Labour is the principal asset for a large number of Indians, especially the poor and marginalized. India faces a key challenge in the coming decade - increasing the earnings of the poor; and providing productive jobs to a large segment of population that will enter the labour market over the next ten years. Though labour market outcomes have been improving since the 1990s and job growth has been on the rise since 2000, unemployment and underemployment continue tocause concern. The recent global economic downturn too has brought these issues and concerns into sharp focus. Addressing the lack of growth of good jobs is thus key for India. Prepared by a team of Indian economists and World Bank staff, this report assesses developments in Indian labour markets and identifies key employment challenges in the future. It also provides prescriptive suggestions for improving labour market outcomes. Specifically, it analyses the main developments in the labour market in India; the volume and quality of the jobs being created. Moreover, it addresses the growth in both the formal and informal sectors, and income gaps therein. It furtherattempts to understand how and why labour market outcomes differ between regions, and the implications of such difference. It also examines existing policies, their effectiveness, and the need for further reform.