India is about to become the most populous country in the world. Can it create enough jobs? | CNN affairs

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CNN

India will overtake China this year to become the most populous country in the world.

The odds of India hitting that key milestone in a few months skyrocketed on Tuesday, as China reported that its population shrank in 2022 for the first time in more than 60 years.

This shift will have significant economic implications for both Asian giants, each of which has a population of more than 1.4 billion.

Along with population data, China also reported one of its worst economic growth rates in nearly half a century, underlining the enormous challenges the country faces as the workforce shrinks and the ranks of the retired grow.

What economists and analysts call the “demographic dividend” could continue to support rapid growth for India as the number of healthy workers increases.

However, there are fears that the country will miss the boat. That is because India simply does not create employment opportunities for the millions of young job seekers who already enter the labor market every year.

The working-age population of the South Asian country stands at more than 900 million, according to 2021 data from the Organization for Economic Co-operation and Development (OECD). This number is expected to exceed 1 billion according to the Indian government in the next ten years.

But these numbers could become a problem if policymakers don’t create enough jobs, experts warned. Already, data shows that a growing number of Indians are not even looking for work, given the lack of opportunities and low wages.

According to 2021 World Bank data, India’s employment rate, an estimate of the active labor force and people looking for work, was 46%, which is one of the lowest in Asia. By comparison, rates for China and the United States were 68% and 61% respectively in the same year.

For women, the numbers are even more alarming. India’s female labor force participation rate will be just 19% by 2021, compared to about 26% in 2005, according to World Bank data.

“India is sitting on a time bomb,” Chandrasekhar Sripada, professor of organizational behavior at the Indian School of Business, told CNN. “Societal unrest will arise if it cannot provide sufficient employment in a relatively short time.”

According to the Center for Monitoring Indian Economy (CMIE), an independent think tank headquartered in Mumbai, which publishes job data more regularly than the Indian government, the unemployment rate in India stood at 8.3% in December. By contrast, US interest rates stood at around 3.5% at the end of last year.

“India has the world’s largest youth population… There is no lack of capital in today’s world,” CMIE CEO Mahesh Vyas wrote in a blog post last year. “Ideally, India should seize this rare opportunity of easy availability of labor and capital to fuel rapid growth. However, this bus seems to be missing.”

Lack of quality education is one of the major causes of the unemployment crisis in India. There is a “massive failure at the educational level” by policymakers, Sripada said, adding that Indian institutions emphasize “memory” over “creative thinking”.

As a result of this toxic combination of poor education and lack of jobs, thousands of college graduates, including those with doctorates, eventually apply for low-level government jobs, such as those of “peons” or office boys, who pay less than $300 a month.

The good news is that policymakers have recognized this problem and have begun to put “reasonable emphasis on skills creation,” Sripada said. But it will be years before the impact of new policies will be felt, he added.

Asia’s third-largest economy also needs to create more non-agricultural jobs to realize its full economic potential. According to recent government data, more than 45% of India’s labor force is employed in the agricultural sector.

According to a 2020 report by the McKinsey Global Institute, the country needs to create at least 90 million new nonfarm jobs by 2030 to take on new workers. Many of these jobs could be created in the manufacturing and construction sectors, experts said.

As tensions rise between China and the West, India has made some progress in boosting manufacturing by attracting international giants like Apple to produce more in the country. But factories still make up only 14% of India’s GDP, according to the World Bank.

With a growth of 6.8% in GDP forecast for this fiscal year ending in March, the South Asian nation is expected to be the fastest growing major economy in the world. But according to a former central banker, even this growth is “insufficient”.

“Much of this growth is jobless growth. Jobs are essentially job one for the economy. We don’t need everyone to be a software programmer or a consultant, but we need decent jobs,” Raghuram Rajan, the former governor of the Reserve Bank of India, told media company NDTV last year.

According to the McKinsey report, “for profitable and productive employment growth of this magnitude, India’s GDP will need to grow at an annual rate of 8.0% to 8.5% over the next decade.”



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