Every year, as India gears up for the festival season, small businesses experience mixed feelings… Excitement for booming sales, and stress from one major challenge: labour shortage.
From factories struggling to meet festive orders to retail stores hunting for seasonal staff, the workforce shortage is now a recurring hurdle for MSMEs across India.
This is no longer just a seasonal issue. It’s a long-term labour crisis that’s shaping how businesses operate, hire, and grow.
In this blog, let’s see what exactly a labour shortage is, the real causes of labour shortage in India, key challenges small businesses face, and practical tips to overcome workforce shortages in 2025, especially during the festive rush.
So, if you’ve been feeling the hiring pinch lately, this one’s for you.
A labour shortage happens when businesses can’t find enough workers with the right skills, experience, or willingness to take up available jobs, even when they’re ready to hire.
In simple terms, there’s more work than there are people to do it.
In India, this workforce shortage can mean…
It’s not just about fewer workers. It’s about a mismatch between the skills employers need and what workers can offer.
That’s why we often hear about both job vacancies and unemployment coexisting, a classic sign of labour market imbalance.
During Diwali, garment units in Tiruppur or Moradabad often see a shortage of skilled labour because workers migrate back to their hometowns or pick up higher-paying temporary gigs elsewhere.
This creates production delays and pushes small businesses to either hire untrained workers or pay higher wages to retain existing ones.
A labour shortage is a business growth challenge. And to fix it, we must first understand why it’s happening.
Labour shortage is just one of the business growth challenges… Identify your business challenges and learn proven strategies that helped thousands of business owners like you!
The labour shortage in India is caused by a mix of economic, social, and seasonal issues that make hiring and retaining the right people tougher for small businesses, especially during the festive season rush.
Many workers, especially from rural areas, move frequently in search of better opportunities or return home during festivals.
For small manufacturers or retail outlets, this means losing trained staff right when demand peaks.
There’s a growing skills gap between what industries need and what job seekers offer.
Despite India’s young population, sectors like manufacturing, logistics, and hospitality face a shortage of trained manpower, welders, electricians, machine operators, and service staff.
Let’s be honest… many skilled workers leave smaller firms for corporates or gig jobs (like delivery or ride-hailing) that pay more with flexible hours.
When the cost of living rises faster than wages, retention becomes a real challenge.
During festivals like Diwali, Navratri, and New Year, the demand for products/services shoots up, but the available workforce doesn’t.
This leads to overworked teams and delayed deliveries, classic signs of a labour crisis during festival seasons.
While India has skilling programs, most MSMEs still struggle to access effective vocational training.
This results in low labour productivity, and owners to constantly retraining new hires from scratch.
The new generation of workers prefers flexibility, digital jobs, and urban lifestyles. Traditional trades like manufacturing or logistics don’t appeal as much, creating a skilled trades shortage.
Since the pandemic, many workers have prioritised job security, health, and local opportunities over long hours and travel-based work, further tightening the workforce supply in metro regions.
For many MSMEs, the labour shortage doesn’t appear as one big problem. It shows up in small, everyday struggles that quietly slow down growth.
Here are some of the most common challenges business owners face across sectors…
When you don’t have enough skilled hands, orders pile up, and delivery schedules slip.
In sectors like garments, metal works, and handicrafts, this can lead to lost festive orders and unhappy customers.
The demand for workers goes up, but supply doesn’t, leading to higher wages and overtime expenses.
This can heavily impact profits for small businesses operating on thin margins.
Untrained or temporary staff may not meet the same standards as experienced workers. This causes inconsistent output, rework, and sometimes even product returns.
It’s not just about filling positions. But about maintaining standards.
When positions stay vacant, the remaining employees are stretched thin.
This leads to fatigue, burnout, and higher turnover, worsening the workforce shortage cycle.
In logistics, warehousing, or retail, the labour crisis peaks during festival seasons when demand spikes.
Deliveries slow down, customer complaints rise, and small businesses struggle to compete with larger, well-staffed competitors.
The shortage of skilled labour forces MSMEs to hire new or inexperienced workers often. That means owners spend more time training and managing than focusing on growth or innovation.
Because labour availability fluctuates, many MSMEs can’t plan capacity properly. This affects everything.
Labour shortages affect customer trust, brand image, and long-term growth. But the good news? You can absolutely overcome them with the right strategies.
Need long-term growth strategies?
If you’re running a small business, you can’t afford to “wait out” the labour shortage. You need to adapt, plan smartly, and build a loyal, skilled team that stays.
Here’s how you can overcome the labour shortage challenges!
Instead of always chasing new workers, focus on training the ones you already have.
Short workshops, mentorship programs, or simple cross-training can go a long way.
Simply put – One worker trained in two roles = double flexibility during high demand.
Small improvements, like flexible shifts, cleaner workspaces, and fair overtime pay, can drastically improve retention.
Workers stay where they feel respected and valued.
Simple digital tools can help you automate repetitive tasks or manage attendance, payroll, and workflow.
Apps like Khatabook, Zoho People, or Vyapar are MSME-friendly and reduce dependence on manual labour.
Don’t wait for Diwali to start hiring. Build a temporary or standby workforce plan in advance.
You can collaborate with local training centres or contractors who supply skilled labour during festivals.
A quick “thank you” or small festive bonus builds trust. Remember, employees are more loyal to people than companies.
Tie up with nearby MSMEs to share temporary labour or training resources. This is one of the simple ways to reduce downtime and fill gaps during the seasonal rush.
Schemes like PMKVY, also known as the Pradhan Mantri Kaushal Vikas Yojana and Skill India Mission provide free training and skilled manpower connections.
Stay updated and partner with local centres.
Pay on time. Be transparent. Offer learning opportunities.
When workers feel seen and supported, they don’t leave, even when bigger firms come calling.
The labour shortage in India may not disappear overnight, but smart, proactive business owners can turn it into an opportunity.
When you focus on training, retaining, and respecting your people, they grow with you.
This festive season, instead of stressing about the shortage, build systems that make your business stronger every year. Because at the end of the day, machines don’t build businesses. People do.
Found this helpful? Check out our blog page for more practical, easy-to-apply insights to help you grow your MSME with clarity and confidence.
None can destroy iron, but its own rust can! Likewise, none can destroy a person, but their own mindset can.
Former chairperson of the Tata Group
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