India's Demographic Gamble: The Risk of Missing Out on a Generational Opportunity

South Asia, India risk squandering demographic dividend: World Bank The World Bank has released the "Job for Resilience Report" recently. The report discusses how South Asia, which includes India, is failing to make use of its demographic dividend.

Demographic dividend:

  • When the proportion of the working-age population (15–64 years old) is larger than that of the non-working age group, there is the potential for economic advantages.

  • A large percentage of the population is employed, which suggests that more individuals have the potential to be productive and support economic growth. This is known as the demographic dividend. 

Major findings in this report:

The South Asia’s labor markets as Emerging markets and developing economies:

  • Decline in employment ratio:

  • During 2000–23, South Asia's employment declined, despite a 6% increase following the epidemic. South Asia saw a 2% reduction, with varying fluctuations within, while the majority of EMDEs(Emerging market and developing economies) stayed steady.

  • Low employment ratios:

  • With the exception of Nepal, the employment ratios of South Asian nations are substantially lower than those of other EMDEs; in 2023, the region's ratio of 59% was significantly lower than the average of 70% worldwide.

  • Employment weakness for men and women: 

  • In contrast to other EMDEs, men's employment ratios decreased in South Asia during the course of 20 years. The consistently low women's ratios—which are half of those found elsewhere—are the main cause of South Asia's lower employment rates overall.

  • A missing engine of growth:

  • Labor productivity growth in South Asia peaked in the 2010s and then fell below the EMDE average from 2020 to 2023. In contrast to other EMDEs, South Asia's output growth was primarily dependent on the expansion of the working-age population and rising labor productivity. However, output growth was hampered by deteriorating employment ratios.

Report on Indian Scenario:

  • Employment and labor productivity trends:

  • India's employment growth was sluggish in the 2010s but picked up after the pandemic. The employment ratio saw a sharp decrease until 2022, at which time it slightly rebounded in 2023, rising by 3 percentage points.

  • Migrant workers:

  • During the pandemic in India, workers from abroad returned to rural areas, and emigration from these areas decreased. After Nepal, India employs 44% of the workers in the region who work in agriculture.

  • Employment composition:

  • Public investments, loosened labor laws, and contract labor all contribute to the growth of industrial employment in India. The services industry, which is dominated by BPO, IT, and healthcare, depends more on trained laborers and digital infrastructure than it does on unskilled workers.

Measures to tackle the issues raised in the report: 

  • Implementing comprehensive skill development programs, with an emphasis on both technical and soft skills, will provide the workforce with the abilities required by the changing employment market.

  • Labor Market Reforms: Constantly examining and improving labor laws to achieve a balance between defending workers' rights and promoting an atmosphere that is favorable to investment and job development.

  • Promotion of Inclusive Growth: Putting policies into place that support inclusive growth, with an emphasis on boosting women's employment through initiatives like accessible childcare, flexible work schedules, and removing barriers related to culture.

  • Infrastructure Development: Ongoing investments in infrastructure will support the expansion of businesses and services and generate additional job opportunities, especially in rural areas.

  • Enhancing Productivity: Putting policies in place to raise productivity in all industries through innovation, resource efficiency, and technology breakthroughs.

In order to benefit from the demographic dividend, enough human capital investment is required, with a focus on healthcare, education, and skill development.

Advait IAS