By Krishna Jha
Among the reflections immediately coming after the announcement of Budget, the absence of substantiation of the claims has occupied a major share. Despite the gripping economic crisis, the Budget is claimed to be visionary, based on ‘stable foundations’. But the reality is the treasure of unemployed labour is lying unused, there is no opening for realizing it. It is a major symptom of pervading economic crisis as Marx had pointed out.
Union Budget of 2026-27 appears unconcerned about it. Whether it is the growing joblessness or falling manufacturing or worsening agrarian distress, the budget has practically nothing significant to offer.
The India Employment Report, prepared by the International Labour Organisation and the Institute for Human Development, shows that while the workforce in the country is becoming more educated and also skilled, the employment remains predominantly informal that keeps productivity low. The wages are kept even below survival level. Labour market has been regularly sending messages now for almost a decade asking to raise it to a sensible level.
Employability surveys routinely attribute the rise in unemployment for educated youth to poor skills. The explanation usually forwarded is that graduate-level jobs exist in adequate numbers and remain vacant because candidates are unsuitable. But the data suggest otherwise. Even graduates with reasonable credentials face almost no demand because the economy is not generating enough mid-skill, white-collar roles outside a set of firms and cities. Skill deficits usually get pushed to the margin. It is never explained why unemployment is systematically higher among the educated.
Private estimates from the Centre for Monitoring Indian Economy reinforce this reading. Methodologies differ, but the direction is consistent: educated youth unemployment keeps going up and search for jobs are long to take away all the colours from their lives. The problem is not placement efficiency. It is job availability.
The consequences extend beyond labour statistics. Prolonged joblessness delays household formation and depresses consumption. It encourages credential inflation, as young people pursue additional degrees to compete for the same limited pool of jobs. It also sharpens inequality. Students from poorer households bear higher costs—tuition, debt, and lost income—for degrees that no longer deliver stable employment.
Over time, this weakens confidence in higher education as a channel of mobility. That erosion carries political and social risks, but its economic cost is more immediate. Idle educated labour is not neutral. It reflects foregone output and misallocated public and private investment. Nor does the budget promise any concerted effort to reverse the continuous fall in India’s manufacturing sector.
Only a month back, in December, India’s manufacturing sector lost momentum, expanding at its slowest pace in two years as domestic demand weakened and firms cut back production. This was reported by the latest HSBC India Manufacturing PMI compiled by S&P Global.
According to the report, the manufacturing index fell to 55.0 from 56.6 in November, its lowest level since December 2023. This has bought the manufacturing index closer to the 50 mark that separates growth from contraction. This got into labour markets, with hiring nearly stalled as the employment index slipped to its lowest level since early 2024, signalling near-stagnant job creation.
Factory output also cooled sharply, growing at its slowest pace in 38 months, as manufacturers cited fewer customers. External demand provided limited support, with export growth slowing to a 14-month low amid the impact of high US tariffs on some Indian goods. A weaker rupee has yet to significantly boost exports.
Business confidence, the report also says, fell to its lowest level in nearly three-and-a-half years. Formal manufacturing shedding jobs was known for quite some time. Now, the informal manufacturing (unincorporated establishments) is also shedding jobs.
On the face of it, the budget claims to push manufacturing to the forefront, but in reality it has done little to boost investment in this sector. In fact, the absence of a clear-cut policy to lift manufacturing sector from the crisis and an increase in the transaction tax on derivatives spooked equity markets, which tumbled nearly two per cent for their worst budget-day performance in last six years.
Since January 2025, the foreign investors have sold a record amount of Indian equities, adding up to 22 billion dollars, and the rupee has weakened sharply to all-time lows.
The budget also seems to be indifferent to the distress in rural areas. There has been a stagnation in the real wages of agricultural workers, directly impacting the earning capacity of a large rural workforce. As a result, the purchasing power of rural labourers is not increasing, contributing to financial hardship. The recent weakening of the employment guarantee scheme in rural areas – the erstwhile MGNREGS – has contributed significantly to it.
There has been no attempt to address the rural distress despite the agriculture sector has been India’s largest employer. Thus, while the share of agricultural workers stood at 42.5 per cent in 2018-19, it grew to the level of 46.1 per cent in 2023-24.
Government policies have failed to address the core concerns in rural areas. There is, for example, a complete lack of focus on creating non-farm employment opportunities in rural areas.
No steps have been taken to help farmers deal with the rising cultivation costs. As a result, farmers are increasingly compelled to borrow since the costs of labour, fertilizers and machinery keep rising high. The prevailing rural distress in India is a multifaceted issue, and the budget simply refuses to see to it. According to recent estimates, the average monthly income of a farm household is 10,218 rupees — barely sufficient for subsistence. Agriculture alone is no longer a viable livelihood, leading to intergenerational poverty and many farmers opting for informal labour or distress migration to urban areas. (IPA Service)
