Introduction
World Economic Forum On the second day of the World Economic Forum (WEF) 2025 in Davos, World Economic Forum former Reserve Bank of India (RBI) Governor Raghuram Rajan took center stage, calling for immediate measures to revitalize India’s job market, which he warned is showing signs of strain. Speaking at a high-profile panel on “Economic Growth and Job Creation in Emerging Markets,” Rajan highlighted the paradox of India’s rapid economic growth and the inability of this growth to create sufficient jobs, particularly in the formal sector.
India, one of the fastest-growing economies globally, faces a growing mismatch between its burgeoning youth population and the availability of quality employment opportunities. While sectors like technology, startups, and green energy are thriving, Rajan warned that structural inefficiencies and insufficient policy reforms have left the broader job market struggling to meet demand.
His observations come at a crucial time as the global economy, World Economic Forum still recovering from the aftermath of the pandemic and geopolitical disruptions, grapples with balancing economic expansion and job creation. The Indian government’s delegates and private sector representatives at Davos are expected to deliberate on this issue in the coming sessions.
This article delves into Raghuram Rajan’s key remarks, the challenges in India’s employment sector, and potential solutions discussed at WEF 2025 to address the situation.
Raghuram Rajan’s Perspective: The Challenges in India’s Job Market
In his speech, Raghuram Rajan painted a mixed picture of India’s economic progress and workforce challenges. He noted that while India’s GDP growth rate consistently ranks among the highest in the world—projected at 6.7% in 2024—the ability to translate this growth into equitable job creation remains limited.
Key Points Highlighted by Raghuram Rajan
- Low Employment Elasticity:
Rajan noted that despite India’s high growth rate, employment elasticity—the ability of economic growth to create jobs—has been relatively weak. Traditional job-creating sectors, World Economic Forum such as manufacturing and agriculture, have not kept pace with the country’s demographic demands.- “India has been successful in raising growth, but much of this growth has come from capital-intensive sectors rather than labor-intensive ones,” Rajan said.
- Youth Unemployment Crisis:
India is home to one of the largest youth populations in the world, with 65% of its population under 35 years old. Yet, unemployment among those aged 18 to 24 remains alarmingly high at 28%, according to recent government estimates.- “We are sitting on a ticking demographic time bomb. If young Indians entering the workforce fail to find meaningful jobs, we risk social unrest and a productivity slowdown,” Rajan warned.
- Informal Sector Reliance:
Rajan emphasized the ongoing challenges faced by the informal sector, which accounts for more than 80% of India’s workforce but lacks basic social protections and job stability. While India’s startup ecosystem is a bright spot, most of its growth has been concentrated in urban tech hubs, World Economic Forum leaving millions in rural areas without access to quality employment. - Global Geopolitical Shifts:
Rajan noted that global trends, such as the shift toward green energy and supply chain diversification away from China, present an opportunity for India to position itself as a manufacturing hub. However, he pointed out that bureaucratic bottlenecks and lack of adequate infrastructure impede progress in this direction.- “India needs urgent reforms in labor laws, logistics, World Economic Forum and ease of doing business to fully capitalize on reshoring trends from the West,” he said.
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- “India needs urgent reforms in labor laws, logistics, World Economic Forum and ease of doing business to fully capitalize on reshoring trends from the West,” he said.
Comparing India’s Job Market with Global Trends
To contextualize Rajan’s comments, it is important to compare India’s labor market trends with those of its global peers. Emerging economies such as Indonesia, Vietnam, and Bangladesh have successfully leveraged labor-intensive manufacturing industries to create jobs at scale, World Economic Forum but India appears to lag behind despite having similar opportunities.
Chart: Job Market Indicators in Emerging Economies (2024)
| Country | GDP Growth (%) | Unemployment Rate (%) | Contribution of Manufacturing to GDP (%) |
|---|---|---|---|
| India | 6.7 | 7.1 | 15.6 |
| Vietnam | 5.9 | 2.3 | 22.8 |
| Bangladesh | 6.1 | 4.0 | 18.4 |
| Indonesia | 5.5 | 5.4 | 21.3 |
India’s relatively low contribution of manufacturing to GDP (15.6%) highlights its untapped potential in creating mass employment in industries such as textiles, electronics, and machinery. Rajan argued that India could take inspiration from these peer economies to develop a coherent job creation roadmap that emphasizes manufacturing and rural employment.
