India is the second largest labour market in the world with around more than 600 million people working or seeking work. In this piece, we look at the difference between the labour force and the workforce, who is in India's labour force and who isn't, and what work people in the labour force do.
Information on employment in India and most countries is gathered by asking people about the economic activities they did in a recent time period through household surveys.
India's National Statistics Office conducts a large, nationally representative, annual survey called the Periodic Labour Force Survey. We use data from the PLFS in our work on employment. Globally comparable international data comes from the International Labour Organization by compiling national statistics from countries. For a more detailed discussion on measuring employment and unemployment, see this piece from our Measurement vertical.
What is work?
The PLFS asks respondents about the work that they do. The question is open-ended, and trained enumerators convert their answers into a system of codes. This means that all work - including established professions like hawkers, teachers or construction workers - and new types of jobs - like being a driver through an aggregator app, or a food delivery person - are covered. It also means that both formal and informal employment are covered.
In economics, work covers activities that produce goods or services that are either consumed by the household or are sold in the market for a price.
In Indian and international labour statistics, most activities that produce goods for self-use as well as for sale are considered as productive work.[1] So a farmer growing vegetables for the household to eat constitutes work, as does her selling those vegetables in the market.
But in terms of services, only those activities that produce an output which can be sold are considered work.[2] So transporting the harvested vegetables to the market for sale is work, but cooking those vegetables for the household members to eat, or the feeding of children is not considered work.
Whether this unpaid care and domestic work that is mostly performed by women should be counted as productive work is a widely debated topic in labour economics.[3]
Who is in India's labour force
India is a signatory to global conventions which prohibit children under the age of 15 from working.[4] There are close to one billion people above the age of 15 in India who can legally work.[5]
This working age population can be divided in three broad categories from the lens of the labour market:
- Employed: those who are working
- Unemployed: those who are not currently working, but seek work or are available for work, and
- Out of the labour force: those who are neither working nor seeking work
The first two categories, or the employed and unemployed together, form the labour force. The labour force is made up of people who are working, and those seeking or available for work.
Roughly, 625 million Indians, or six in ten working-age people, are in the labour force, while nearly 400 million working age Indians are out of the labour force.[6]
The share of the population that is in the labour force relative to the total population is an important labour market indicator, called the Labour Force Participation Rate (LFPR). It indicates the relative share of those working or available for work to the total population, and can affect productivity and growth.
India's national LFPR is 45%. This means that 45% of India's total population is in the labour force. Among adults only (population above the age of 15), India's LFPR is 59%.
The level of labour force participation in India is lower than that of South Asian peers such as Bangladesh, and other comparable middle income countries.[7]
One part of the explanation for this is that more young people (aged 15-24) are now pursuing education than before.[8] But a larger part of the explanation is that while Indian men enter the labour force at rates comparable to other countries, female labour force participation in India lags far behind that of men.
Just four in ten working age women in India enter the labour force as compared to eight in ten men.[9]
While female labour force participation rates are lower than those of males in many parts of the world, this gap is particularly sharp in India. There are a little more than 200 million women in India's labour force, compared to more than 400 million men.
Economic sectors
Of the 625 million people in India's labour force, around 600 million are currently working, and are categorised as employed persons. The remaining roughly 25 million persons in India's labour force are unemployed.
A key way to understand the labour market is in the way the workforce is distributed across the areas of the economy.
In economics and Indian and international statistics, the economy is understood to be composed of three major sectors - agriculture, industry and services. In this categorisation, industry includes construction and manufacturing, in addition to public utilities and mining. Services mainly include trade, transport, communications, real estate, financial services, professional services, and public administration.
Agriculture employs nearly half of India's workforce, followed by services and industry roughly employing a quarter share each. In absolute terms, 280 million Indians are employed in agriculture, followed by 150 million working in the industry sector, and 180 million people in services.
Over the last 50 years, there has been a significant change in the economic sectors that Indians work in. This change is in line with the economic transformation that is expected when a developing country grows and industrialises. While agriculture still dominates, its share in total employment fell from three-quarters in the 1970s to less than half as of 2024.
