Mathew Mattam
India has become one of the world’s most important sources of low- and middle-cost labour. Its software developers serve international companies from Bengaluru, Hyderabad and Pune. Its call-centre employees handle customers in the United States, Britain and Australia. Indian construction workers build cities across the Gulf. Nurses from Kerala work in hospitals from Dubai to London, while seafarers, caregivers, technicians, garment workers and freelancers support global industries. Their wages may be higher than what they could earn in their villages or towns, but they are frequently much lower than what employers would pay local workers for comparable work.
This labour advantage has brought real benefits. It has created employment, strengthened India’s service exports and supported millions of families through remittances. The World Bank estimated that India received approximately $129 billion in remittances in 2024, the highest amount received by any country. This money supports household consumption, education, healthcare, housing and local businesses. It must be recognised as the hard-earned contribution of migrant workers to India’s development. But remittances, however valuable, cannot substitute for a national strategy that creates productive, secure and well-paid employment at home.
The danger begins when low wages stop being a temporary competitive advantage and become India’s permanent economic identity. A nation cannot become prosperous merely by offering its people to the world at the lowest possible price. Cheap labour may attract contracts, factories and outsourcing in the short term, but it does not necessarily improve workers’ living standards. If employees work long hours yet cannot afford nutritious food, quality education, healthcare, adequate housing or savings, employment has not become a pathway out of poverty. It has merely made poverty more productive.
Low wages also create a hidden weakness within the economy. Workers are not only producers; they are consumers. When millions of workers earn too little, they cannot buy the goods and services produced by Indian businesses. A garment worker who cannot buy clothes, a construction worker who cannot afford a house and a food-processing worker who cannot provide a nutritious diet for the family represent lost demand. Businesses then depend more heavily on exports or on consumption by a small, affluent section of society. Broad-based economic growth becomes difficult because the domestic market remains weaker than India’s population suggests.
The International Labour Organization has warned that rapid economic growth has not produced enough decent and productive employment for most Indian workers. Nearly 90% of the labour force remains informal, while only a small proportion enjoys formal wage employment. Informal workers commonly lack written contracts, paid leave, predictable wages, insurance, pensions and effective grievance mechanisms. Their employment may be counted statistically, but it does not always provide dignity or security.
Cheap labour can also become a trap for industry. When employers can remain profitable by paying low wages, they have less incentive to invest in modern machinery, research, worker training, improved management or better product design. Large companies may transfer work to small informal units where labour laws are difficult to enforce. Small suppliers, in turn, face delayed payments, weak bargaining power and limited access to affordable credit. They survive by reducing workers’ wages rather than improving productivity. The result is a cycle in which workers remain poor, small enterprises remain fragile and large firms remain dependent on cost-cutting.
India’s experience in information technology demonstrates both the strength and the limitation of labour-cost advantage. The country built an impressive global services industry by combining English-language ability, technical education and lower costs. But the next stage cannot be based only on completing routine assignments more cheaply than workers in another country. Artificial intelligence and automation are already transforming coding, customer service, bookkeeping, design and data processing. Work that is outsourced purely because it is inexpensive can move elsewhere—or disappear entirely—when technology becomes cheaper.
The same warning applies to the gig economy. A designer in Kochi, a video editor in Indore or an accountant in Pune may serve an overseas customer through a digital platform. This creates opportunity and access to global markets. But when Indian professionals compete mainly by reducing their hourly rates, platforms and clients capture much of the value. India supplies the skill, time and creativity, yet another country may own the brand, technology, customer relationship and intellectual property. The worker receives a task payment; the platform builds lasting wealth.
The answer is not to reject labour-intensive industries, outsourcing or overseas employment. These will remain important sources of jobs, income and international experience. Nor should India prevent workers from seeking better opportunities abroad. The real question is whether migration and low-cost production are stepping stones towards development or permanent substitutes for it. Workers going abroad should receive verified contracts, fair recruitment, social protection and opportunities to upgrade their skills. Those who return should be supported to invest their savings, experience and international networks in Indian enterprises.
India must gradually shift from exporting cheap labour to creating high-value products, services and enterprises. A construction worker should have a pathway to become a certified technician, supervisor or contractor. A nurse should be valued as a highly trained professional rather than an inexpensive substitute. A garment worker should participate in enterprises that own designs, brands and markets. A freelancer should be able to build a company, develop intellectual property and employ others. Economic progress occurs when workers move upward in the value chain—not when they remain at its lowest-paid end.
This transition requires a different understanding of education and skilling. Colleges cannot remain centres that simply distribute degrees and prepare young people to accept low-paid jobs. They must become creative learning and innovation centres where students solve local problems, work with industries, use emerging technologies and develop enterprises. Industrial Training Institutes and vocational centres must prepare young people not only for placement but also for productivity, entrepreneurship and continuous learning. With more than 12 million people entering India’s labour market each year, creating better jobs is not merely a social priority; it is an economic necessity.
Small and medium enterprises must be at the centre of this transformation. They need affordable credit, timely payments, technology support, common production facilities, market intelligence and partnerships with research institutions. Large companies should treat small suppliers as innovation partners rather than as units from which the lowest possible price can be extracted. Government incentives should reward firms that increase productivity, train workers, create formal employment and share the gains of growth through better wages.
Fair wages are not a burden on economic growth. They are an investment in it. Adequately paid workers eat better, educate their children, access healthcare, purchase local products, pay taxes and save for the future. Their spending becomes income for another business and employment for another worker.
India’s demographic strength will become a dividend only when its people are educated, healthy, innovative and fairly rewarded. Otherwise, a large young population may simply become an abundant supply of underpaid workers for richer economies. India should aspire to be known not as the world’s cheapest workforce, but as a country of skilled professionals, creative entrepreneurs, responsible businesses and globally respected products.
Supplying labour can generate income, but building human capability, technology, enterprises and ownership creates wealth. India will not become economically powerful by making its people cheaper. It will grow when their labour becomes more productive, their skills become more valuable and their lives become more dignified.
This Post Has One Comment
Very true. The deeper challenge, in India and worldwide, is the disintegration of organised labour. The working-class movement barely exists anymore; its voice has grown feeble. In most nations, including India, working-class representation in parliaments and assemblies is negligible. Rising inflation and the daily struggle to survive leave people little time or energy to organise and protest. Governments, meanwhile, stay busy with political manoeuvring, instigating and dividing the working class along lines of caste, creed and religion. The opposition, for its part, is losing touch with the people, weakened further by the absence of a clear agenda that could win back their trust. I often wonder whether they even grasp these basic economic realities.
NGOs in India, too, largely stay within their own narrow spaces, and most prefer to avoid raising their voice on this real cause. Few dare to name it as you have, Mathew. Today, I must say, you have dared to put forth the truth — and I personally appreciate it.
Raising awareness like this is essential to building that voice. But I’m not sure it’s enough, on its own, to spark the larger people’s movement that the moment truly demands. I hope it does, and soon. It has been a long time since I’ve read a perspective this honest and necessary. Congratulations on writing it.