Digital Adoption Boosts Employment in Indian Enterprises by 78%

Enterprises that adopt digital technologies are employing significantly more workers than their non-digital counterparts, according to a new study that adds empirical weight to India’s ongoing push for technology-led economic growth and job creation. The report, released by the National Council of Applied Economic Research (NCAER), finds that enterprises using digital tools hire 78 per cent more workers on average than those that do not use such technologies.

The findings come from a study titled “India’s Employment Prospects: Pathways to Jobs”, authored by Professor Farzana Afridi and a team of researchers at NCAER. The report was formally released by NCAER Vice Chairman Manish Sabharwal on 11 December 2025 and focuses on how skilling, access to finance and technology adoption among small and informal enterprises can reshape India’s employment landscape.

Study background and institutional context

NCAER, one of India’s oldest economic think tanks, undertook the study to examine the structural factors influencing job creation in the country. The report is positioned against the backdrop of India’s demographic profile, where a large and relatively young workforce coexists with persistent underemployment and a high share of self-employment.

The study draws attention to the role of unincorporated household enterprises, small firms and micro businesses that operate at low levels of productivity, capital and technology usage. These entities account for a substantial share of India’s employment, yet often function at subsistence levels, with limited capacity to expand, formalise or absorb additional labour.

Lead author Professor Afridi underscores that India’s employment challenge cannot be understood only through the lens of large firms and organised industry. The report instead places emphasis on the productivity and growth potential of the smallest enterprises, especially in labour-intensive manufacturing and services.

Key finding on digital technology use and hiring

The most striking quantitative result highlighted in the public release relates to the employment impact of digital technologies at the enterprise level. Analysing data across small and micro enterprises, the study reports a clear positive association between the use of digital tools and the scale of hiring.

“Enterprises using digital technologies hire 78% more workers as compared to those not using tech,” said the lead author, Professor Farzana Afridi, at the launch of the report.[PIB]

Digital technologies in this context typically include basic and intermediate tools such as digital payments infrastructure, point-of-sale devices, online marketplaces, enterprise software, accounting and inventory systems, and connectivity platforms. While the report summary does not list each tool individually, it links technology adoption to improvements in productivity, market access, and the ability to manage and scale operations.

The 78 per cent differential is presented as an average effect, suggesting that, controlling for other factors, digitally enabled enterprises are significantly more likely to expand their workforce compared to similar firms that remain offline or operate manually. The study frames digital adoption not merely as a feature of more successful firms, but as a pathway that can be systematically supported through policy, credit access and skilling programmes.

Credit access and employment linkages

Alongside digital technology, the study highlights access to credit as another crucial determinant of hiring decisions by small enterprises. The report notes that many unincorporated and informal units remain credit constrained, limiting their ability to invest in technology, expand capacity or formalise employment.

“Even 1% increase in access to credit increases expected number of hired workers by 45%,” the report notes, based on its modelling of enterprise-level behaviour.[PIB]

This estimated relationship underlines that credit deepening, particularly when combined with digital infrastructure and business support services, can have a sizeable effect on employment generation. The study suggests that financing constraints are not only limiting investment in physical capital but are also preventing firms from upgrading technology and moving towards more formal job contracts.

In policy terms, this aligns with the government’s emphasis on digital public infrastructure, financial inclusion and targeted credit schemes for micro, small and medium enterprises. It also reinforces the administrative rationale behind integrating digital footprints, transaction histories and e-invoicing into credit risk assessment, particularly for small firms with limited collateral.

Self-employment, subsistence enterprises and the technology gap

The NCAER study situates its digital adoption findings within a broader diagnosis of India’s current employment structure. It observes that self-employment dominates the labour market, especially in rural areas and in urban informal sectors, but much of this self-employment arises from economic compulsion rather than from high-productivity entrepreneurship.

Most small enterprises, particularly unincorporated household units, operate with minimal fixed capital and very low levels of technology use. According to the report, these conditions translate into modest productivity, limited revenue growth and weak capacity to generate stable wage employment. As a result, a large proportion of India’s workforce is concentrated in low-income, low-productivity activities.

