While GDP is booming, manufacturing jobs are falling; what went wrong?

India is rapidly shedding jobs — not just in the formal sector but also in the informal one — and manufacturing has again emerged as the main culprit.

Three of four official job reports released in the past few days clearly point to this, which is quite ironic, given the robust growth — averaging 8.2 per cent in the post-pandemic FY22-FY25 and 7.8 per cent in the first quarter of FY26 (all at constant prices).

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Formal manufacturing shedding jobs was known for quite some time. Now, the first editions of the Quarterly Bulletin on Unincorporated Sector Enterprises (QBUSE), for the January-March 2025 and April-June 2025 quarters, released on September 3, showed that informal manufacturing (unincorporated establishments) is also shedding jobs even as the total number of unincorporated establishments has gone up.

Here is a detailed look at the four job reports that shed light on the worrisome numbers.

1. QBUSE: Informal manufacturing shedding jobs

The QBUSE maps non-farm informal manufacturing, trade and services establishments. It shows the number of non-farm unincorporated (informal) establishments grew by 1per cent in Q1 of FY26, over the previous quarter. But during the same period, the share of manufacturing establishments fell from 28 per cent to 26 per cent.

A significant finding is a rise in rural workforce and the fall in the urban workforce — indicating a further shift of the workforce from urban to rural areas.

The other findings are: (i) number of workers fell by (-)2 per cent (ii) share of working owners went up from 58.3 to 60.2 per cent (iii) share of hired workers decreased from 26.86 to 24.38 per cent (iv) share of other workers, including unpaid family workers, went up from 14.9 to 15.4 per cent (v) rural workforce increased from 59.7 million to 62.5 million and (vi) women accounted for over 28 per cent.

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What these numbers tell is that despite the rise in the number of establishments, the number of total workers went down as hirings dropped and owners turned to running their establishments. They relied more on family members, without paying wages (unpaid workers).

The net result is a rise in vulnerable or precarious jobs — working owners and unpaid family members accounting for 75.6 per cent. As the annual Periodic Labour Force Survey (PLFS) data have shown over the years, most of the unpaid family members in these establishments are likely to be women.

Which establishments are shedding jobs?

The report points to manufacturing.

It says, the job shedding is “mainly” in the manufacturing with its job share falling by “more than 2 percentage points” and that the shift to “working owners” (self-employed) and the entrepreneurial activities is “particularly evident in manufacturing”. These manufacturing units are the ones that saw the “steepest decline” in the share of hired workers.

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The other significant finding is a rise in rural workforce and a fall in the urban workforce — indicating a further shift of the workforce from urban to rural areas — just like the PLFS reports have shown over the years (workers are migrating back to informal and low-paid agriculture). The PLFS of 2023-24 showed that the agriculture’s share of workers went up to 46.1 per cent, while that of manufacturing went down to 11.4 per cent.

2. ASI: Creeping informalisation of jobs

On August 27, the Annual Survey of Industries (ASI) data for FY24 was released. This survey tracks organised manufacturing industries. It shows their GVA (gross value added) growth was very healthy at 11.9 per cent, and the number of workers also grew at 5.6 per cent.

But here is the catch.

The ‘real’ wage growth was just 0.1 per cent, and the share of contract workers grew to 42 per cent — both pointing to worsening conditions of workers in organised manufacturing.

There is a fall in organised manufacturing despite a massive corporate tax cut of 2019 and several other incentives and cash handout schemes, aimed primarily at manufacturing to boost investment and jobs.

Recall how the Chief Economic Advisor Anantha V Nageswaran had upbraided Indian Inc in December 2024 for “creeping informalization” due to higher contractual hirings and stagnated wages despite a 15-year high of profit-to-GDP in FY24. The Economic Survey 2023-24 had said India Inc was “swimming in excess profits”.

