Jobs Are Growing, But Productivity Is Lagging: India’s Quality-of-Growth Paradox

India’s economy in 2025 is humming. The number of employers recruiting is at a record high, domestic demand is stable, and the GDP growth rate of 7.8% is among the highest in the world. By conventional standards, this looks like a success story. Yet, beneath the surface lies a troubling reality: productivity per worker has levelled off. Output per hour worked is among the lowest in the G20, and real wages have risen at a snail’s pace. This lack of correlation between job creation and productivity marks a new kind of growth paradox for India.

Boom Without Lift
In the second quarter of 2025, India’s Net Employment Outlook at 43% — the highest globally and almost twice the world average. Employers in IT, manufacturing, logistics, and healthcare reported strong hiring intentions, and government data show that total employment rose significantly — from 475 million in 2017-18 to 643 million 2023-24. Female participation in the workforce nearly doubled during this period. Overall joblessness has fallen to a multi-decade low of 3.2%.

However, these encouraging numbers have not been matched by a commensurate rise in output. International estimates put India’s labour productivity, measured as GDP per hour worked, at around $8.7 — less than one sixth of the UK’s $54.3. What’s worse, Indian workers put in some of the longest hours in the world, suggesting that output per worker remains stubbornly low. The paradox: working more, hiring more, but producing little more.

Wages Tell the Story
This productivity stagnation is reflected in paycheques. Between 2021 and 2023, real wages fell by nearly 3%, even as GDP grew briskly. Income growth was weakest among salaried employees, traditionally the most productive segment of the workforce. This points to a deeper structural imbalance: much of job creation has been in low-skill, low-value sectors, much of it is outside the formal economy. These jobs offer livelihoods, but not real advancement.

Why the Disconnect?
Three structural issues lie at the heart of this disconnect. First, must of the employment growth has occurred in agriculture and informal services, where output per worker is low. Even today, one in four Indians works in agriculture, which contributes less than 20% of GDP. Second, most Indian enterprises are small. Roughly 98% employ fewer than 10 workers. Such micro-enterprises lack capital, technology, and scale needed to improve productivity. Third, the workforce remains largely unskilled. Only about 5% of Indian workers have received formal skill training, and nearly 88% are in low-skill roles. In the absence of training, tools, or technology, productivity gains simply stall.

More Hours, Not Smarter Work
Cultural and economic pressures have long equated effort with productivity in India’s labour markets. Many employees work 50-60 hours a week or more, but output does not rise proportionately. Research shows that excessive working hours often reduce efficiency rather than enhance it. Proposals for 90-hour workweeks may sound heroic but are ultimately counterproductive. The goal should not be to stretch, but to increase the value created within it.

A Shift in Focus
To bridge the gap between employment and output, India needs to recalibrate its development narrative. First, expand high-productivity industries. Manufacturing, especially in medium- and high-technology sectors, can absorb labour while generating more output per worker. Second, scale up firms. Micro-enterprises should be encouraged to formalise and expand through easing regulation and better access to finance. Third, invest deeply in skills. On-the-job training, soft-skills, and digital fluency have proven to yield strong productivity gains. Training should prioritise productivity, not merely employability.

Policy Can Nudge
Government initiatives such as the Production-Linked Incentive (PLI) schemes and the National Education Policy are steps in the right direction. The next must focus on execution, on quality rather than quantity. Policies should encourage firms to raise productivity per worker, not just expand payrolls. Platforms that connect MSMEs with technology, training and export markets can play a crucial role. The state’s role is not to create jobs directly, but to enable good jobs to emerge.

India’s strategic Imperative of becoming an advanced economy by 2047 depends not just on employment, but on the quality of employment. The demographic dividend will not last forever. The danger lies in being trapped in low-productivity work, growing but not transforming: rising yet still middle-income. Productivity is not a peripheral technocratic concern. It lies at the heart of national income, social mobility, and economic resilience.

The window to act is open. Growth is strong, confidence is high, and employment momentum is real. But this decade cannot settle for superficial progress. India’s next leap will come not from hiring more people, but from making every job count.

*Views are personal