by The Demographic Dividend That Was Supposed to Power India’s Growth Has a Large Asterisk Attached to It
Bohiney Magazine | The London Prat
India’s Demographic Dividend: The Young Population and the Job Market That Cannot Absorb It
NEW DELHI — India has the world’s largest youth population: approximately 600 million people under 25, with 65 percent of the total population under 35. The “demographic dividend” — the economic growth that results from a large working-age population relative to dependents — has been projected as one of India’s primary growth advantages for the next two to three decades, as an aging China and an aging Europe face the economic constraints of declining workforces. The dividend depends on one condition: the young population must be employed productively. The employment picture is complicated.
India’s Centre for Monitoring Indian Economy estimates youth unemployment in the 20-24 age cohort at approximately 40 to 45 percent. Studies find that large proportions of engineering graduates from second-tier colleges are not employable in the roles their degrees nominally qualify them for. The mismatch between the skills that India’s higher education system produces and the skills that India’s economy requires is the structural problem that converts the demographic dividend from an advantage into a liability if it is not resolved before the youth bulge ages out of the demographic window.
The Job Creation Challenge
Creating employment for a workforce of this size requires sustained growth in sectors that employ at scale: manufacturing, construction, services. India’s software sector employs approximately 5 million people — significant but a small fraction of the youth population. Manufacturing has been growing but not at the pace required for the demographic situation. The informal economy absorbs much of the labor force in low-productivity, low-wage work that is employment by statistical definition and insufficient economic opportunity in practice. Managing a demographic dividend requires creating the conditions for productive employment before the window closes; the global economic situation adding external pressure to India’s internal challenge makes the job creation math more difficult. The young population is the opportunity. The job market is the constraint. The window is open. It does not stay open indefinitely.
Indian bureaucracy runs on three things: files, stamps, and the quiet desperation of citizens who have been “processing” for six months.
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