Every weekday morning at 6.30 am in India’s factory clusters—Manesar, Noida, Dholera, Hosur, and many more—a unique scene emerges. Factory supervisors start scouting for workers. They reach out to the local labour contractors to round up as many workers as possible, depending on that day’s shortage on the factory floors.
Greenway Grameen Infra, a small manufacturer of biomass cookstoves in Vadodara, saw a spurt in demand in March during the energy crisis following the war in West Asia. Ankit Mathur, the co-founder of the company, desperately looked for up to 40 workers to add to its existing workforce of about 100. He reached out to this network to cover the shortage.
“We tried the local network to get more people. We put out ads, reached out to local contractors, who promised but didn’t show up. They stopped taking calls. Eventually, over two weeks, we got half of what we needed, and we let go of some demand. It was not optimal,” said Mathur.
His experience echoes across India. In Bengaluru, A. Dhananjay of Maruthi Garments has 20 sewing machines lying unused. His factory, which caters to the export markets, saw queues of people wanting to take up jobs 10 years ago. But now there is no one.
“No one wants to work in factories anymore. They want to work on bikes and go around town,” he fumes, hinting at delivery jobs that have mushroomed because of the exponential growth of quick commerce.
Compared to the rigidity and discipline needed on the manufacturing floor, delivery roles offer more flexibility. An expert from Teamlease, a staffing firm, told this writer last year that gig jobs offer faster earnings, more autonomy, and daily payouts, even when the overall cost to company is lower.
Dhananjay’s frustration is only a symptom of the larger problem facing India. As the country tries to reconfigure its economy, from largely services-led to being industry-centric, labour shortfall is turning out to be a painful truth.
In the last two decades, the number of factories has nearly doubled; the number of workers has grown at a faster rate. According to an analysis by Data for India, a data research firm, based on the Annual Survey of Industries, India has more than 200,000 operational factories that employed 18.5 million people as of 2023. In 2001, over 124,000 factories employed eight million.
The Annual Survey of Industries, conducted by India’s National Statistics Office since 1960, is the most exhaustive source of data on India’s factories, and covers entities as defined by India’s Factories Act (1948).
The production-linked incentive schemes (PLIs), first introduced in 2020, now cover 14 key sectors. This has fundamentally altered the demand baseline. According to estimates from Randstad, another recruitment firm, the formal Indian manufacturing sector requires an incremental inflow of 10 to 12 million skilled workers over the next five years to sustain its target output. On the factory floor, this translates into a 40% to 45% talent shortfall in specialized, high-growth technical roles.
On the other hand, legacy, labour-intensive sectors such as textiles and apparel, which sustain roughly 15-16% of the formal manufacturing workforce, are facing volume-driven worker deficits caused by high seasonal attrition and a clear demographic pivot Dhananjay mentions—the younger workforce is increasingly choosing service-sector employment over traditional factory shop floors.
The great mismatch
At the heart of the labour shortage is an expectation mismatch.
India’s blue-collar labour pyramid has skilled, semi-skilled and low-skilled workers. The expectations of those who are skilled have dramatically evolved.
India’s gross enrolment ratio (the ratio of student enrolment to total population in the age group of 18-23) has risen to 30% in 2023-24 from 23.7% in 2014-15, as per the All India Survey of Higher Education, creating a larger pool of educated and ambitious young workers who increasingly prefer salaried, office-based jobs over factory employment.
According to the Azim Premji University’s State of Working report, published in early 2026, the educational composition of migrants across age cohorts reveals that younger migrants are systematically more educated than older migrants, and they travel much less as opposed to their less-educated counterparts.
Aimtron Electronics Ltd, an electronics design and manufacturing company based out of Vadodara, needs high-skilled workers to run its machinery. But they are hard to come by.
“Which 25- 35-year-old wants to join a manufacturing unit?” asks Parth Kanani, business unit head and director of operations at the company. “Everyone wants software, artificial intelligence, services. Either we try to find an alternate solution to the shortage, or we try to bring in automation and achieve the same consistency.”
At the lower end of the labour pyramid, expectations around remain a pertinent problem.
Twenty-year-old Raj Prajapati tried out a factory job last year. He left his hometown in Mirzapur, Uttar Pradesh, with his friend to move to a towel and denim factory in Kolhapur, Maharashtra, after he heard about the job from a village thekedaar (local contractor). He was back in Mirzapur in eight months. His friend did too.
“They were paying me ₹15,000 a month. I was working 12 hours, six days a week. After paying for terrible food and accommodation, I was barely left with ₹8,000-9,000. I can make that money by making and selling clay diyas in my village,” Prajapati said. “I told them to pay me more, but they didn’t agree, so I left the factory.”
A by Ashoka University shows that daily wages of industrial workers stood at ₹307 per hour in 2021-22 compared to ₹285 per hour a decade ago, showing barely any growth in wages adjusted for inflation.
Yeshab Giri, chief commercial officer, operational talent solutions, Randstad India, says that manufacturing wages are still very low. “The data we have says close to about half of the frontline workers in a manufacturing set-up earn about ₹10,000 a month,” Giri said.
