The World Is Short of Workers. India Can’t Wing This | The Reason Why

Economic theory says countries grow by exporting what they’re best at. For India, the usual answers are IT services, agriculture, or pharmaceuticals. All are true. However, India’s biggest, but most uncomfortable, strength is its vast pool of young workers, many of them low- or semi-skilled.

India is beginning to treat blue-collar labour as an exportable asset. If done right, labour mobility won’t be a footnote to India’s growth story.

India’s labour market faces a unique challenge: The economy skipped the agriculture to manufacturing transition, leaving many people in low-productivity jobs. Only a small percentage are formally trained for high-skill sectors.

In contrast, advanced economies are ageing. They just don’t have enough people to work—at any skill level—and this problem will only get worse. India, with surplus labour and limited domestic opportunities, fits neatly into this gap.

Through labour mobility agreements with countries like Germany and Russia, India is already stepping in to fill these vacancies. For now, it’s a clear win-win.

India’s migration to Gulf states began in the 1970s, especially from Kerala. However, the Gulf system limited workers' rights and security and mostly offered low-skilled jobs.

The latest migration trend is much more organised. These structured agreements make things safer and more predictable for everyone. For the advanced economies, it means they can fill job gaps legally and reliably.

Those Indian workers will not get citizenship, thus pacifying the anti-immigrant sentiment in those countries. For India, it means more steady remittances and easier ways for people to return with new skills and more income.

One clear advantage of labour migration is remittances. In FY25, Indians abroad sent home a record $135 billion, higher than foreign direct investment (FDI). They even made up nearly half the trade deficit (goods imports minus exports).

Remittances stabilise families, fund education and health, and even finance small businesses in India. India's UPI expansion could be a cherry on top as it can enable cheaper and faster transfers, making them even more reliable.

Because it is so important, we need to prioritise the migration ecosystem just as much as we do FDI or exports. To treat labour as a strategic export, solid checks and balances, strong legal frameworks, effective infrastructure—including vocational training, language courses, streamlined visa procedures, and grievance mechanisms—are essential.

For years, remittances were concentrated in southern and western states. As wages rise there, the new wave of recruitment is shifting north and east, to the poorer regions. Done right, this can help those states catch up through higher incomes and better skills. Done wrong, it risks becoming a pure consumption play without productive investment.

But remittances have their own disadvantages. One of the biggest issues is that they can make politicians complacent, allowing them to treat migration as a quick fix instead of focusing on reforms here.

Kerala’s experience serves as a cautionary tale. While remittances did help improve people’s lives, they also took the pressure off leaders to create jobs locally and push for difficult reforms. We really shouldn’t let that pattern repeat in other states.

The ripple effects may be wide-ranging. At home, we might face a shortage of workers, such as electricians, drivers, cooks, and nurses. That could raise domestic wages, increase demand for appliances like dishwashers, robot vacuum cleaners, etc., and create new pockets of prosperity in smaller towns.

Skill training centres, language institutes, visa processors, travel agencies and remittance fintechs may expand rapidly. Small towns may see new schools, better healthcare and a remittance-driven middle class.

As migrants return with savings and global exposure, they may seed new businesses and reshape local economies. Their skills may even push India’s manufacturing capabilities.

But unlike Kerala, where strong human development indicators helped it ride the migration wave, this time, the gains may be uneven and appear in pockets. It depends on which regions manage to make the most of this wave.

Our people are our strength, and they must be treated like that. India is among the few countries with a growing labour pool. Agreements with the countries can generate foreign exchange, build skills, deepen global connections, and ease domestic labour pressures.

But it must complement, not replace, job creation, productivity growth, and human capital investment in India. Technology could soon replace those workers in advanced economies.

Thus, there is only a brief period of opportunity, which the government has acted on quickly. The push on structured agreements is a start; the challenge now is to scale it fast and get it right.

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