Professor Afridi is quoted as saying that India’s employment future is closely tied to the productivity of its smallest enterprises. From that perspective, the digital technology gap becomes a critical policy concern. Enterprises that remain offline or reliant exclusively on manual processes are less likely to access new markets, use data for decision-making, or integrate into higher-value supply chains.

The reported 78 per cent hiring differential therefore offers a quantitative measure of this gap. It indicates that enterprises that cross the digital threshold are not only becoming more efficient but are also able to expand employment at a significantly faster rate than their non-digital peers.

Sectoral focus and labour-intensive growth potential

The study pays particular attention to labour-intensive manufacturing and services as key sectors that can absorb large numbers of workers if productivity, skilling and technology adoption are strengthened. Textiles, garments and related manufacturing activities, along with trade, hotels and related services, are identified as segments with high employment multipliers.

Using simulations based on inter-sectoral linkages, the report estimates that under a moderate growth scenario, higher output in labour-intensive sub-sectors can translate into substantial job creation. It projects that by 2030, there could be up to 53 per cent more jobs in textile, garments and related industries, and around 79 per cent more jobs in trade, hotel and related services, if these segments are supported effectively.

Within this sectoral framework, digital technologies are seen as catalysts that can raise productivity, improve logistics, enable online sales channels and reduce transaction costs. For example, garment and textile units that adopt digital design tools, supply-chain software and e-commerce platforms can expand their market reach. Similarly, small hotels, restaurants and retail outlets using digital payments and online booking platforms can serve larger customer bases and manage operations more efficiently.

These improvements can, in turn, support higher levels of formal hiring, as enterprises become more confident about predictable demand and financial flows. The study’s headline figure on digital enterprises hiring 78 per cent more workers can thus be interpreted as part of a broader ecosystem effect, where technology adoption interacts with sectoral demand and workforce skills.

Role of skilling and workforce composition

The report emphasises that technology adoption alone is not sufficient. It must be accompanied by systematic investment in skilling, particularly formal skilling aligned with industry needs. The study notes that India’s workforce still has a relatively low share of formally skilled workers compared to global benchmarks, and that this constrains both productivity and the quality of employment.

According to the simulations presented, increasing the share of the formally skilled workforce by 12 percentage points, through investments in formal skilling programmes, could lead to more than a 13 per cent increase in employment in labour-intensive sectors by 2030. Another scenario suggests that a 9 percentage point increase in the share of skilled workers could generate about 9.3 million additional jobs in these sectors by the end of the decade.[PIB]

These projections intersect with ongoing national initiatives such as the Skill India Mission and schemes to expand formal vocational training, apprenticeships and sector-specific skilling infrastructure. In particular, programmes focused on digital literacy and digital skills provide a complementary foundation for micro and small enterprises to integrate technology into their business models.

Government schemes such as the Pradhan Mantri Kaushal Vikas Yojana and Pradhan Mantri Gramin Digital Saksharta Abhiyan, while not directly evaluated in this study, are designed to expand basic and intermediate digital skills among youth and rural populations. These broader initiatives help create a pool of workers capable of operating in technology-enabled workplaces and small enterprises that are migrating to digital tools.

Administrative and policy relevance

The NCAER findings feed directly into policy discussions on how to link digital public infrastructure, enterprise support and employment strategies. Administratively, the reported 78 per cent hiring differential associated with digital technology usage can inform the design of future schemes aimed at micro and small enterprises.

Several potential policy implications emerge from the report’s analysis.

• Targeted support for digital adoption among small and micro enterprises, including subsidised access to basic digital tools, awareness programmes and handholding support for first-time users.
• Integration of credit schemes with digital enablement, where access to low-cost or priority credit is combined with digital onboarding, use of digital payments, invoicing and simple enterprise software.
• Alignment of skilling programmes with enterprise-level digital needs, so that workers trained under government schemes can help small firms implement and manage digital systems.

These are administrative directions that can be pursued within existing policy frameworks, rather than new schemes alone. Many current initiatives already emphasise digital payments, online registrations and digital documentation as preconditions for availing benefits. The new evidence can be used to refine such measures, focusing more directly on employment outcomes.

