By Priya Raghuvanshi

Copyright timesnownews

India faces a critical crossroads as it strives to solve its massive underemployment problem, with economists at Morgan Stanley highlighting the need for an extraordinary 12.2 per cent yearly economic expansion. Without such rapid growth, millions of young Indians risk remaining excluded from meaningful employment, potentially escalating social tensions across the nation, the report said. The Indian labour market is grappling with two pressing issues simultaneously: unemployment and underemployment. Morgan Stanley economists noted that the youth unemployment rate has climbed to 17.6 per cent, the highest in the South Asian region. At the same time, a surge of workers returning to agriculture has pushed farm employment to its highest level in 17 years, signalling underemployment where jobs do not fully utilise workers’ skills or time. Underemployment remains particularly hard to measure because India’s broad employment definitions count anyone working even just one hour in the previous week as employed, including unpaid family labour. This skews official figures and masks the true scale of underutilised labour, much of it informal, the report said. Growth Shortfalls Threaten India’s Economic Ambitions The government’s projected GDP growth rate of 6.3 per cent to 6.8 per cent is insufficient to address these labour challenges, Morgan Stanley warns. The outlook has been further clouded by external pressures such as a 50 per cent US tariff on Indian exports and rising visa costs for Indian workers abroad. Although India’s economy expanded 7.8 per cent in the June quarter, this remains well below the growth needed to absorb the estimated 84 million new entrants to the workforce over the next decade. Structural Reforms And Skill Development Are Urgent Morgan Stanley emphasises the necessity of stronger industrial and export growth, faster infrastructure development, and sweeping reforms to improve the business environment and upgrade workforce skills. The rapid advancements in artificial intelligence and automation also threaten to shrink traditional service-sector jobs that have historically provided opportunities for India’s educated youth. Without increased investment in advanced manufacturing and technology, the country’s labour market risks falling further behind the needs of its young population. With roughly 603 million Indians living below the $3.65 per day income threshold, the challenge of lifting millions out of poverty adds another layer of urgency to India’s economic transformation, added the report.