India's labor market showcased resilience in December, as indicated by the latest employment report. While the unemployment rate saw a marginal increase, it remained below the 5% mark, signaling a stable employment scenario.
The unemployment rate in India inched up to 4.8% in December 2025, according to recent data. This represents a slight increase from the series low of 4.7% recorded in November 2025. Despite this marginal rise, the rate remains significantly below the averages observed in previous years.
A closer look at the numbers reveals that the urban unemployment rate edged up to 6.7% in December from 6.5% the previous month. In contrast, the rural unemployment rate remained steady at 3.9%. The overall increase in unemployment coincided with a rise in the labor force participation rate, which reached a series high of 56.1%. This indicates that more people are actively seeking employment.
India's labor market has shown a gradual recovery in recent years. The unemployment rate has been steadily falling, settling at 4.7% in November 2025, down from 5.2% in October. The youth unemployment rate (ages 15–29) has also eased to 14.9% in November 2025 from the peak of 17.8% in September 2025.
The Indian economy is projected to grow at around 7.4% in FY 2025-26, driven by strong domestic demand and investment momentum. However, this growth has not yet translated into enough high-quality employment generation to fully absorb the youth entering the workforce annually. This has led to persistent competition for formal roles.
Several factors contribute to this jobless growth. The increasing adoption of automation in manufacturing and infrastructure projects means that growth is increasingly driven by "machines over men". India has also skipped the traditional "manufacturing-first" development phase, moving straight to a services-led economy which is inherently less labor-absorptive for unskilled workers.
Despite these challenges, there are encouraging signs. Female labor force participation has risen, supported by flexible work models and government initiatives. There is also a growing demand for AI-ready talent in IT and Fintech.
Going forward, it will be important to promote labor-intensive sectors, MSMEs, skilling and apprenticeships, and green and care economies. This will help to convert growth into quality jobs and advance SDG-8 (Decent Work), SDG-9 (Industry & Innovation) and SDG-10 (Reduced Inequalities) while sustaining high growth.