Proposed Solutions for India’s Employment Challenges
During his panel discussion, Rajan suggested several policy interventions to improve India’s job creation prospects. These ideas sparked wide-ranging debates and insights from other global leaders and experts present at the session.
1. Focus on Labor-Intensive Industries
Rajan emphasized that India must prioritize sectors capable of creating millions of low- and medium-skill jobs, such as textiles, apparel, food processing, and electronics manufacturing. He pointed to India’s Production Linked Incentive (PLI) schemes, which incentivize domestic production, as a step in the right direction but said more needs to be done to expand these initiatives into labor-intensive industries.
- “If we don’t actively promote labor-intensive industries, World Economic Forum the informal economy will continue to dominate, leaving millions of workers stuck in low-paying, precarious jobs,” Rajan warned.
2. Upskilling and Vocational Training
Rajan stressed the need to revamp India’s education and skilling infrastructure to prepare the workforce for the future. This includes promoting vocational training programs tailored to key growth sectors like renewable energy, healthcare, and digital technology.
He noted that while schemes like Skill India have made progress, World Economic Forum the scale and alignment of these programs with market demands remain insufficient.
- “We cannot rely on college degrees alone to solve our job crisis. We need targeted skilling initiatives that match the needs of growing industries and global markets,” Rajan said.
3. Empowering Rural Economies
Given that the majority of India’s population lives in rural areas, Rajan called for greater investment in rural job creation. Expanding public works programs like Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and developing agri-tech solutions to enhance rural livelihoods were key suggestions.
He added that boosting rural employment would ease the burden on urban centers, which are struggling with overcrowding and unemployment.
4. Enhancing the Ease of Doing Business
To attract foreign and domestic investments that can generate jobs, Rajan said India must significantly improve its ease of doing business, focusing on areas like:
- Simplifying labor laws
- Improving logistics infrastructure
- Cutting red tape to streamline approval processes for industries.
Reactions at Davos
Industry Leaders Respond
Indian and international industry leaders at the panel offered their perspectives on Rajan’s observations and proposals.
Narayana Murthy, co-founder of Infosys, echoed Rajan’s sentiment, World Economic Forum emphasizing the role of startups in bridging the employment gap:
“India’s youth have enormous entrepreneurial energy. If we can provide them with the right environment and support, startups can play a transformative role in job creation.”
On the global front, Christina Lagarde, President of the European Central Bank, World Economic Forum underscored the need for global cooperation to foster job creation:
“India is not alone in facing an employment crisis. The solution lies in governments and businesses coming together to create sustainable jobs aligned with the needs of a rapidly transforming economy.”
Government’s Response
The Indian delegation at Davos, led by Union Commerce Minister Piyush Goyal, defended India’s efforts in promoting job creation, highlighting initiatives such as Make in India, Startup India, World Economic Forum and infrastructure projects aimed at creating employment.
However, Goyal also acknowledged the need for continued reforms:
“We understand the importance of creating jobs that are not just plentiful but meaningful. India remains committed to promoting labor-intensive industries, attracting foreign investment, World Economic Forum and providing skills training to its youth.”
Global Implications
India’s job market challenges are not only a domestic issue but also carry significant global implications: 
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- Supply Chain Realignment: India’s ability to establish itself as a global manufacturing hub could play a critical role in reshoring supply chains from China.
- Demographic Dividend: A successful employment strategy in India could create ripple effects in the global labor market, with India’s young workforce potentially filling skill gaps worldwide.
- Sustainability Goals: Given the rise of green jobs in sectors like renewable energy, India has an opportunity to set a global benchmark for sustainable job creation.
Conclusion
Raghuram Rajan’s urgent call for a boost to India’s job market during WEF 2025 Day 2 highlights the pressing need for reforms and innovation in employment policies. With a massive youth population entering the workforce every year, India’s ability to create jobs that align with the needs of a modern economy is critical—not just for its own future but also for its role in global economic growth.
As discussions at Davos continue, it is clear that India’s success in balancing growth with equitable employment opportunities will require collaboration between policymakers, businesses, and global partners. The question remains: will India seize the moment to address its employment crisis, World Economic Forum or will its demographic dividend become a missed opportunity? The coming years will be decisive for ensuring that growth truly translates into prosperity for all. ALSO READ:- Landslides, Flash Floods Devastate Indonesia’s Java Island: 16 Dead, 9 Missing 2025