Challenges of Demographic dividend in India

Source: This post challenges of Demographic dividend in India has been created based on the article “India’s youth can give the country an edge — if they get the jobs they desire”, published in Indian Express on 19^th April 2024.

UPSC Syllabus Topic: GS paper 3 – Indian Economy – Growth, development and employment

Context: The article discusses the current economic and employment situation in India. It highlights the challenges and opportunities presented by India’s demographic dividend.

What are the facts that establish India’s demographic dividend?

1) India’s dependency ratio is low. There are around 100 workers for every 40 dependents.

2) There is an anticipation of the addition of around 10 million new workers annually for the next couple of decades.

3) India’s economic transition from agrarian to non-agrarian sectors.

4) Gig work is not matching the aspirations of the youth, fueled by their education and growing economic power of India.

What are the challenged posed by the demographic dividend in India?

Providing workers with productive jobs: labor flow from agrarian economy to industries is increased manifold. However, Indian firms are small, both in terms of employment and revenue, generating the limited demand for workers.

Skill deficit: Firms, especially in the white-collar service sector, struggle to find workers with the required skills, reflecting the issues in the education system and student learning outcomes. Both ILO report and CMIE estimates suggest high unemployment among graduates and the young population.

Tax or regulatory policy environment: Present policy environment and lack of ambition among small entrepreneurs, works against the growth of small firms. Therefore, firms are happy to stay small and avoid any ambition to compete with big firms.

Migration cost: Since non-agrarian jobs are only available in urban areas, workers need to move and arrange accommodation. It is a costly affair, discouraging many.

What should be done?

Incentivizing exports could be a solution to the labor market crisis, as firms that export tend to be larger and more productive. An export reorientation is likely to change the entrepreneurial mindset and encourage firms to scale up their ambitions, creating more employment opportunities.

Addressing the skill deficit and improving the education system are also crucial steps to ensure a better match between the workforce’s skills and the demands of the labor market.