India needs labour-intensive growth to address job challenges: Economists | BS Events

India needs to make its economic growth more labour-intensive to generate enough jobs, as technological advances and artificial intelligence (AI) risk widening the disconnect between economic expansion and employment, economists Sajjid Chinoy and Soumya Kanti Ghosh said at the Business Standard BFSI Insight Summit 2026 in Mumbai on Tuesday.

 

Speaking at a panel discussion titled ‘Making India’s growth story more equitable’ moderated by Business Standard’s A K Bhattacharya, Chinoy, head of Asia Economic Research at JPMorgan, and Ghosh, Group Chief Economic Adviser at the State Bank of India, called for greater focus on labour-intensive manufacturing, education and reskilling to ensure that technological progress translates into broader employment opportunities.

  

Capital-intensive growth poses a jobs challenge

 

Chinoy said the disconnect between gross domestic product (GDP) growth and employment growth was a challenge facing economies worldwide. Advances in technology have made production increasingly capital-intensive, with businesses using more machinery and fewer workers.

 

“If you go back to data from 2000 to 2025, and you look at the Annual Survey of Industries, what you find is we’re using more machines and fewer people,” he said.

 

The concern, he added, was no longer limited to manufacturing automation, as AI could also affect service-sector jobs. “The fundamental challenge that policymakers around the world face is: how do you make growth more labour-intensive?” Chinoy said. He pointed to the scale of India’s employment challenge, saying the country still needed to create eight to nine million jobs.

 

Ghosh said the nature of India’s labour market and the country’s dependence on agriculture made employment generation particularly important. Although manufacturing’s share of India’s gross value added had remained around 14-15 per cent, he said the country needed to do more to move workers into productive economic activities. “My sense is that we have to travel a distance and overall engage the youth of India today in meaningful activity. The manufacturing sector is the only way up,” Ghosh said.

 

Labour-intensive growth key to job creation

 

Chinoy said India could draw lessons from China’s structural transformation, which involved moving workers from agriculture into manufacturing and building export-oriented industries.

 

“What China did so successfully was massive structural transformation: pull people out of agriculture, put them into labour-intensive manufacturing, and export to the whole world,” he said.

 

He welcomed the government’s focus on labour-intensive manufacturing and pointed to sectors such as footwear, apparel, leather goods, gems and jewellery as areas that could support employment.

 

Chinoy also cautioned against treating capital-intensive industries such as data centres as a complete growth strategy for India. “Data centres in India’s context cannot become the only way, cannot become a growth strategy, given the capital intensity of what you’re seeing in AI,” he said.

 

Ghosh pointed to the rise in investment and exports in India in recent years and said government initiatives, including production-linked incentive schemes, were beginning to show results. However, he argued that the country still needed to do more to expand manufacturing and exports and create meaningful employment.

 

AI raises urgency of skilling and reskilling

 

Chinoy said AI could accelerate the disruption of existing jobs while creating new industries and occupations. The challenge for policymakers would be to help workers move from declining sectors into emerging ones through education, retraining and reskilling.

 

“What’s different this time is the speed of progress,” he said, explaining that previous industrial revolutions had given economies more time to assess which sectors were being disrupted and help workers transition.

 

He said governments needed a broad approach that included education, labour laws and a temporary but effective social safety net, alongside investment in skills that would help workers compete with technology.

 

“All jobs are welcome, but the point is we want high-productivity jobs,” Chinoy said. “We have to move up the productivity ladder.”

 

Ghosh said India had a substantial skilling gap to address. Citing Periodic Labour Force Survey data, he said only around 30.7 per cent of the informal workforce had received training. “My sense is that we need to fill this gap very fast,” Ghosh said, adding that improving training was important to help workers access better employment opportunities.

 

Both economists cautioned that AI could displace workers even as it improved productivity. Chinoy said the technology could augment labour in some settings but could also substitute for workers, making it important for India to prepare for changes in the nature of work.

 

‘Gig economy cannot fully address India’s jobs challenge’

 

Ghosh cautioned against treating the gig economy as a complete answer to India’s employment challenge. While gig work could offer opportunities, he said, low pay and gaps in training and social protection limited its ability to provide a comprehensive solution. “Gig employment could be a part of the solution, but it cannot be an entire solution to the job problem,” he said.

 

Chinoy said India could also learn from states that had made progress in manufacturing and labour-force participation. He cited Tamil Nadu as an example and called for states to share successful approaches to employment, education and industrial development.

 

He suggested that institutional mechanisms similar to the GST Council could help states discuss and share best practices in areas such as labour, land, health and education.