Can Trade Create Jobs for India's Young Workers?

Every year, millions of young Indians enter the job market. East Asian economies such as China, South Korea and Vietnam employed millions of workers by exporting labour-intensive goods like clothing, shoes and toys. Many economists argue India needs to do the same.

India’s pattern

India’s export success has been strongest in skill-intensive or capital-intensive sectors:

• Software and services.
• Pharmaceuticals.
• Refined petroleum.
• Engineering goods.

These create relatively few jobs per rupee of exports. In labour-intensive sectors like garments and footwear, Bangladesh and Vietnam have overtaken India in world market share.

Why labour-intensive exports lagged

• Small firms: many Indian garment firms are too small to fill large global orders.
• Labour laws that discouraged large factories.
• Logistics costs and slow ports.
• Tariffs on inputs, such as synthetic fibres, raised costs.
• Market access: competitors enjoyed duty-free access to the EU and other markets through trade deals or least-developed-country status.
• Scale and speed: global brands want large, fast, reliable suppliers.

What could change it

• Trade agreements with the UK, EFTA and others that cut tariffs on Indian garments and leather.
• Labour codes that make it easier to run large factories.
• PM MITRA textile parks, large integrated parks announced in 2021.
• Lower tariffs on inputs.
• Better logistics.

Why it matters

A garment factory can employ thousands of workers, many of them women, with modest training. Jobs like these helped lift millions out of poverty in East Asia. For India, the question is whether it can combine its strength in services with a stronger manufacturing export base.