Stakeholder perspectives

During the discussion on the report, senior economists and policy experts associated with NCAER and other institutions underscored the broader implications of the findings.

Dr G C Manna, Senior Advisor at NCAER, noted that the report identifies key sectors with strong potential to drive employment growth, particularly when supported by improvements in productivity and technology adoption. His remarks point to the need for sector-specific strategies that combine digital infrastructure, credit access and skilling inputs.

Visiting Professor Aditya Bhattacharjea from the Institute for Studies in Industrial Development highlighted that the report places India’s employment challenge in an international context and identifies areas where the country's performance can be better aligned with global benchmarks. That includes not only headline employment numbers but also indicators of labour productivity, formalisation and the share of skilled jobs.

The central message emerging from these perspectives is that India’s demographic advantage can translate into sustained employment growth only if small enterprises are enabled to move beyond subsistence operations. Digital technologies, as the study quantifies, are one of the most effective levers for such transformation when combined with finance and skills.

Implications for digital inclusion and rural enterprises

Given that a large share of India’s small and informal enterprises are located in rural areas or small towns, the report’s findings intersect with ongoing efforts to improve rural connectivity and digital access. Initiatives such as the expansion of broadband infrastructure, common service centres, and rural digital literacy programmes create the baseline conditions for enterprise-level digital adoption.

For rural micro enterprises, including small traders, service providers and home-based manufacturing units, the shift to digital tools can lower transaction costs, reduce information asymmetry and expand access to urban and even international markets via online platforms. The employment impact in such settings may include both direct hiring and more stable, better-remunerated self-employment.

The study does not provide a separate rural-urban breakdown in the publicly available summary, but its overarching conclusion implies that digital inclusion for enterprises can be a powerful complement to household-level digital literacy and connectivity efforts. The emphasis on small enterprises also suggests that policy design may need to consider local business ecosystems, including district-level training, mentorship and digital service providers.

Positioning within India’s broader digital and employment agenda

Over the past decade, India has invested heavily in digital public infrastructure, including digital identity, payments and platforms for government services. These foundations have increasingly been used to support financial inclusion, direct benefit transfer and ease of doing business for smaller firms.

The NCAER study adds a focused employment perspective to this trajectory by quantifying how enterprise-level digital technology use correlates with hiring. The 78 per cent hiring differential provides a concrete statistic that can be referenced in future policy documents, programme evaluations and public communication on the benefits of digitalisation for job creation.

At the same time, the study’s emphasis on formal skilling, sectoral strategies and credit underscores that digital technology is one component in a wider set of reforms. Sustained employment gains are projected under scenarios that combine higher skill shares, increased credit access and output growth in labour-intensive sectors.

From an administrative standpoint, these findings may be relevant to multiple ministries and departments, including those dealing with labour and employment, micro, small and medium enterprises, skill development, rural development and digital governance. Coordination between these entities can help ensure that digital adoption, credit provision and skilling programmes converge at the level of small enterprises, rather than operating in isolation.

Future outlook and areas for further analysis

The NCAER report projects employment gains and sectoral shifts up to 2030 under different scenarios, but it also recognises persistent challenges. These include the slow pace of transition from low-skill to higher-skill jobs, the continued dominance of self-employment out of necessity, and disparities in technology access across regions and enterprise types.

Further analysis could explore how different categories of digital technologies contribute to employment growth, whether the 78 per cent hiring differential varies by sector, and how digital adoption interacts with other variables such as firm age, ownership structure and location. Such granular insights would support more finely targeted interventions, especially for women-owned enterprises, youth-led startups and rural micro businesses.

The report’s release, and the public attention to its headline findings, also help frame future monitoring priorities. Tracking digital adoption among small enterprises, and systematically linking those metrics with employment data, could become an important component of labour market and enterprise surveys in the coming years.

For now, the key message from “India’s Employment Prospects: Pathways to Jobs” is clear. Small and micro enterprises that embrace digital technologies are not only improving their productivity but are also generating substantially more employment. When supported by credit access and skilling, this digital shift can become a central pillar of India’s efforts to expand job opportunities, particularly in labour-intensive sectors that are critical for inclusive growth.