India today is the darling of emerging-markets investors. The economies of Brazil and Russia are shrinking, while China faces a soft or hard landing. By contrast, India is surging ahead as the fastest-growing large economy. But creating enough jobs for the world’s youngest and largest workforce will be a challenge.

Ten years ago, India had fewer than 500 million workers. By 2022 it will have one billion. Half of Indians are under 25 years old; over the coming decades, this cohort will create a demographic tsunami that will power India’s economic takeoff—or sink it.

Given its population, India needs to create nearly 17% of the world’s new jobs every year—about one million jobs each month. On paper, India’s economy is growing at 7.5% and unemployment is less than 3%, suggesting it is meeting the challenge.

In fact, it is falling short. The country is creating fewer than six million new jobs each year, mostly on the margins of the real economy. The labor-force participation rate is low and only one in four Indian women work. Perversely, unemployment rises with the level of education, because of the lack of quality jobs in the formal sector.