A recent report from SBI Research, based on PLFS 2025 unit-level data, underscores India's ongoing struggle to generate high-quality employment opportunities beyond the agriculture and informal sectors. Despite an expanding labor market, a significant portion of the workforce remains engaged in low-productivity areas, raising concerns about job stability and social security.
Persistent Informal Employment
The study indicates that India’s labor force participation rate (LFPR) reached 59.3% in 2025, yet a notable gender gap persists, with male LFPR at 79.1% compared to just 40% for women. A key finding is the continued heavy reliance on agriculture, which still employs 43% of workers, a gradual decline from 66% in 1987-88. However, the transition towards formal manufacturing and high-quality services remains slow.
Informal businesses, defined as non-agricultural enterprises with fewer than 19 workers, account for over 42% of total employment. Only 13.7% of workers are employed in larger enterprises with more than 20 workers, though this marks an improvement from 10.8% in 2024, partly due to government initiatives in manufacturing.
The report highlights the widespread issue of informal employment across states and sectors. Punjab recorded the highest share of informal workers at 82%, followed closely by Uttar Pradesh and Bihar at 81% each. Agriculture alone contributes to nearly 42% of India’s informal workforce, with trade and hotels adding 17%, and other services 14%. Informal jobs typically lack written contracts, social security benefits, paid leave, and income stability, presenting a major policy challenge for workforce formalization.
Regional Disparities in Job Quality
Employment quality varies significantly across India. States like Karnataka, Tamil Nadu, and Odisha demonstrate stronger labor force participation alongside better employment quality indicators, including higher rates of written contracts, paid leave, and social security coverage. In contrast, Uttar Pradesh, Bihar, and Punjab scored poorly on both participation and job quality metrics.
Women, in particular, face additional barriers to accessing stable jobs, being 4.8% more likely to be employed informally than men. However, the report also identified positive trends, noting that women heading households were more likely to secure regular salaried positions and less reliant on casual labor.
Pathways to Formalization
The SBI Research report suggests that skill development and the expansion of the manufacturing sector are crucial for improving job quality. Workers who receive training are 4.8% less likely to remain in informal employment, and government-funded training programs have specifically enhanced self-employment opportunities for women.
Ultimately, India’s labor market transition requires faster growth in formal manufacturing, services, and social-security-backed employment to reduce the economy’s dependence on agriculture and low-quality informal jobs, paving the way for a more stable and equitable workforce.