It needs to create opportunities for existing labour force and new entrants by improving productivity
India’s biggest strength is its manpower. The next 25 years could be the golden years for the country provided we make the best use of the favourable demographic composition. To reap the demographic dividend, we need to improve our labour force participation by improving the employability of our labour force through large-scale skilling. At the same time, we need to create employment opportunities for the youth who enter the job market every year.
India’s average age is 29 years, whereas the average age in US, China, France, Germany and Japan is 38, 38, 42, 45 and 48 years, respectively. India, with its huge population, is now in a phase in which its working-age population is rising and the old-age dependency ratio coming down. The world, in contrast, is ageing with an increase in the population of the aged and a drastic reduction in fertility rates. For example, India’s old-age dependency ratio will reach 37 per cent in 2075, whereas the same will be 55.8 per cent in France, 75.3 per cent in Japan, 49.3 per cent in the US, 53 per cent in the UK and 63.1 per cent in Germany. Most countries are experiencing record low fertility rates — for example, 6.77 births per 1,000 people in the case of China — and a shrinking labour force. India is the youngest among the most populous countries in the world.
Most developed countries today have been able to make use of their phase of favourable demographics for higher growth and standard of living. In Asia, China has already set an example of being a superpower by harnessing its demographic dividend from the early Eighties till 2008-2009. China’s early focus on labour-intensive manufacturing and subsequent structural transformation resulted in an almost 10 per cent annual average growth rate over four decades, which is unprecedented. Similarly, major Asian countries — Japan between the mid-50s and late 80s, South Korea, from the early 90s till 2015, Malaysia and Singapore in recent decades — have shown consistent growth by engineering structural transformations to utilise their demographic dividend. They now have a declining working-age population.
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There is a need to create opportunities for the existing labour force and the new entrants into the labour market by improving their productivity. There is a need to shift a major chunk of the 45.5 per cent of the labour force engaged in agriculture with low and negligible labour productivity. As most of the labour force has limited education and skillsets, they can only be used in labour-intensive manufacturing such as textiles, toys, footwear, auto components, sports goods and agricultural processing. Sectors like restaurants, hotels, mining and construction, healthcare and caregiving services have huge potential. For the manufacturing sector to grow, we need an accelerated focus on infrastructure development to reduce trade and transaction costs, trade facilitation measures, a better IPR ecosystem, ease of doing business on the ground, and further rationalisation of labour laws and the taxation system. MSMEs are the backbone of Indian manufacturing. They need support in improving competitiveness, achieving scale, digital infrastructure, technology up-grade and branding to be part of a larger supply chain and the global value chains.
India can only reap the demographic dividend and be a source of labour supply for the world if we make our labour force more productive and efficient through skilling, re-skilling and up-skilling. Further, we have to focus on quality education and health facilities. Simply having the largest labour force is not enough in an environment of fast-changing production processes.
Skill development programmes such as the Jan Shikshan Sansthan, the Pradhan Mantri Kaushal Vikas Yojana and the National Apprenticeship Promotion Scheme are welcome steps. The skill development programmes have succeeded in many parts and have increased human resources supply in various sectors during 2017-22. However, 93 per cent of the employment in India is absorbed by the unorganised sector, where workers are employed in underpaid jobs. We need to upscale and improve their skills. The skill mission has the MSDE Vision 2025 in sight which is set to improve linkages between education and skill, catalyse demand for formal skills and create a high-skilled ecosystem.
With wide-ranging reforms such as Ayushman Bharat and Swachh Bharat Mission, the Centre has ensured health equity to a great extent. Though India is a pharmaceutical giant with a $50 billion industry and is a global leader in vaccines, accounting for about 60 per cent of DPT, BCG and measles vaccines, we have to scale up access and quality health services for the majority of the population. Drug prices should be made affordable and accessible by the government for easy reach. In this context, the Pradhan Mantri Bhartiya Janaushadhi Pariyojana is a welcome step.
Sometimes Indians prefer or are forced to go to private sector hospitals for treatment even though that entails high out-of-pocket expenditure. We still have a long way to go to ensure financial medical protection in terms of universal insurance and adequate medical infrastructure. The focus on quality health infrastructure for all will make a healthy labour force.
The National Education Policy 2020 gives importance to updating knowledge. It also aims at ensuring productive employment opportunities and decent/dignified work as listed in the United Nations Sustainable Development Goals 2030. In 2018, the government launched the Samagra Shiksha programme to provide inclusive, equitable and quality education at all levels of school education. However, there are several instances of schools being non-functional, authorities being reluctant to drive change and students suffering. The delivery of quality education up to higher secondary education to all is imperative for making a productive labour force.
The next 30 years belong to India provided we accelerate our reforms and achieve the desired results of flagship programmes of Skill India, Make in India, Start-up India, and others. It’s time to focus on labour-intensive manufacturing and human capital. India can be the source of the labour force for the rest of the world.
Sahoo is Senior Lead, NITI Aayog and Sen is Senior Research Analyst, Institute of Economic Growth. Views are personal
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First published on: 06-07-2023 at 07:06 IST