Much has been made of India’s “demographic dividend” and how it could be an engine to power economic growth instead of being a liability that drags progress. The now famous Brics (Brazil, Russia, India and China) report first highlighted this window of opportunity in 2003. Now, another report has pointed out how India may yet squander that opportunity.
A youthful and low-cost labour force is a big economic advantage for any country. India has that advantage now and will do so for some more time. Between this year and 2020, India will add about 120 million people to its working (age) population. From 2020 to 2030, it will add another 100 million. This will represent, roughly, one-third of the global increase in these years. It is a “dividend” that none of the current economic powerhouses—Japan, Europe and Russia—has. China, too, does not enjoy that advantage: between 2010 and 2030 it will add 164 million people to the plus 60 years age group. Even more significantly, its working age population is set to drop significantly between 2020 and 2030.
India is, however, unprepared to reap the benefit of this once- in-a-lifetime advantage.The India Labour Report 2009: The Geographic Mismatch and a Ranking of Indian States by their Labour Ecosystem by Teamlease Services Pvt. Ltd shows this clearly. The report highlights the three mismatches that haunt India’s labour economy.
Illustration: Jayachandran / Mint
Most of the increase in the numbers in the working age population (40%) will occur in Uttar Pradesh, Bihar and Madhya Pradesh. These are backward states with a poor institutional order and little capacity to make use of this swelling tide effectively. The states that are equipped to make use of an increasing labour pool—Maharashtra, Gujarat, Tamil Nadu and Andhra Pradesh—will only see an accretion of 20% to their working population. Migration and their attendant problems will be a big side effect of this development.
Then there are questions of skills, education and sectoral mismatches. Poor training and lack of education leaves labour market entrants at the low end of the wage spectrum, something that negates many fruits of economic growth. And, in any case, if labour is available where it is not needed, there is no point in having a surplus. If population swells in rural areas while where it is needed are the cities, it will only create friction.
It is not that policymakers are not aware of the situation, but their priorities are in a direction that yields greater political dividend. Job creation hardly helps at the hustings. This is a shame.
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