Macroeconomic Determinants of Employment: The Role of Economic Growth and Money Supply

Employment generation remains a central challenge for developing economies like India, particularly in the context of sustaining long-term economic growth. This study examines the relationship between employment, economic growth (GDP), and money supply in India using a macroeconomic perspective. Drawing on time-series data spanning several decades, the paper analyses trends and growth patterns of GDP, money supply, and employment to understand their interlinkages. The study finds a strong positive relationship between GDP growth and employment generation, indicating that economic growth plays an active role in creating employment opportunities. In contrast, money supply is found to have no significant direct impact on employment, supporting the neutrality hypothesis of monetary variables with respect to employment. Sectoral analysis further reveals that while the service sector contributes significantly to GDP, it generates limited employment for unskilled labour, whereas manufacturing and agriculture remain crucial for broad-based employment creation. The findings suggest that policy efforts should prioritise GDP-driven growth strategies, strengthen manufacturing and agriculture, and promote skill development programmes to address unemployment effectively in India.