Whalesbook
New Jobs Policy Focuses on Private Sector
India is set to unveil a draft national employment policy, marking a shift in the government's approach to job creation. Labour and Employment Minister Mansukh Mandaviya stated the policy is in its final stages and will be shared for feedback. This initiative aims to place greater responsibility on the private sector for driving employment. This move comes after a low uptake of government incentives like the employment-linked incentive program, which offers financial benefits for new hires.
The minister emphasized the government will act as a facilitator, not a direct organizer, of employment, highlighting this change in strategy.
Contract Worker Welfare and Global Jobs
Beyond broad goals, the government is focusing on specific labor market areas. Mandaviya expressed concern over challenges faced by contractual workers, especially regarding timely wage payments, and told industries to ensure they comply with labor laws. Late salary payments by contract agencies are causing worker hardship and labor disputes.
Furthermore, the minister encouraged industry groups like the Confederation of Indian Industry (CII) to look into international job opportunities for Indian workers, as these groups understand global demand for various skill levels. This push aims to help Indian workers move abroad more easily.
Economic Headwinds: Geopolitics & Growth Fears
The government's push for a new employment policy is happening amid considerable economic uncertainty. The ongoing West Asia conflict is a major worry, with economists warning it could pull India's GDP growth below 6.5% for 2026 if oil prices exceed $100 a barrel. Moody's Ratings recently lowered India's 2026 growth forecast to 6%.
Inflation is also a risk, expected to stay high at 4.5% in 2026 due to ongoing high energy costs. The conflict is impacting India's current account deficit and has led to a weaker rupee. Foreign investors are becoming cautious, leading to significant money leaving the country.
Banker Uday Kotak noted that Indian households have not yet felt the full impact of higher oil prices, suggesting current fuel stocks are only softening the immediate blow.
Labor Reforms and Industry Input
This employment policy announcement comes after major labor reforms. India combined 29 labor laws into four main codes in late 2025: the Code on Wages, the Code on Social Security, the Industrial Relations Code, and the Occupational Safety, Health, and Working Conditions Code.
These reforms aim to improve 'ease of doing business' and offer social security for workers, including gig and platform workers. However, concerns exist about potential increases in informal work and contract instability, based on global trends.
The CII has repeatedly called for unified employment policies and better implementation of labor codes to boost jobs and productivity. Their past suggestions include offering tax breaks for new hires and promoting industries that create many jobs.
The industry body has also proposed an expert panel to study productivity and ways to lower India's ICOR (Incremental Capital Output Ratio), a measure of capital efficiency.
Hurdles and Implementation Challenges
While the new employment policy aims to boost job growth, several underlying issues and potential implementation problems loom. The low registration for the employment incentive program suggests that industry incentives alone won't drive hiring, pointing to deeper issues with business confidence or demand.
Contractual workers, who make up a large part of the workforce (around 94% by some estimates), still face widespread problems like low pay, job insecurity, poor conditions, and exploitation, even with current laws.
The recent labor codes faced criticism for possibly worsening 'contractual instability' and informal work if not strictly enforced. The government's push for private sector leadership depends heavily on companies' willingness and ability to hire, a commitment that could be challenged by global instability and rising costs, especially for small and medium businesses (MSMEs) vital for job creation.
Past large job schemes, like MGNREGA, have had mixed success, facing challenges in using funds and consistent delivery.
What Lies Ahead
Analysts forecast India's GDP growth between 6% and 7.8% for fiscal years 2025-26 and 2026-27, depending on global economic conditions and geopolitical stability.
The new employment policy's success will depend on creating an environment for private investment and job growth, alongside strong enforcement of labor protections for vulnerable contract workers. Addressing issues of productivity, skills matching, and external shocks will be key to unlocking India's demographic potential.