Leveraging India’s demographic dividend through education, skill development, and job creation can boost economic growth
With a GDP growth rate of 7.8 percent in Q1 of FY23-24 ( the fastest growing nation in the G20), India is expected to surpass its US$ 5 trillion economy goal by 2026-27. The country stands at a pivotal juncture in its economic evolution, where a dynamic interplay of factors reshapes its economic landscape and demographic structure.
Several key factors mark India's current economic scenario. With respect to GDP growth, projections from the Economic Survey 2022-23 indicate that India is expected to experience growth ranging from 6.0 percent to 6.8 percent in the fiscal year 2023-24, with a baseline GDP growth of 6.5 percent in real terms. However, inflation has been a persistent concern in India's economy. Efforts to manage inflation have been evident in recent fiscal and monetary policies, including the central bank's rise in key interest rates in 2022 to control inflation. India has also been actively implementing fiscal policies to address economic challenges.
With respect to GDP growth, projections from the Economic Survey 2022-23 indicate that India is expected to experience growth ranging from 6.0 percent to 6.8 percent in the fiscal year 2023-24, with a baseline GDP growth of 6.5 percent in real terms.
The manufacturing sector holds the promise of integration into Global Value Chains (GVCs) but faces the challenge of balancing scale with labour requirements. In this context, it is imperative to explore how India can leverage these opportunities and address the associated challenges to ensure sustainable economic growth and increased employment opportunities for its burgeoning population.
The service sector in India, while employing a lower percentage of the population compared to its East Asian counterparts, has been consistently contributing to the national Gross Value Added (GVA). The construction industry, too, has shown remarkable promise in the industrial sector, with its workforce steadily expanding over the past two decades. The banking sector, employing 1.6 million individuals, sees a significant portion (49.1 percent) working in the public sector. Furthermore, the emergence of gig workers, currently constituting 1.5 percent of the workforce, is expected to increase their contribution to total employment to 4.1 percent by 2029-30.
Indian domestic manufacturing has a golden opportunity to strengthen its position within GVCs, thereby increasing the scale of its operations. Nevertheless, the manufacturing sector is poised to become more capital-intensive, leading to an increase in the capital-output ratio and, consequently, reduced demand for labour. Striking a balance between scaling up operations and managing the surplus labour force in the manufacturing sector will be a critical challenge in the coming decade.
The emergence of gig workers, currently constituting 1.5 percent of the workforce, is expected to increase their contribution to total employment to 4.1 percent by 2029-30.
The labour-intensive sub-sectors within manufacturing can play a pivotal role in achieving a net increase in productivity during this transition. India's export basket, which includes a growing share of electronics, automobiles, iron, and steel, signifies an enhanced capacity for manufacturing and competitive refining services. The labour-intensive export sectors, such as toys, textiles, footwear, and furniture, hold significant potential to generate domestic jobs and should be prioritised for growth and development.
In India, the symbiotic relationship between government initiatives and policies, alongside a vibrant and dynamic workforce, can pave the way for a conducive environment for job creation. As the nation progresses on its economic development journey, these opportunity sectors are poised to play a pivotal role in shaping India's employment landscape, catalysed by government initiatives' strategic support and interventions. A few key government initiatives include:
The Digital India programme launched in 2015 is a comprehensive government initiative to transform India into a knowledge economy. Through Digital Push Initiatives, it promotes digital literacy, expands digital infrastructure, and enhances e-government services, fostering a digital ecosystem. Under the broad umbrella of Digital India, the government launched the India BPO Promotion Scheme and the North-East BPO Promotion Scheme to generate employment in Information Technology and Information Technology-enabled services in small cities and has already created around 52,000 jobs.
The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is a pivotal government initiative in India, launched in 2015, focused on skill development. It offers free, short-duration skill training programs and provides monetary incentives upon skill certification, aligning workforce skills with industry requirements and making individuals more employable. PMKVY plays a crucial role in addressing the employability gap and contributes significantly to India's national skill development efforts by improving employability and empowering participants to access better job opportunities
The Startup India Initiative, launched in 2016, aimed to support startups by simplifying registration, offering tax exemptions, and creating a dedicated fund. It streamlined the regulatory environment, reducing obstacles for startups. Enabling one of the largest startup ecosystems, India has created over 900 thousand jobs from the Department for Promotion of Industry and Internal Trade recognised startups.
Launched in 2020, India's Production-Linked Incentive (PLI) scheme is a significant initiative to bolster manufacturing in strategically important sectors. Its core objective is to foster domestic manufacturing and generate employment across various sectors such as electronics, pharmaceuticals, automobiles, textiles, solar, and telecommunications. Moreover, it strives to make Indian manufacturing globally competitive by improving cost competitiveness, adhering to World Trade Organisation (WTO) commitments, and promoting exports. The PLI scheme brought in a significant 76 percent increase in FDI in the manufacturing sector in 2021-22, and has the potential to create 6 million jobs in five years starting from 2021-22.
The PM Vishwakarma Yojana launched in September 2023 is a government initiative to provide financial assistance and skill development support to traditional artisans and craftsmen in various trades, such as blacksmiths, goldsmiths, potters, carpenters, and sculptors. Eligible beneficiaries can access loans of up to INR 300 thousand without collateral, enabling them to start or expand their businesses. By empowering traditional artisans and promoting their skills, this initiative contributes to preserving traditional industries and facilitates entrepreneurship, ultimately increasing self-employment and other livelihood opportunities in India.
As of January 2023, India has attained the status of the world's most populous nation, surpassing China, with a population of 1.417 billion compared to China's 1.412 billion. This demographic shift has brought international attention to New Delhi's ability to harness its extensive human resources, particularly its young population, to strengthen its domestic economy and establish itself as a prominent global presence.
With more than 52 percent of its inhabitants below the age of 30 and a notable internet penetration rate of 43 percent, India possesses substantial potential. Finally, while the population growth rate has slowed, the age distribution presents opportunities and challenges. Leveraging this demographic dividend through education, skill development, and job creation can boost economic growth, but it also necessitates effective resource management and opportunity provision for the growing workforce.
Soumya Bhowmick is an Associate Fellow at the Centre for New Economic Diplomacy Observer Research Foundation
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Soumya Bhowmick is an Associate Fellow at the Centre for New Economic Diplomacy at the Observer Research Foundation. His research focuses on sustainable development and ...
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