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'We must act fast to create jobs, improve the workforce'

Without the right economic climate, the demographic dividend can turn into a liability, as a restless young population finds itself underutilised, its dreams and aspirations thwarted by a lack of access and opportunity. RB Bhagat writes.

ht view Updated: Feb 16, 2014 10:11 IST
RB Bhagat
RB Bhagat

By the year 2020, India — already one of the youngest nations in the world — will have an average age of 29. Already, 58% of the population is under the age of 30.

For years, development gurus have looked forward to this period as a time when the nation will finally be able to cash in on a ‘demographic dividend’ within its massive population.

The crux of the dividend is this: India is at a point where the ratio of the working population (15-59) is rising, the ratio of the child population (0-14) declining, and the ratio of those over 60 growing only moderately.

The beauty of this is that increased labour supply could raise GDP — while the declining child dependency ratio could boost savings and investments, helping build the nation at many levels.

This is an opportunity that comes but rarely in the life of a nation. It represents a time to build with the energy of a young workforce, strengthen the economy and create assets that will boost growth for generations — allowing for stability when the tide turns and the population begins to age.

In the West, a similar demographic dividend arrived in the industrial age and was chanelled into the high-productivity industrial and service sectors, creating assets that boosted the wealth of those nations and continue to reap dividends.

Without the right economic climate, however, the demographic dividend can turn instead into a liability, as a restless young population finds itself underutilised, its dreams and aspirations thwarted by a lack of access and opportunity.

Various rounds of employment and unemployment data indicate that our demographic milestone is, unfortunately, tending towards this direction.

Most of the 1990s experienced jobless growth. Employment did increase significantly between 1999-2000 and 2004-05, when the average yearly increase in the number of workers was 7.7 million, but studies show that this was essentially distress-driven, primarily a result of an agrarian crisis.

The increase in number of workers has now declined to 2.5 million per year (2004-05 to 2011-2012), while the working-age population has risen at the rate of 14 million per year between 2001 and 2011.

All in all, it is becoming obvious that India is already failing to realise the potential of its demographic dividend.

Nearly half of India’s workforce (49%) is dependent on agriculture, which contributes less than 15% of the GDP.

The role of household industry and manufacturing is limited to just a fifth of the workforce, while 90% of the urban workforce is employed in the low-paying unorganised sector.

The quality of the workforce is also low — 11% of the urban male workforce and 28% of the urban female workforce is illiterate; only 53% of male workers and 40% of female workers have studied past secondary school.

What India must do now is increase jobs in the industrial and manufacturing sector, as agriculture cannot meet the growing demand.

In urban areas, growing job markets in the service sector should be supplemented by the expansion of the industrial and manufacturing sectors, so as to gainfully accommodate all levels of potential young employees. Skills development and training will also play a critical role in achieving this goal.

Most importantly, we need to move fast. Because the biological clock is ticking, and our youngsters will not wait quietly on the sidelines forever.

(RB Bhagat is head of the Department of Migration and Urban Studies at the International Institute for Population Sciences)

First Published: Feb 16, 2014 10:06 IST