The Indian job market is witnessing an unprecedented dichotomy where a severe shortage of skilled and semi-skilled workers is leading to project delays and stalling of work for corporates even as marquee B-schools and engineering colleges struggle to place their fresh graduates.

India Inc is facing an acute shortage of blue-collar workforce amid a sharp drop in interstate migration of workers while its white-collar hiring has slowed down sharply due to global macroeconomic conditions and geopolitical tensions, economists and top company officials said.

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“There is an element of duality in play,” said Sachchidanand Shukla, group chief economist at engineering and infrastructure major Larsen & Toubro.

“Top-of-the-pyramid white collar and similar nature jobs will struggle a tad till more certainty and clarity on global macroeconomic conditions and geopolitical tensions emerge. Blue collar and semi-skilled or unskilled segments will find it difficult to attract the required number and quality of people,” he added.

With key sectors including manufacturing, construction, real estate, facility management, security services, and ecommerce facing up to 30% labour demand-supply gap, experts are seeking immediate measures such as higher wages and enhanced focus on skill development to boost availability of blue-collar workforce.

“We need to take urgent measures to enhance vocational training,” said Harsh Goenka, chairman of RPG Enterprises. “Besides this, it is also important to ensure good working conditions and fair wages to the blue-collar workers. The interim budget has outlined the problem and I am hopeful we will be able to bridge the gap to a fair degree.” Highlighting the severity of labour shortage in core sectors, Goenka said, “For instance, the real estate sector, which is projected to reach a market size of $1 trillion by 2030, is already experiencing delays in projects due to labour shortages. The infrastructure sector faces a similar challenge, which is stalling critical projects.” A significant tailwind to job creation at the bottom of the pyramid helped by the government’s focus on infrastructure development and rural employment is one of the main causes for labour shortage, experts said. Other key factors include the Covid-induced migration from urban centres to rural India, lack of formal vocational training, and a growing allure of white-collar jobs among the youth among others, they said.

Also, a sudden spurt in job creation in and around Ayodhya, with the opening of the Ram Temple turning the city into one of the largest spiritual tourism centres in the country, is prompting thousands of migrant workers from Uttar Pradesh working in urban centres such as Tiruppur to return to their homeland, as ET reported in its online edition on Friday.

Migration Declines
Interstate migration of blue-collar workers from states such as Jharkhand, Bihar, West Bengal and Uttar Pradesh has dropped by 17-20% in 2023, data from recruitment service provider Teamlease showed. In some regions of the Northeast, the decline in blue-collar workforce moving to cities for jobs is 30-40%, it said.

“The shortage of skills is so acute that despite an increase in within-state migration by 15-18% in the last one year, it isn’t enough to fill the supply gap,” said Kartik Narayan, CEO-staffing at Teamlease.

Average labour demand-supply gap ranges from 10% to 30% across various sectors with manufacturing being among the worst impacted.

Labour supply in manufacturing and construction has only reached 70-80% of their requirement, Narayan said.

India Inc is facing a shortage of about 150 million skilled workers at present, up from 138 million in 2020, Teamlease said.

This shortage is most pronounced in auto/components (35 million), construction (33 million), textiles and clothing (26 million), transportation and logistics (18 million), retail (17 million), and healthcare (13 million), it said.

“Supply side problem of labour in urban manufacturing units will continue for some time now,” said Abheek Barua, chief economist at HDFC Bank. “Employers may have to offer higher wages to attract labour from rural areas.”

Pradeep Chavda, senior director – global HR transformation at Sodexo, a global leader in employee experience services. Said the decline in migrant labour, causing a shortage of skilled and trained workers, “poses a significant challenge for India’s food, hospitality, and facility management sectors”.

“This scarcity puts strain on companies to meet staffing demands… Addressing this issue requires focused efforts on skill development, training initiatives, and policies that encourage a stable workforce in these crucial industries,” he said.

Shukla of L&T said, “A good run of 2-3 years of continuous growth will be needed for the supply side of labour to return to normalcy or desirable levels.”


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