In the last 10 years, manufacturing has become more capital intensive. And is creating polarization on the factory floor, said Manmeet Singh, president of the Indian Staffing Federation (ISF). “They cannot operate on legacy low-skill manual labour—the 10th or 12th pass. Factories are poaching higher-skilled talent at 15-20% higher salaries, but baseline entry workers in manual assembly jobs are getting the nominal 6-8% growth,” he added.
The productivity trap
As per S&P Global Market Intelligence, India’s average manufacturing wage stood at $3.45 per hour in 2025, compared with $5.83 in mainland China. But cheap labour isn’t enough. The productivity of the labour matters too. According to Equirus Securities, India’s productivity gap with China has widened by over $30,000 per worker in absolute terms since 2000, despite decades of strong GDP growth.
“Low productivity limits firms’ ability to offer sustained wage increases, while a high unemployment rate reduces workers’ bargaining power. For many rural households, moving to a city no longer guarantees significantly higher incomes or greater job security,” said Prateek Chaturvedi, senior economist at S&P Global Market Intelligence.
The hard experience
Historically, the primary destination states facing the most persistent labour shortages are Tamil Nadu (specifically the Chennai and Coimbatore industrial belts), Maharashtra (Pune and Chakan clusters), Gujarat (Ahmedabad-Sanand region), and Karnataka. These highly industrialized states have traditionally relied on a steady, long-distance migration pipeline to staff their production floors. The traditional supply or source states contributing to this workforce continue to be Uttar Pradesh, Bihar, Odisha, Jharkhand, and Madhya Pradesh.
According to World Bank data, only 12% of migrant workers move across state borders in India. Labour mobility, therefore, remains remarkably low.
“India has the demographic dividend, and yet an adequate number of people are not available at the right time, right place,” Nitin Dave, CEO, staffing solutions, Quess Corp, said. The company, which has 480,000 workers on its payroll, counts the manufacturing sector as its fastest-growing unit but acknowledges the hardships that come with the job.
“The migration experience is hard. A person’s preference is to find a job near their hometowns. A lot of entry-level workers ask why they should migrate when they can make the same money at home. But wages do go up after one-two years of working in factories,” Dave added.
Farm comfort
At home, in villages, there is farm work.
According to data from the World Bank, in 2025, 42% of India’s workforce worked in agriculture. It was 41% in 2019. Post pandemic, the number shot up to a high of 45% before moderating again. Those who worked in factories went back to their farms during the pandemic; many of them never returned to factory floors.
Here is the challenge: India’s ambitions to replicate the industrial success of China, South Korea and Japan hinge on moving India’s young population from unproductive farm jobs to formal factory jobs. However, this process appears to have slowed.
“Perhaps the clearest sign of this disconnect is the post-pandemic rise in agricultural employment. In a successful structural transformation, workers move from farms into higher-productivity manufacturing and modern services. Instead, many workers appear to be remaining in or returning to agriculture, construction and informal services,” S&P Global’s Chaturvedi said.
“The slowdown in rural-to-urban migration is not because India lacks workers willing to move—it is because the economic payoff from migration has weakened. Historically, workers left agriculture for manufacturing because factory jobs offered a clear productivity and wage premium. Today, however, manufacturing growth has moderated,” Chaturvedi added.
The HSBC India Manufacturing PMI eased from 55.0 in May 2026 to 54.2 in June 2026, while industrial output growth slowed from 12.7% in 2021 to 4.9% in 2025, as per S&P Global Market Intelligence, reducing the sector’s capacity to generate jobs at scale.
Manufacturing accounted for less than 13% of GDP in fiscal 2026, well below the levels of 25% typically seen in export-oriented Asian economies, according to World Bank data. Merchandise exports as a share of GDP also lag peers such as Vietnam, Malaysia and Thailand, limiting both the number and diversity of factory jobs available to rural workers.
Machines at work
So, how are companies addressing labour shortages?
One answer is in automation. The capital-intensive industries in automobile and electronics are automating their factory floors to meet the stringent demands of global clients and skipping the pain of employing thousands of unskilled and low-skilled workforce on factory floors.
BL Agro Industries is one of the many companies to adopt extensive automation since 2016. The FMCG company is based in Uttar Pradesh, a state with an ample young population. “Labour cannot achieve the kind of productivity expected now. Labour turnover for unskilled jobs is also very high. We were in a continuous process of hiring. That headache has come down to a large extent,” said Ajay Bhatt, head of human resources & administration at the company.
Randstad’s Giri cited an example of an automotive component manufacturer in Haryana that has switched to partial automation to combat the challenge of local contractors poaching talent between nearby units, allowing the company to gain better control over its workforce and production reliability.
To bridge the manufacturing talent gap, India needs to transition from standard minimum-wage frameworks to a formalized skill-badged, productivity-linked wage structure, Giri suggests.
“When workers see a clear, policy-backed financial incentive tied to acquiring advanced certifications, it drives organic up-skilling. Second, we could benefit from introducing targeted corporate tax credits for MSMEs (micro small and medium enterprises) that directly invest in co-designing curricula and providing on-the-job training under the National Apprenticeship Promotion Scheme,” he said.