India's multidimensional poverty has plummeted dramatically over the past two decades, dropping from 55.3% in FY05-06 to just 11.28% in FY22-23, according to the latest Economic Survey 2024-25. This rapid decline, coupled with a sharp surge in female labour force participation and a shift toward self-employment, signals a transformative phase in the country's labour market and social welfare landscape. However, persistent gaps in women's ownership of businesses and dependence on rural job schemes highlight ongoing challenges that could undermine sustained progress.
The Survey, tabled ahead of the Union Budget, paints a picture of an economy rebounding from pandemic disruptions with resilient employment trends and targeted policy interventions. "Poverty dropped from 55.3% in FY05-06 to 11.28% in FY22-23 (Tendulkar line at 2.3% in FY23-24), driven by welfare and reforms across rural/urban areas," states the document. This unprecedented speed in poverty reduction defies traditional expectations of gradual improvement in developing economies, attributing the success to comprehensive welfare programmes and economic reforms that have lifted millions out of deprivation.
Central to this narrative is the remarkable rise in female labour force participation which has jumped from 23.3% in 2017-18 to 41.7% in FY23-24. Driven primarily by rural women, this increase has narrowed gender disparities in the workforce, with only three states or Union Territories (UTs) now reporting rates below 20%, down from 20 in previous years.
"Female labour force participation rose from 23.3% in FY17-18 to 41.7% in FY23-24, driven by rural women, with only three states and Union Territories (UTs) below 20% now (down from 20)," notes the Survey. This surge challenges long-held assumptions about slow progress in women's economic empowerment amid cultural and structural barriers, crediting initiatives like skill development programs and digital access for the shift.
However, the empowerment story has nuances. While more women are entering the workforce, their ownership in micro, small and medium enterprises (MSMEs) remains disproportionately low. Only 22% of MSMEs are women-owned, with the figure dropping to 12% for small enterprises and a mere 7% for medium ones, even as women-led start-ups attract increasing funding.
"Only 22% of MSMEs are women-owned, dropping to 12% for small and 7% for medium enterprises, even as women-led start-ups gain funding," the Survey highlights. This disconnect reveals barriers in scaling businesses, such as access to credit, mentorship, and market networks, suggesting that participation alone does not translate to control or economic independence.
Interlinked with these gender dynamics is a broader transformation in employment patterns. Self-employment has risen from 52.2% to 58.4% of the workforce between FY17-18 and FY23-24, while regular or salaried jobs have declined from 22.8% to 21.7%. "Self-employment has increased from 52.2% to 58.4% of the workforce (FY17-18 to FY23-24), while regular and salaried jobs declined from 22.8% to 21.7%, indicating a shift to flexible work," explains the Survey.
This trend, which includes gig work and entrepreneurship, reflects a post-pandemic preference for flexibility but also raises concerns about job security and benefits in an economy where formal employment growth lags.
In rural areas, where much of this shift is occurring, unemployment has fallen sharply from 3.3% in FY20-21 to 2.5% in FY23-24. Concurrently, dependence on the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has decreased, with person-days generated dropping 53% from the FY20-21 peak. "Rural unemployment fell from 3.3% in FY20-21 to 2.5% in FY23-24, with MGNREGS person-days dropping 53% from FY20-21 peak, signalling shifts to alternative work," the Survey observes.
This reduction in reliance on the flagship scheme indicates stronger private sector opportunities and a robust recovery, countering narratives that portray MGNREGS as an indispensable safety net in perpetuity.
To align with these evolving dynamics, the Survey proposes an overhaul of MGNREGS, including increasing guaranteed workdays to 125 and introducing 60-day seasonal pauses during agricultural peak periods. "The 2025 Act increases guaranteed days to 125, introduces 60-day seasonal pauses during agricultural peaks, and prioritises work in water, infrastructure and livelihoods.”
Further, this reform aims to prevent labour shortages in farming while enhancing the scheme's focus on asset creation and skill-building, marking a departure from its original entitlement-based design.
These interconnected trends, such as poverty reduction, female workforce entry, self-employment growth and rural job scheme refinements, underscore India's progress toward inclusive growth. The decline in poverty, measured by multidimensional indicators including health, education, and living standards, has been accelerated by direct benefit transfers, housing schemes, and sanitation drives. The Survey notes that this has resulted in a near-elimination of extreme poverty under the Tendulkar methodology, with urban-rural gaps narrowing significantly.
However, experts caution that sustaining these gains requires addressing underlying issues. Low female ownership in MSMEs, for instance, could perpetuate gender inequalities if not addressed through targeted policies. Similarly, the rise in self-employment might mask underemployment if not supported by training and financial inclusion. The MGNREGS changes, while pragmatic, must ensure vulnerable groups aren't left without support during pauses.
Delving deeper, the data reveals regional variations. The female participation surge is most pronounced in states like Bihar and Uttar Pradesh, where rural women have benefited from self-help groups and microfinance. Meanwhile, self-employment data from the periodic labour force survey (PLFS) highlights a youth-driven trend, with many opting for digital platforms amid formal job scarcity.
The poverty metrics, drawn from National Family Health Surveys and consumption data, show deprivations in nutrition and housing falling fastest. "This unprecedented speed in a developing economy defies gradual progress assumptions, suggesting outsized intervention impacts," the Survey emphasises.
Rural unemployment trends tie into broader agricultural reforms, with MGNREGS pauses designed to sync with sowing and harvesting cycles.
As India eyes Viksit Bharat by 2047, these insights from the Economic Survey call for agile policies. Enhancing women's entrepreneurial access, formalising self-employment, and refining safety nets could amplify the momentum. With GDP growth projected at 6.5-7% for FY24-25, the labour market's evolution will be pivotal in translating economic gains into equitable prosperity.
