The latest macroeconomic controversy in India has to do with whether employment has fallen in India between 2004-05 and 2009-10 —roughly the period between two five-year surveys by the National Sample Survey. The government has sought to explain this period of jobless growth with arguments based on temporary frictions in the labour market such as greater number of years spent in school by potential entrants or certain social reasons.
The debate should also be seen in the context of managing India’s so-called demographic dividend—roughly faster economic growth due to an increase in the working-age population. It has been estimated that between 2010 and 2020, the country will add 120 million people in the working-age group—roughly 28% of the global increase. Another 100 million will be added to this age group from 2020 to 2030. These are gigantic numbers. If handled properly, they promise prosperity; mishandled, they can lead to social chaos.
So far, there are few, if any, signs of India managing this “hump” of its youthful population in a meaningful manner. So, if the interpretation made by the country’s chief statistician, T. C. A. Anant, that more and more young men and women—especially in rural areas— are spending more time in school is true, then our planners and policymakers should be worried sick. What this does is to fuel expectations from schooling while changes in the labour market enabling better and more paying jobs may not be happening. This could be due to two reasons. For one, even if more young people are staying in school for a greater number of years, they may not get better paying jobs as the quality of education is uncertain at best—the output of this system simply doesn’t have skills needed in a modern economy. There is also the issue of employers being enabled to absorb these numbers without worrying about keeping them on rolls due to restrictive labour laws. That issue awaits resolution.
The skills and numbers mismatch issue is already at hand in urban India. Most sectors of urban India’s economy, especially services—hospitality, aviation and healthcare, to name a few—have seen rapid wage increases while the numbers needed are simply not there. Where the numbers are abundant—in rural India—the skills are absent.
It’s not as if there is no awareness about these issues. Yet, this awareness has not led to any movement in addressing the structural issues that make this sad situation so persistent. Unless some effort is devoted to fixing this problem, India’s demographic dividend is likely to remain in the realm of “what if…”
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Illustration by Jayachandran/Mint