The share of agriculture in Indian employment is still much higher than in comparable middle-income countries - around one in four workers in China and Vietnam, for instance, are in agriculture, while in India this is two in four.[10]
Agricultural employment dominates the workforce at the regional level, too, including some of the most industrialised states. For example, more than 40% of employment in Maharashtra and Karnataka is on account of agriculture. A few of the relatively high-income states, on the other hand, show an accelerated move away from agriculture. In Tamil Nadu and Kerala, only 25% of the workforce is now engaged in agriculture.
Those who moved out of agriculture entered industry and the services sector. Within industry, construction now employs 75 million people, more than the 65 million workers who are in manufacturing.[11] In the services sector, trade and hotels have gained the most and now employ 70 million people.
Types of workers
In labour studies, the nature of people's work is understood in three broad categories - salaried workers, casual labourers and the self-employed.
Workers who are employed in an enterprise on a regular, usually monthly, payment basis are called salaried workers. They include those in corporate jobs but also those who work as domestic help on a regular basis.
Salaried workers do not form the majority in India, as they do in most advanced economies and many emerging ones. They account for around one in five workers in India. In urban India, half of all jobs are now salaried jobs, and they are concentrated in manufacturing, education, health, trade, and technology sectors. In absolute terms, 130 million Indian workers are salaried workers.
Higher education and technical certifications increase the chances of a candidate being in a salaried position. Among illiterate workers, only 6% are in salaried jobs, compared to 57% among workers who have diplomas or graduate degrees.
But the meaning of a salaried job is not universal, and all salaried jobs do not have similar benefits. Only half of India's salaried jobs are secure with a contract and social security.
Casual workers account for another one in five Indian workers or close to 120 million people. A casual worker works on someone else's farm or non-farm enterprise and receives daily or periodic wages. Casual work is irregularly available, and is characterised by short-term contracts. The construction sector in particular is dominated by casual workers in India.
Self-employment is the main type of employment in India. The majority of Indian workers, or three in five, are self-employed. Self-employment is the most prevalent mode of work both in urban as well as rural areas.
In rural areas, most self-employed workers are engaged in agriculture, managing their own farms. Self-employed workers in urban areas might run small stores that sell food products, or could be tailors and drivers.
Public and private employment
Only about 6% of Indian workers work in the public sector. The public sector includes government departments, public sector enterprises, and autonomous organisations funded by the government. The public sector occupies a higher share in total employment in advanced economies compared to developing ones.
Most of the government jobs are in schools, in railways and public sector banks, in government-funded road and other construction projects, power and water supply utilities. Rural health workers and panchayat officials also form a part of rural government jobs.
Another 6% of India's workers are in private companies in the formal sector. Half of the jobs in private companies are in manufacturing, while information technology has the next biggest share.
But, the majority of Indians work in informal enterprises, which are unregistered enterprises run at the household-level.[12]
This is not just the case in India's agricultural sector, but also the case when we look at India's non-farm sector alone. In India's non-farm workforce, the share of the public sector in the workforce is 10%, while employment in private companies forms another 11% of the workforce.
Unemployment
Unemployment is a situation when a person is either available for work or is actively seeking work, but is not working. Unemployed people are a part of the labour force but are outside the workforce.
To measure the unemployment rate, workers are asked how long they worked during the year preceding the survey. A person who worked for at least 30 days in the preceding 365 days is considered as employed. A person who was available to work or spent most part of the year looking for work but was unable to secure work for even 30 days in the preceding 365 days is counted as unemployed.[13]
Roughly 20-25 million Indians want work but cannot find it, meaning that they are unemployed. This puts India's unemployment rate - the share of the unemployed among 580 million Indians in the labour force - at 3.2% as of 2023-24. The urban unemployment rate, at 5.1%, was twice as that of the rural unemployment rate (2.5%).
The unemployment rate varies drastically across demographic and socioeconomic groups.
