India’s labour market may be showing signs of stability, but a deeper look at the latest employment data suggests the country still faces a major challenge in creating quality jobs outside agriculture and informal work.

According to an SBI Research report based on the latest PLFS 2025 unit-level data, India’s labour force participation rate (LFPR) stood at 59.3% in 2025. However, the report highlighted a persistent gender gap, with male LFPR at 79.1% compared to just 40% for women.

More importantly, India’s workforce continues to remain heavily dependent on agriculture, which still employs 43% of workers despite decades of economic diversification.

Agriculture still dominates

The report noted that while the share of agriculture in the workforce has gradually declined from 66% in 1987-88 to 43% in 2023-24, the transition towards manufacturing and high-quality services jobs remains slow.

Non-agricultural enterprises with fewer than 19 workers account for more than 42% of total employment, indicating that small and informal businesses continue to dominate India’s labour ecosystem. Only 13.7% of workers are employed in enterprises with more than 20 workers, though this has improved from 10.8% in 2024 amid the government’s manufacturing push.

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The report observed that labour-intensive sectors such as apparel, footwear, furniture, and light manufacturing remain fragmented and informal, limiting productivity growth and stable wage creation.

Informal employment

One of the biggest concerns highlighted in the study is the scale of informal employment across states and sectors.

Punjab recorded the highest share of informal workers at 82%, followed by Uttar Pradesh and Bihar at 81% each. Rajasthan, Chhattisgarh, Andhra Pradesh, and Madhya Pradesh also reported high levels of informal employment.

Agriculture alone accounted for nearly 42% of India’s informal workforce, while trade and hotels contributed 17%, followed by other services at 14%.

The report noted that informal jobs often lack written contracts, social security benefits, paid leave, and income stability, making workforce formalisation a key policy challenge.

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Quality of jobs

The study also found sharp differences in employment quality across states. Karnataka, Tamil Nadu, and Odisha showed relatively stronger labour force participation alongside better employment quality indicators such as written contracts, paid leave, and social security coverage.

In contrast, states such as Uttar Pradesh, Bihar, and Punjab scored poorly on both participation and employment quality metrics.

Women continue to face additional barriers in accessing stable jobs. Female workers were found to be 4.8% more likely to be employed informally compared to men.

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However, the report also highlighted some positive trends. Women heading households were more likely to secure regular salaried jobs and less likely to depend on casual labour.

Training and manufacturing

The report suggested that skill development and manufacturing expansion could play a major role in improving job quality in the coming years.

Workers receiving training were 4.8% less likely to remain in informal employment, while government-funded training improved women’s self-employment opportunities.

SBI Research said India’s labour transition is underway, but the economy still needs faster growth in formal manufacturing, services, and social-security-backed employment to reduce dependence on agriculture and low-quality informal jobs.

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Published on: May 9, 2026 9:10 AM IST