"Non-farm employment will decrease more than 25 per cent to 38 million in FY13-FY19 compared with 52 million seen in FY05-FY12. That's because fewer jobs are being created with the economy treading a lower-growth path and labour intensity is declining across industry and services," the report said.
As a consequence, an additional 12 million people will be redirected to farms in the next seven years, which is in sharp contrast to a decline of 37 million in agriculture employment during FY05-F12 period.
"It is desirable to pull more and more people out of agriculture since it is a low-productivity sector, with only a 14 per cent share in GDP, but around 49 per cent share in employment.
"The old trend of migration from agriculture will reverse, with fewer non-farm job opportunities coming in the way of achieving this," Crisil president for research Mukesh Agarwal said.
Crisil pointed out that the ability of relatively labour-intensive sectors such as manufacturing to absorb workers has diminished due to rising automation and complicated employment laws.
As per the report, the employment elasticity of manufacturing, or the percentage increase in employment for every percentage point increase in manufacturing GDP, deteriorated sharply to an average 0.17 in the seven years to FY12 from 0.68 in the seven years to FY05.
"We expect the domestic economy to expand at a slower pace of 6 per cent per year in the FY13-FY19 period from 8.5 per cent in FY05-FY12. Further, GDP growth is driven increasingly by less labour-intensive services such as financial, real estate and business services, including IT-ITES.
"For example, in FY12, these services, with nearly 19 per cent share in GDP, employed only three out of 100 workers in the economy. Employment generation in evolving scenario will therefore pose a severe test for policy makers," Crisil chief economist Dharmakirti Joshi said.
The rating agency said higher economic growth, especially in corporate and infrastructure investments, along with appropriate policy measures can accelerate job creation.
"Apart from GDP growth, the country needs to raise the demand for labour, especially in the manufacturing sector, by simplifying labour laws and de-bottlenecking labour-intensive industries such as textiles, gems and jewellery and leather.
Policymakers should also focus on expanding the health, education, construction sectors. This will not only raise growth potential, but also generate a significant number of jobs," Agarwal of Crisil said.