Modi’s ‘Make in India’ Didn’t Make Jobs

A new multilane highway from Delhi to Meerut, a small town in Uttar Pradesh, India’s most populous state, has cut what used to be a three-hour journey by one full hour. From chai shops to roadside restaurants, or dhabas, it’s all everyone spoke about as I traveled to the country to cover the Indian elections that started today and asked them about the chances of incumbent Prime Minister Narendra Modi securing a third term.

Meerut’s national relevance has until now been based on its large military garrison, but the new road has become a symbol of its population’s hopes of future growth and development. Just as the Modi government brought them a new swanky highway, they now hope it will bring them industry, jobs, and improved quality of life.

Yet other than the highway, not much more has changed in the city in the 10 years since Modi took power, promising 100 million jobs through his flagship “Make in India” initiative. Just about 50 miles from Delhi, Meerut is still a long distance from the capital’s cosmopolitan lifestyle. In that way, it has become its own symbol of India’s uneven growth story under Modi.

Every year, 7-8 million young Indians enter the workforce. But many never find a job. The unemployment crisis in India is particularly acute among the young and the educated, including Manu Chaudhary. On a recent day in Meerut, in a shop only a few feet away from an open drain filled with waste, Chaudhary was sticking thin plastic covers on laptops at a cubicle-size computer repair shop. This is not what he dreamed of when he studied for a bachelor’s in computer administration at a local college. He had hoped to get a well-paid job with a multinational company but never managed to, not in Meerut or Delhi or Bengaluru, India’s IT hub.

According to a recent report from the International Labor Organization (ILO), being educated is no guarantee for employment in the country. On the contrary, those without university degrees or even full schooling have a higher employment rate.

Nearly 83 percent of those unemployed in India are young, and among these unemployed young Indians, nearly 66 percent are educated. In 2022, the unemployment rate was nearly nine times greater among graduates, at 29.1 percent, than those who could neither read nor write, at 3.4 percent. The ILO report states that the “youth unemployment rate has increased with the level of education, with the highest rates among those with a graduate degree or higher” and that it is “higher among women than men.”

Further illustrating the mismatch, the report says that while the ratio of educated youth went up from 18 percent in 2000 to 35 percent in 2022, their participation in economic activities went down from 52 percent to 37 percent over that same period. While the overall youth unemployment rate in India reduced from 88.6 percent in 2000 and 82.9 percent in 2022, the ratio of educated young Indians facing unemployment grew from 54.2 percent to 65.7 percent.

Indian economists and experts told Foreign Policy that there are multiple reasons behind the country’s unemployment crisis, including poor quality of education, insufficient government investment in education and health, and a desperate need for the government and the private sector to invest in more labor-intensive industries.

In Meerut, banners advertise private schools and professional courses on nearly every street. They charge a fee that the middle classes in such cities can somehow scramble, but the quality of education they provide is rarely up to the mark. Those who study there either cannot afford more prestigious and expensive private institutes, which have a higher placement rate, or didn’t manage to clear any competitive exams for top public-funded educational institutes, which, among ace intellectuals and professionals at home, have also produced the likes of Google CEO Sundar Pichai and other Silicon Valley minds.

Raghuram Rajan, the former governor of the Reserve Bank of India and widely known in the West as the banker who predicted the 2008 meltdown, recently spoke about the poor quality of such education as a problem for long-term economic growth in India and called for higher government spending in education and health. India needs to, firstly, make the workforce more employable and, secondly, create jobs for the workforce it has, Rajan told Bloomberg in an interview last month.

But even those—and there are many—who are bright and willing to work hard in cities such as Meerut just don’t have enough opportunities. “There are no jobs in Meerut, no industry,” Chaudhary said.

The ILO report analyzed data for a period of more than 20 years, which included the reign of the Indian National Congress, now an opposition party. According to a March paper by four economists at the World Inequality Lab, however, inequality in India is worse under Modi than it was under the British. Between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration, the paper says, and India’s top 1 percent income share is “among the very highest in the world, higher than even South Africa, Brazil and [the United States].” Modi came to power in 2014.

Jayati Ghosh, an Indian economist and professor of economics at the University of Massachusetts Amherst and a member of the Club of Rome’s Transformational Economics Commission, has written that the top 10-20 percent of income earners have been the beneficiaries of the high growth rate, while most others ended up suffering due to Modi’s policies.

In 2016, when Modi demonetized 500 and 1,000 rupee notes, 86 percent of Indian currency became illegal, Ghosh noted. The scarcity of cash led to a crunch in jobs in an economy that was still largely informal and operated primarily on printed money.

A new goods and services tax also “created disequilibrium,” said Aasheerwad Dwivedi, an assistant professor of economics at the Jawaharlal Nehru University. “Producers needed to adjust to the new system, which was difficult given the informality in India.” The two interventions were a major shock to the Indian system further exacerbated by the COVID-19 pandemic.

Economists say one of the more worrying recent developments has been the reversal of structural transformation—the movement of working-age Indians back to the farm sector. This unusual shift is attributed to a range of factors including the mass movement back home as a result of the pandemic but also because there are not enough jobs in the cities.

Tripati Rao, a senior professor of economics at the Indian Institute of Management Lucknow, who recently carried out a similar study on unemployment among educated youth, said India is undergoing a slow structural transformation. Agriculture still “employs roughly 43.7 percent of the country’s workforce, reflecting that job creation in India is slow,” he said. “The share of workforce employed in agriculture is larger than it should be due to ineffective demand for skilled employees in the non-farm sectors.”

Modi’s Make in India was supposed to have created demand for jobs in manufacturing, but that, too, is progressing slowly. Dwivedi said one of the objectives of the program was to increase the manufacturing sector’s share of India’s GDP to 25 percent but that it was an “ambitious” target from the start since India has not traditionally been a manufacturing economy. There were also policy flaws. Dwivedi said the government focused on too many sectors and too few were labor-intensive. He added that even though other, more labor-intensive sectors have since been added, the results will take time.

Rao said the manufacturing and services sectors were being continuously mechanized and becoming more capital-intensive while the capacity of these sectors to employ more people was reducing. “Of course, this is good in terms of productivity-driven growth, but their employment absorption capacity is becoming lesser,” he said. “When manufacturing or even services cannot generate the kind of employment they are looking for,” the young and the educated “prefer to remain unemployed rather than underemployed.”

Chaudhary says he is disappointed but has moved on. He is now studying for a master’s in yoga science and wants to open a yoga center. As he drove back home on his scooter, he crossed a regional railway construction site. Once it is built, Chaudhary will be able to commute to Delhi every day in record time—just 50 to 55 minutes. But even when Delhi is more accessible, he faces stiff competition from millions of others for fewer job openings.

Yet Chaudhary isn’t upset with Modi over the glaring unemployment problem. He wants him to return to power and focus on creating the many jobs that he promised for India.