs to be interpreted carefully due to an increase in agricultural employment in rural areas."

Think about what this means. When times are good, women in India often withdraw from the labour force—a phenomenon economists call the "income effect." As household incomes rise, families can afford to have women focus on domestic work or education. It is when times are bad—when the primary earner loses a job, or wages stagnate, or inflation eats into purchasing power—that women are pushed into work to make ends meet. This is not empowerment. This is coping.

The earnings data supports the distress hypothesis. Research by economists at Ideas for India shows that real average earnings for self-employed women actually fell between 2022-23 and 2023-24. If more women were joining the workforce because of expanding opportunities and rising wages, we would expect earnings to rise, not fall. The fact that participation is up but earnings are down suggests something else is going on.

The ILO report noted that after COVID, nearly two-thirds of new employment was in self-employment and unpaid family work—primarily among women. These are not the kinds of jobs that lift people out of poverty. They are the kinds of jobs people take when there is nothing else.

The Youth Problem

If the women's participation story is ambiguous, the youth employment story is unambiguously grim.

India's youth—those aged 15 to 29—account for nearly 83 percent of the unemployed workforce. This statistic from the ILO report deserves repetition. Eighty-three percent. In a country that prides itself on its demographic dividend, where we have more young people than any nation on earth, four out of five unemployed people are young.

The youth unemployment rate rose from 5.7 percent in 2000 to 17.5 percent in 2019—a threefold increase. It has since fallen to about 10 percent in 2023-24, which the government highlights as an improvement. But this decline, like the decline in overall unemployment, comes with caveats. Much of the improvement reflects young people taking low-quality work out of desperation, or dropping out of the labour force altogether.

Here is the most telling statistic: the share of young people with secondary or higher education among the total unemployed nearly doubled from 35.2 percent in 2000 to 65.7 percent in 2022. The more educated you are in India, the more likely you are to be unemployed. This is not how development is supposed to work. This is a system failing its most prepared young people.

One in three young Indians is neither in education, employment, nor training—the so-called NEET category. Among young women, this figure is far higher. These are people who have effectively disappeared from the economic radar. They are not students, they are not workers, they are not job-seekers showing up in unemployment statistics. They are simply waiting—for an economy that seems to have no place for them.

The Gig Mirage

One response to this litany of problems is to point to the gig economy. Surely all those Swiggy delivery riders and Ola drivers represent a new kind of employment—flexible, technology-enabled, accessible? The NITI Aayog estimated 7.7 million gig workers in India as of 2020-21, with projections suggesting this could grow to 23.5 million by 2029-30.

The reality is less rosy. Gig workers are excluded from minimum wage laws, occupational safety regulations, and the Industrial Relations Code of 2020. They have no paid leave, no pensions, no health insurance provided by their platforms. A NITI Aayog report from 2024 found that 90 percent of gig workers lack savings and are financially vulnerable during emergencies.

The irony is sharp. The government celebrates gig work as a sign of India's technological advancement. But what is technology-enabled work without basic protections but a digital repackaging of precarious informal labour? The delivery rider navigating Bengaluru traffic at 2 AM has an app instead of a boss, but he has no more security than the casual labourer of a generation ago. Arguably, he has less—at least the casual labourer knew who to complain to.

The Code on Social Security, 2020 mentions gig workers but provides no guaranteed rights. It creates a framework for welfare schemes but leaves the funding and implementation to state governments and platforms, neither of which have shown much enthusiasm. The Budget 2025-26 "formally recognised" gig and platform workers, extending social protection schemes to them on paper. But the PLFS still lacks a distinct classification for gig workers, grouping them under self-employed or casual labour. We cannot even count them properly, let alone protect them.

The Informal Economy's Iron Grip

Beneath all these specific problems lies a structural reality that has not changed in decades: India's economy is overwhelmingly informal. The National Sample Survey Organization estimates that roughly 39 crore of India's 47 crore workforce—about 83 percent—works in the unorganised sector. These workers lack job security, formal contracts, and social protection. Even among workers in the organised sector, nearly 10 percent are employed informally, highlighting the pervasive use of contract labour and outsourcing.

The productivity gap tells the story most starkly. Formal industrial employees contribute approximately Rs 12 lakh in gross value added per worker annually. Workers in the informal sector generate about Rs 1.5 lakh. This is an eightfold difference. When 91 percent of your workforce operates in a sector that is one-eighth as productive as the formal sector, your overall economic performance is severely constrained.

The puzzle of Indian development is precisely this: GDP formalisation has reached 56 percent—the formal sector produces more than half of economic output. But labour market formalisation lags at just 15 percent. We have an economy where formal firms generate most of the value but employ few of the workers. This is not a recipe for inclusive growth. It is a recipe for inequality and resentment.

So Where Does This Leave Us?

Let me return to where I began, four years ago, writing about unemployment and stagflation while the world burned. The diagnosis then was that India had a structural jobs problem—an economy that grew but did not create enough quality employment. The prescription was growth that was more employment-intensive, investment in manufacturing, serious attention to skills, and a rethinking of how we measure and support work.

None of that has happened. What has happened is a statistical sleight of hand that makes the problem appear to have solved itself. Unemployment is down, but quality employment is not up. Women are joining the workforce, but they are joining it at the bottom—as unpaid helpers, as subsistence farmers, as own-account workers with falling real earnings. Youth are dropping out or taking whatever scraps are available. The gig economy is growing, but without protections. The informal sector retains its iron grip.

The numbers sparkle, but the reality beneath them is unchanged. India needs to create roughly 8 million jobs annually for the next decade just to absorb new entrants to the labour force. It needs these to be quality jobs—with security, with benefits, with wages that rise over time. The current trajectory does not achieve this. It achieves, instead, a kind of statistical full employment where everyone is technically working but nobody is getting ahead.

The ILO report called this a "paradoxical improvement"—labour market indicators improving even as underlying conditions worsen. It is a useful phrase. We have become very good, in India, at paradoxical improvements. Growth without jobs. Participation without wages. Employment without security.

My son, the one who was two months old during the second wave, will enter the labour force in about fifteen years. The choices we make now—about investment, about manufacturing, about skills, about how we measure and value work—will determine what kind of economy he inherits. Right now, we are building him an economy of low-quality self-employment and gig work dressed up as opportunity. We can do better. But first, we have to stop pretending the problem has been solved.

The unemployment problem nobody wanted to talk about four years ago? It is still here. It has just learned to hide.

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This is the seventh piece in an ongoing series on India's economic challenges. Previous pieces covered unemployment, stagflation, safety nets, policy design, child labour in the media economy, and data obfuscation. If you found this useful, consider sharing it with someone who might benefit.