Overview
With some workers returning to agriculture, the post-pandemic job market structure exhibits retrogression. The increase of labor earnings has been hampered by this trend. According to research, the multiplier from public investments in local infrastructure passes through MSMEs and contributes to a favorable work environment. The budget should prioritize that.

The release of this year’s Union Budget coincides with a number of concerning structural change and employment data. Following the Covid-19 pandemic, overall economic growth recovered rapidly; however, current growth figures suggest that this impetus is waning. It is too soon to tell if the slowdown in GDP growth predicted for FY25 would be a one-time event or a long-term decline in growth. In any event, it is evident that concerted policy action is required on the employment front.

Increase in labour force in agriculture post pandemic
According to recent data from KLEMS and periodic labour force survey (PLFS), the pandemic caused a structural regression in the Indian economy, which has not yet been reversed as of 2023–2024.

An increase in the percentage of jobs in agriculture and self-employment is what is meant by structural retrogression in the Indian economy. Such a shift in employment from other sectors of the economy to more stable industries like agriculture was anticipated during the pandemic. As of 2023–2024, there were more workers in agriculture than at any other point since the early 2000s, indicating that employment in this industry has continued to rise after the epidemic. After the pandemic, labor productivity in the agricultural sector stalled as a result of the value created there not increasing proportionately.

In addition to agriculture, we anticipate that if more conventional wage or salaried employment opportunities are established, the percentage of self-employed workers—especially own-account and unpaid family workers—will decline with economic growth. However, from roughly 52% of the workforce prior to the epidemic to 58% in 2023–2024, the percentage of self-employed workers has grown. The growth has persisted after the pandemic, which is concerning.

Stagnation in earnings of major corporates and businesses
The fact that other industries where household businesses are commonly found, like food, beverages, and tobacco, textiles, leather and footwear, trade, and domestic services, were also less productive in real terms as of 2022–2023 than they were in 2017–18 suggests that the phenomenon of crowding into the self-employment sector appears to be more widespread than just agriculture. In other words, employment has increased more quickly than output in each of these sectors, most likely as a result of workers moving in from other parts of the economy where there is less need for labor.

This has the effect of completely stagnating or even decreasing real earnings overall. The PLFS provides quarterly data on earnings from regular salaried labor, self-employment, and casual wage work; the most recent data covers the April–June 2024 quarter. Earnings from regular salaried work have increased by an average of 5.3% annually in nominal terms or 0% annually in real terms since 2017–18 (the first year for which PLFS data are available). Earnings from regular wage jobs actually decreased by 0.14 percent annually over the April-June 2022 and April-June 2024 quarters.

Positive outlook
The fact that conventional pay employment increased by 11% in 2023–2024—its largest one-year growth in recent memory—surpassed the 8.6% increase in predicted self-employment. To ensure that the proportion of regular wage workers in the economy grows consistently, every effort must be made to ensure that this process continues.

MSMEs are a way of creating newer jobs
The bigger puzzle is why, in spite of a robust recovery in overall GDP growth, regular wage employment has not grown more quickly. Additionally, we should remember that the majority of job creation, even for paying positions, occurs in unlisted businesses and informal enterprises (more generally, MSMEs) rather than huge corporate firms. To allow businesses to grow, save, and invest, a new push for policy is required.

Barriers that hinder the growth at the bottom end for corporates
The absence of physical infrastructure is still a major barrier, aside from aggregate demand, which is a macro limitation that affects all businesses. Roads, energy, and water—the so-called bijli, sadak, and pani—are cited by businesses as the biggest barriers to growth, according to a 2019 IDFC Institute poll of 2500 small businesses nationwide. The government is well renowned for emphasizing the improvement of physical infrastructure. This agenda needs to be pushed further by shifting its focus to local infrastructure and small communities. India has made good progress in building highways, airports, and other major infrastructure, but we still lag far behind in terms of the quantity and quality of local roads, water, power, and other essential services.

Conclusion
In a big and diverse economy like India, the impact of a single budget—and that of only the Union government—is minimal, but the budget’s goals do give an idea of how the Union government is currently considering the economy. If the budget strongly favors removing barriers to small business growth in small towns, that would be encouraging. In order to guarantee inclusive development and long-term economic growth, India must produce the requisite number of jobs.