Employment in formal manufacturing more concentrated in fewer states

Employment in India’s formal manufacturing sector has become increasingly concentrated in a handful of states over the past five years, despite output growth remaining geographically broad, according to a Moneycontrol analysis.

The share of the top three states in formal sector jobs rose to 41.2 percent in FY24 from 40.7 percent in FY20, while the top five states’ share climbed from 54 percent to 55.8 percent. Regionally, the South and North together accounted for nearly two-thirds of employment, up from just over half before the pandemic.

The South has expanded its footprint sharply, with its share rising to 32.2 percent in FY24 from 28.5 percent in FY20. The North, too, has climbed to 30.5 percent from 25.1 percent during the same period. In contrast, the West—dominant in output with a 32 percent share—employs only 26.5 percent of the workforce. The East and Northeast together continue to lag, contributing less than 10 percent of both output and employment.

Tamil Nadu has retained its lead as the single-largest employer, accounting for 15.2 percent of jobs, though slightly lower than 16 percent in FY20. Maharashtra and Gujarat, pillars of production with 14.5 percent and 17.2 percent of output respectively, also gained in employment share.

Uttar Pradesh has been a standout, raising its employment share to 8.3 percent from 6.8 percent, reflecting the steady expansion of industries in the state.