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This fall in organised manufacturing happened despite a massive corporate tax cut of 2019 and several other incentives and cash handout schemes — aimed primarily at manufacturing to boost investment and jobs. The Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) of 2018 handed over Rs 9,253 crore, and the Aatmanirbhar Bharat Rojgar Yojana (ABRY) another Rs 10,189 crore — both fully subsidising the EPF liabilities of private companies.

On July 1, the Employment Linked Incentive (ELI) scheme was launched with an outlay of Rs 99,446 crore, which also reimburses the EPF liability of employers, mainly aimed at manufacturing, along with cash handouts to the newly employed.

3. EPFO: Manufacturing among those shedding jobs

The latest EPFO data, released on August 20, show for the past two years, jobs are slowing down in the formal sector with (a) “new EPF subscribers” falling from 11.5 million in FY23 to 11 million in FY24 and 11.39 million in FY25 — a massive fall from 13.9 million in FY19, the first full fiscal for which such data are available and (b) “net payroll” (total EPFO registered workers) falling from 13.9 million in FY23 to 13.15 million in FY24 and 12.98 million in FY25.

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The industry-wise data are provided for different age groups of workers, ranging from below 18 years to above 35 years.

The latest EPFO data show that formal sector jobs have slowed, with both new subscribers and net payroll shrinking steadily since FY23, far below FY19 levels.

If the industry-wise data for above 35 years is considered, one of the top sectors shedding jobs is that manufacturing electrical, mechanical and engineering products. The others are export services; trading; school and societies, clubs or associations.

4. Quarterly PLFS: Manufacturing share masked

The first-ever quarterly PLFS report of FY26 was released on August 18. Unlike the previous ones, it covers both rural and urban areas and reflects the workforce in totality — including formal and informal.

Unlike the annual PLFS, it doesn’t show the manufacturing job share. It has a bizarre classification — agriculture, secondary and tertiary sectors.

The PLFS annual reports have shown that the manufacturing’s share has gradually fallen from 12.1 per cent in 2017-18 to 11.4 per cent in 2023-24.

Manufacturing is clubbed with mining and quarrying (part of primary sector as per the National Accounts of Statistics’ classifications, with agriculture), electricity and the construction sector — together forming the ‘secondary sector’.

This unusual ‘secondary' sector's share in the workforce is 26.6 per cent — far lower than agriculture’s 39.5 per cent. The tertiary sector is the second-largest job provider with a share of 33.9 per cent.

Is this bizarre classification meant to hide manufacturing’s poor job share? That seems more likely.

The PLFS annual reports have shown that the manufacturing’s share has gradually fallen from 12.1 per cent in 2017-18 to 11.4 per cent in 2023-24.

This report also shows the best quality jobs that formal manufacturing provides, “regular wage/salaried”, are low at 25.5 per cent, while vulnerable self-employed at 54.4 per cent and casual at 20.1 per cent. Unpaid family workers constitute 14.1 per cent of the total workforce.

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Manufacturing needs scrutiny

Except for the report on the non-farm unincorporated establishments, none of the others giving jobs data provide any clue to why jobs are falling in manufacturing. The newly minted quarterly PLFS report hides the manufacturing job share, instead of highlighting it and shedding some light on the factors at play.

In fact, these job reports take one back to square one.

Recall the 12th Five-Year Plan document of 2013, which said five million jobs were lost in manufacturing between 2004-05 and 2019-10, even as total jobs went up by 2.76 million during the same period. That was the reason the United Progressive Alliance-ruled years were branded as ones with ‘jobless growth' (GDP growth averaged 7.1 per cent during that period).

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It is known that manufacturing is not creating enough jobs because it is growing capital and technology-intensive. But there is no specific study or assessment to show if indeed the fall in jobs is proportionate to the growth in adoption of technology.

Given that even informal manufacturing is shedding jobs, it should alarm policymakers and planners. It should egg them on to carry out a comprehensive study to identify the real issues instead of pumping in cash to cash-rich India Inc, sitting on a cash pile of Rs 13.5 lakh crore without knowing what to do.