India sees higher job growth in capital-intensive sectors compared to labor-intensive sectors: Goldman Sachs report
India has seen higher job growth in capital-intensive sectors compared to labor-intensive sectors, says a Goldman Sachs report. According to the report, India’s capital-intensive industries have done well in terms of export growth as the government has focused on promoting integration of electronics, machinery and pharmaceutical products.
It noted that over the past decade, capital-intensive small sectors in the manufacturing sector, including chemicals and machinery, have experienced significant growth in both exports and employment.
Focusing on capital-intensive industries has yielded positive results, with exports to developed markets growing by double digits. It shows India’s progress in building a strong export base for high-value products.
“In the last 10 years, small sectors that need a lot of capital (which we define as sectors with a large capital share of 0.65 or more) in production such as chemical products, machinery etc. saw higher job growth on average compared to labor-intensive sectors. such as clothes and shoes, food and drinks,” the report added.
The report also reveals that despite the dramatic growth of capital-intensive sectors, labor-intensive sectors account for the largest share of jobs in the country.
According to a global investment firm, about 67 percent of manufacturing jobs are in labor-intensive sectors such as textiles, food processing, and furniture.
According to the annual industrial survey (ASI) covering the organized manufacturing sector in the economy, 17 million workers (28 percent of total manufacturing sector employment) were employed in the organized manufacturing sector as of FY22.
The government’s Production-Linked Incentive (PLI) programs target capital-intensive industries to stimulate growth.
There has been a recent shift to support labor-intensive sectors, as PLIs have expanded to include areas such as textiles, footwear, toys, and leather products, which are often labor-intensive.
Labor-intensive sectors, including food products and textiles, remain the largest employers, accounting for 11 percent and 10 percent of employment, respectively. On the other hand, the construction sector stands out as the biggest producer of employment, providing jobs to about 13 percent of the workforce.
Construction has been the largest sector of job creation in India, accounting for 13 percent of total employment. During the previous construction cycle between 2004-2008,40 and 40 percent of the non-agricultural job growth was created in this sector, driven by increased investment in buildings and infrastructure.
Construction also has the highest share of labor income among the broad sectors, making it stand out not only in terms of productivity but also in improving wages.
Business services and retail trade led the growth of the service sector which accounted for 34 percent of total employment. However, as of FY23, this percentage is still less than 54 percent of the sector’s contribution to gross value added (GVA).
The largest number of service sector jobs are in retail and wholesale trade, with further growth in business and transportation, accounting for 15 percent and 12 percent of service jobs, respectively.
Advances in technology and the rise of e-commerce have transformed retail, with nearly 41 percent of offline retailers creating new job roles as they move online. This shift has created a demand for digital skills, logistics, and warehousing roles across the country.
The IT industry has also played a major role in the employment of Indian people within business services.
According to NASSCOM, India’s IT industry reached USD 245 billion in revenue in FY23, representing about 7 percent of the country’s GDP.
The IT industry, in the last eight years, has added about 1.9 million jobs, increasing the number of employees to 5.4 million, according to the company.