Young Indians who are relatively newer entrants to the labour force face higher joblessness in India compared to older workers. Unemployment rates were below 1% for those above 35 years of age, but close to 8% for those between the ages of 15 and 34.
The unemployment rate in India is higher among the better educated individuals in the labour force. Among women with a higher education, one in five is likely to be unemployed. However, among illiterate women, less than one in a hundred are unemployed.
In low-income countries, skilled jobs may be scarce and there could be a mismatch between skills and jobs. In addition, the better educated can afford to stay unemployed for longer, and might hold out for a suitable job.[14] While less than 1% of Indians educated up to primary level are unemployed, more than 13% of those with graduate degree or above are jobless.
While the unemployment rate is a crucial metric to understand economic trends in developed countries, it does not always fully capture the ability of developing countries to adequately employ most people. In the absence of unemployment insurance systems or social safety nets, most people of working age in poorer countries engage in some form of economic activity, even if it is inadequate.[15]
[1] This definition follows from the System of National Accounts (2008), an internationally accepted statistical framework that is also used to define labour force and employment in India's national employment surveys, including the PLFS as well as the earlier Employment and Unemployment Surveys.
[2] Indian labour statistics have additional restrictions in their definition of work. The methodology used in the PLFS includes only the production of primary goods (the output from agriculture, mining, and allied activities) for own-consumption and the production of fixed assets for own-use such as building a house for one's own family inside the definition of work. All other goods and all services (such as cooking food and childcare) fall outside the purview of work in the Indian framework of labour statistics.
[3] See work on this topic by ILO, OECD and UN Women.
[4] India is a signatory to the International Labour Organization's Minimum Age Convention, 1973, and Worst Forms of Child Labour Convention, 1999. According to these conventions, a person above the age of 15 can work, except in hazardous industries, for which they must be above the age of 18.
[5] Using 2011 Census data, the Registrar General and Census Commissioner of India has published population estimates up to 2036 using assumptions about fertility, mortality and migration pathways. Until the new Census 2027 is complete and its results published, we use these official estimates for population.
[6] All data in this piece are from the Periodic Labour Force Survey (2023-24) conducted by the National Statistics Office, unless stated otherwise.
[7] The World Bank categorises countries into income groups based on their per capita income.
[8] Data based on EUS 1999-2000 and PLFS 2023-2024 shows that the proportion of 15-24 year-olds who say that their main annual activity (principal activity status) is education has increased from 27% in 2000 to 51% in 2024.
[9] Periodic Labour Force Survey (2023-24), National Statistics Office.
[10] Data accessed from World Bank World Development Indicators, based on modelled estimates by the International Labour Organization.
[11] The economist Dani Rodrik of Harvard University finds that countries like India are reaching peak industrialisation in terms of employment and output at much lower levels of income compared to the early industrialisers. Industrialisation peaked in Western European countries such as Britain, Sweden, and Italy at income levels of around $14,000 per capita (in 1990 dollars), while India and many Sub‐Saharan African countries appear to have already reached their peak manufacturing employment shares at income levels of $700 per capita. Rodrik called this "premature deindustrialisation" in his 2015 paper and suggests that it has potentially important economic and political implications.
[12] In the PLFS, informal sector enterprises are defined as unincorporated enterprises owned by households, such as proprietary and partnership enterprises including the informal producers' cooperatives.
[13] In Indian labour statistics, the reference period most commonly used to understand employment is 365 days preceding the date of survey. This long time horizon makes possible the recording of stable occupations of persons. If a person worked or sought work for a relatively long part of the last 365 days, she is said to be in the labour force in the Principal Activity Status. If someone outside the labour force in the Principal Activity Status had worked for at least 30 days during the last 365 days, she is said to be a worker in the Subsidiary Activity Status.Taken together, anyone who worked for more than 30 days in the preceding 365 days gets classified as a worker. The unemployed persons would be those persons who sought work or were available for work but did not work for more than 30 days in the 365 days preceding the survey.
[14] "Education pays off but you have to be patient", 2020, ILO.
[15] As described by the ILO in its Labour statistics overview.
