Budget @ 2024: Unleashing India's youth capital

With a population of approximately 1.4 billion, India stands as the world's most populous country, surpassing China in 2023. Of this, about 65 percent are between the ages of 15 and 64, making India uniquely positioned to harness the potential of a large working-age population. Despite this demographic advantage, India faces significant challenges in terms of unemployment, particularly among its youth. Addressing this issue requires a distinct set of policy measures aimed at job creation. Simultaneously, for the employed population to be more productive, they need adequate resources, training, and support. 

The expectation from the Union Budget 2024 has been to primarily address this substantial proportion of India’s young population that defines India’s growth story.

The expectation from the Union Budget 2024 has been to primarily address this substantial proportion of India’s young population that defines India’s growth story. With a relatively young population (median age of 28.4 years), India not only gains a competitive advantage in terms of workforce but also has the opportunity to unleash the consumption power of a young population, driving India’s economic growth.

Figure 1: Ratio of Working Age Population to Total Population – India & China

Source: EY India

In fact, Indian consumers, especially the youth, are increasingly embracing credit-driven consumption, reflected in the rising credit uptake from scheduled commercial banks. From 2016-17 to 2021-22, outstanding personal loans from these banks more than doubled, increasing from INR 16.2 trillion to INR 33.85 trillion. This trend is bolstered by the government’s strong push for financial inclusion, from promoting bank accounts and investments to developing digital payments infrastructure. As the financial services sector evolves and expands these solutions, household credit availability will likely increase, further driving consumption growth.

Towards youth capital enhancement

Economic theories underscore that labour markets in an economy are quantified through the number of persons employed, labour days, or hours, and subsequently multiplied by the wage rate. However, a critical element often overlooked is that labour supply is inherently linked to the productivity quotient—which is a function of various factors, including education and health, amongst others. While the numbers are impressive for India, there is a pressing need to enhance labour productivity. The role of India’s Budget 2024, after the Indian general elections this year, is pivotal.

Economic theories underscore that labour markets in an economy are quantified through the number of persons employed, labour days, or hours, and subsequently multiplied by the wage rate.

As one of its key objectives, this Budget aims to fortify India’s human capital, thereby, creating more concrete pathways to boost the country’s growth. Enhancing human capital involves not only increasing the number of skilled workers but also ensuring that their productivity is on par with global standards. This requires a strategic focus on education, skill development, health, and well-being.

Table 1: Key Initiatives in Budget 2024

Source: Author’s own, data from various sources

(Disclaimer: GPT-4o has been used to help summarise the findings from various sources. The information is then edited and placed in the relevant column categories defined by the author.)

Labour mobility and global outlook

As the global workforce evolves, projections indicate that low-income countries will have an influx of two billion new working-age individuals by 2050. Labour mobility emerges as a crucial mechanism to bridge the gap between this potential workforce and employers in need, enhancing global equity and productivity. Facilitating labour mobility can significantly alleviate poverty, as workers migrating to wealthier countries can increase their incomes by six to 15 times.

However, for India to benefit from this dynamic, it must elevate the quality of its labour force to meet global standards. This evolution is essential to produce mutually beneficial outcomes, such as higher output in host countries and increased remittances to India. Current labour mobility systems need to be revised to manage the necessary scale effectively, overcoming obstacles like negative public perceptions and mismatched demand and supply of labour.

However, for India to benefit from this dynamic, it must elevate the quality of its labour force to meet global standards. This evolution is essential to produce mutually beneficial outcomes, such as higher output in host countries and increased remittances to India.

India’s transition from "Vishwa Guru" (global teacher) to "Vishwa Bandhu" (global partner) signals its intent to collaborate more closely with other nations to address labour market demands. By aligning its workforce development strategies with global needs, India can play a pivotal role in the international labour market. The initiatives outlined in Budget 2024 are instrumental in this regard. The Budget's focus on skilling, education, financial support, infrastructure development, and health services aims to create a workforce that is not only large but also highly skilled and productive, capable of meeting global standards and demands.

In conclusion, Budget 2024 presents a comprehensive plan to enhance India’s human capital, addressing both domestic and global economic challenges. This strategic approach not only aims to harness India’s demographic advantage but also positions the country as a significant player in the global labour market, paving the way for sustained economic growth and prosperity.

Soumya Bhowmick is an Associate Fellow at the Observer Research Foundation.

• Indian Economy
• India
• India Budget 2024-2025
• Narendra Modi
• Nirmala Sitharaman
• Union Budget 2024-2025

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.

PREV NEXT