Increasing urban development and labour flexibility are key to creating jobs, sustaining growth and reducing poverty, World Bank said in a report.

According to the 'World Development Report 2013: Jobs' released on Monday, part time work is on the rise in India.

"Medium-size businesses are not growing and the share of informal workers in organised firms is up from 32 percent in 2000 to 68 percent in 2010," it said.

The report said with the working age population increasing by seven million people each year in India, accelerating urban development and increasing labour flexibility are key to creating jobs in more productive activities, thus sustaining growth and reducing poverty.

The number of temporary workers in India grew more than 10 percent in 2009 and 18 percent in 2010. More unusual is the increase in its number of informal workers in the organised sector -- from 32 percent in 2000 to 68 percent in 2010.

The report underlined on the need for strong urbanisation policy for India in creating better jobs.

The report also emphasised the need for India to stay within the efficiency "plateau" of labour laws where labour policies are not too stringent and allow the creation of more wage employment, especially in cities and in activities connected to global markets.

"When workers move from low-to-high-productivity jobs, output increases and the economy becomes more efficient. Stringent regulations that obstruct such labour reallocation do not sit on the efficiency plateau and affect economic efficiency.

"There are dimensions over which the country is not close to the cliff and the regulation does not have a detrimental effect on development, but on some other dimensions India is close to the edge, if not beyond it," said Kaushik Basu, World Bank Chief Economist.

The report said a majority of firms are born small but in India they also tend to stay small. "In the United States, if a company lasts 35 years, it becomes on average 10 times as productive and employs 10 times as many people. In India, the productivity of a 35 year-old firm merely doubles and its headcount actually falls by a fourth," it said.

"India's working age population is on the rise and will continue to do so for another two decades. India can take advantage of this demographic dividend by creating an environment more conducive to job creation. Jobs can serve as a cornerstone for development, contributing to growth, prosperity and social cohesion," World Bank Country Director for India Onno Ruhl said.

To keep employment as a share of the working-age population constant, the World Development report said, in 2020 there should be around 600 million more jobs than in 2005, a majority of them in Asia and Sub-Saharan Africa.

While some countries have experienced very large increases in their labour force, nearly 8 million new entrants a year in China since the mid-1990s and 7 million in India, others face a shrinking population, it said.

Ukraine's labour force, for example, is estimated to fall by about 1,60,000 people a year, it added.

In India, the number of temporary workers that employment agencies recruit grew more than 10 percent in 2009 and 18 percent in 2010, the report said.

As per the report, India and China rank high in perceived attractiveness as outsourcing hubs because of their exceptionally high ratings in the availability of skills.

In India, complex and cumbersome labour market institutions have unambiguously negative effects on economic efficiency but these institutions have remained largely untouched for 60 years.

Tolerance for the avoidance or evasion of distortive regulation can help contain their cost but not ensure dynamism. In India, widespread non-compliance has been the dominant response to cumbersome labour regulations, it said.

Read the report