India sees higher employment growth in capital-intensive sectors compared to labour-intensive: Goldman Sachs report

India has witnessed higher employment growth in capital intensive sectors compared to the labour intensive sectors, a Goldman Sachs report has observed. As per the report, the capital-intensive industries in India have done relatively well in terms of export growth with the government focusing on promoting assembly of electronics, machinery, and pharmaceutical products.

It observed that over the past ten years, capital-intensive sub-sectors within manufacturing sector which includes chemicals and machinery, have seen major growth in both exports and employment.

The focus on capital-intensive industries has given an impressive outcome, with exports to developed markets experiencing double-digit growth. It reflects India's progress in building a robust export base for high-value products.

"Over the last 10 years, capital-intensive sub-sectors (which we define sectors with capital income share of 0.65 or more) within manufacturing such as chemical products, machinery etc. have seen higher employment growth on average versus the labour-intensive sectors like textiles and footwear, food and beverages," the report added.

The report also highlights that despite an impreessive growth of capital intensive sector, labour-intensive sectors have a higher share of jobs in the country.

According to the global investment firm, around 67 per cent of manufacturing jobs are in thelabour-intensive sectors such as textile, food processing, furniture.

As per the Annual Survey of Industries (ASI) data which covers the organised manufacturing sector in the economy, 17 million workers (28 per cent of total manufacturing sector employment) were employed in the organized manufacturing sector as of FY22.

The government's Production-Linked Incentive (PLI) schemes have mostly targeted capital-intensive industries to spur growth.

There has been a recent shift to support labor-intensive sectors as well, with PLIs expanding to cover areas like textiles, footwear, toys, and leather products, which are traditionally more labor-driven.

Labor-intensive sectors, including food products and textiles, remain the largest employers, accounting for 11 per cent and 10 per cent of employment, respectively. The construction sector, meanwhile, stands out as a major employment generator, providing jobs for about 13 per cent of the workforce.

Construction has been a major sector for large-scale job creation in India, accounting for13 per cent of total employment. During the previous construction cycle over 2004-2008,40 per cent of incremental non-agricultural jobs were created in this sector, driven byincreased capital investment in real estate and infrastructure.

Construction also has the highest labour income share among the broader sectors, making it significant not only for employment generation but also for improving incomes.

Business services and retails trade led the growth in the service sector which comprises 34 per cent of total employment. However, as of FY23, this percentage is still below the sector's 54 per cent contribution to gross value added (GVA).

A significant number of service-sector jobs are in retail and wholesale trade, with additional growth in business and transportation services, which make up 15 per cent and 12 per cent of service jobs, respectively.

Technology advancements and the expansion of e-commerce have transformed retail, with nearly 41 per cent of offline vendors creating new job roles as they move online. This shift has created demand for digital skills, logistics, and warehousing roles across the country.

The IT industry has also played a significant role in India's employment landscape within business services.

According to NASSCOM, India's IT industry reached USD 245 billion in revenue by FY23, representing around 7 per cent of the country's nominal GDP.

The IT industry, in last eight years has added about 1.9 million jobs, boosting the total workforce to around 5.4 million, as per the firm.