How India’s growth story has left its workers behind

What Happened

• Despite India recording among the fastest GDP growth rates globally in recent years, real wages for a large share of the workforce have stagnated or declined, exposing a structural disconnect between aggregate growth and labour income.
• Between 2021-22 and 2022-23, real GDP grew at approximately 7% while real wages declined by an average of nearly 3%, indicating that growth has not translated into proportionate wage gains for workers.
• The ratio of the top 1% income threshold to the bottom 50% income threshold widened from 5.89 in 2017-18 to 6.25 in 2023-24, reflecting deepening income concentration.
• Agriculture continues to absorb approximately 45% of India's workforce while contributing less than 20% of GVA — a structural mismatch that suppresses earnings for the majority of workers.
• Workers in urban manufacturing and service sectors report wage levels that leave little margin after basic expenditure, highlighting the insufficiency of minimum wage enforcement and the dominance of informal employment.

Static Topic Bridges

Labour Share of Income — The GDP-Wage Disconnect

In economics, the "labour share of income" refers to the fraction of national income that goes to workers as wages and salaries, as opposed to capital owners as profits and returns. Globally, labour share has declined since the 1980s due to capital-intensive technological change, globalisation, and the weakening of collective bargaining. In India, the labour share problem is compounded by structural factors: the persistence of surplus agricultural labour, the dominance of self-employment, and the size of the informal economy.

GDP growth can occur through either labour productivity gains (more output per worker — which can raise wages) or capital deepening (substitution of capital for labour — which may suppress wages). When growth is capital-intensive and concentrated in high-productivity sectors with limited labour absorption, the wage-growth nexus weakens.

Periodic Labour Force Survey (PLFS) — India's Employment Data Framework

The Periodic Labour Force Survey (PLFS), conducted by the National Statistical Office (NSO) under MoSPI, is the primary source of employment and unemployment statistics in India. It replaced the older NSSO Employment-Unemployment Survey (EUS) and has been conducted annually since 2017-18. The PLFS distinguishes between usual status (employment over the past 365 days) and current weekly status (employment in the reference week), providing a nuanced picture of employment patterns.

From 2025, the PLFS adopted a revised sampling design with a rotational panel approach and expanded sample size to enable monthly employment estimates for both rural and urban areas.

Informal Economy and Structural Employment Challenges

India's informal sector is defined as employment in enterprises that are not registered and/or do not maintain accounts — though definitional nuances vary. The informal sector includes informal enterprises in the formal economy (contract labour, casual workers in large firms) as well as all activity in the informal economy. The National Commission for Enterprises in the Unorganised Sector (NCEUS), established in 2004, was a landmark institutional effort to document and address informal work conditions.

Key structural challenges include: (a) the agrarian trap — surplus labour in agriculture with limited absorption into manufacturing; (b) the missing middle — India's manufacturing sector is dominated by micro and large enterprises, with the medium enterprise layer comparatively thin; (c) premature deindustrialisation — services have grown faster than manufacturing, bypassing the labour-intensive manufacturing phase that enabled wage growth in East Asian economies.

Social Security Gaps and the New Labour Code Framework

The absence of portable, universal social security (healthcare, provident fund, accident insurance) in the informal sector reduces workers' effective compensation and leaves them vulnerable to income shocks. The Code on Social Security, 2020 (now operationalised from November 2025) attempts to address this by extending coverage to gig workers, platform workers, and unorganised sector workers — but implementation and actual enrolment remain challenges.

The Employees' Provident Fund Organisation (EPFO) covers formal sector workers; the Employees' State Insurance Corporation (ESIC) covers health insurance for workers in establishments with 10 or more employees earning below a threshold. The new Code integrates these along with other schemes under a unified framework.

Key Facts & Data

• India GDP growth rate (2022-23): approximately 7%; real wage change (same year): approximately -3%
• Income ratio (top 1% to bottom 50%): widened from 5.89 (2017-18) to 6.25 (2023-24)
• Agriculture: ~45% of employment, <20% of GVA
• Informal employment: 82–90% of India's workforce
• LFPR (PLFS 2025, usual status, age 15+): 59.3%
• WPR (PLFS 2025, usual status, age 15+): 57.4%
• EPFO active members: approximately 7.5 crore
• e-Shram portal registrations: over 30 crore unorganised workers
• Self-employment share: approximately 55–57% of total employment
• ILO India Employment Report 2024: highlighted skill-job mismatch and youth unemployment as structural risks