Unlocking India's demographic dividend

India is at a crucial moment in history. With over half the population under 25 years of age, it has potential to emerge as the world’s next superpower. The demographic dividend brings opportunity for huge pay-offs.

However, it also brings along potential disaster if lingering demands for quality education, jobs, infrastructure and overall development are not met. I believe millions of workers will be redirected to farms for work if the current economic slowdown compounds job creation problem in the industry and services sector.

Some estimates suggest that 12 million people will join the agriculture workforce by 2018-19 compared with a decline of 37 million in agriculture employment between 2004-05 and 2011-12. This should be accompanied with rural development projects.

As India grows below potential, those looking for non-farm work will also be left to contend with fewer jobs. Employment outside agriculture will increase by only 38 million between 2011-12 and 2018-19 compared with 52 million between 2004-05 and 2011-12.

While tottering GDP growth rate of about five per cent is partly to blame, the country’s inability to create labour-intensive manufacturing jobs that propelled growth in economies like China and southeast Asian countries could cost heavily in coming years.

The real estate sector – which employs a large bulk of construction labour – has already reported 18 to 20 per cent job losses over the past one year. Meanwhile, manufacturing added one to two million jobs a year since 1970s but has lost seven million jobs between 2005 and 2010. The services sector accounting for 60 per cent of GDP is unlikely to employ more than 20 to 30 per cent of the incoming labour. 

It may be trendy to talk about demographic dividend but India could well be staring at a massive demographic liability as 51 million people seek work with not enough jobs to absorb them.

Unemployment and underemployment statistics also show an ominous reality. If India's youth are not given opportunities for a meaningful future, they could become an economic burden rather than an asset.

A focus on manufacturing, skills development and acceleration of infrastructure creation are some of the solutions to arrest this crisis. But all these are dependent on a rigorous policy approach by those in the government and consist of tough decisions like undertaking dramatic labour reforms, easing the climate for doing business and quicker decision making.

And, of course, a harmonious mechanism for land distribution is must so that equitable growth can take place in agriculture, industry and services sector.

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