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For the better part of a decade, India has been touted as the next big economic growth story after China, thanks to its relatively young population: As of this year, the country’s median age will be 28, versus 37 in China and the US. The resulting “demographic dividend”—the potential that comes from a nation’s working-age population being larger than its non-working-age population—was expected to give India a competitive edge.
Instead, the country has been in the throes of an unemployment crisis.
Since India’s stellar growth was derailed by the 2008 recession, the country has struggled to get back on track: Its fiscal deficit has not fully recovered, and political turmoil has fueled widespread economic discontent, even during the pre-pandemic days of GDP growth.
In the latter half of the decade, the government also made some hasty and unpopular decisions, including demonetizing 500- and 1,000-rupee bills without warning in 2016, and introducing a goods and services tax a year later. Together, the two moves crippled the poor and created a slump in corporate investment, and therefore jobs. The public sector did little to help: Several employment-oriented programs run by the government have been subject to budget cuts in recent years, or shelved entirely.
Then came covid, which strained infrastructure and existing workforces, and brought disruption leading to long-term job losses. In 2020, India’s unemployment rate topped 7%, its highest level in 29 years.
Today, the country’s recovery is both trickier and more important than ever. In the absence of conducive economic, social, and political conditions, India risks “creating a young and angry population, and with it conditions for social unrest and economic disaster,” investment bank Espirito Santo warned back in 2013. That risk is higher now. India will need to focus on making sure its demographic dividend doesn’t become a demographic demon.
- India has an education problem. A cocktail of low-quality instructors, outdated curricula, inadequate infrastructure, and time-consuming certification processes have kept the country’s education system tied up in knots (pdf). As a result, skilled workers are rare: Some 13 million youngsters join the workforce each year, but only one in 10 graduates are considered fit for jobs.
- India has an inclusion problem. The country’s size and diversity mean there are barriers ranging from language to geographic immobility. Another key hurdle is social mobility, especially for women and those belonging to oppressed castes. Cultural barriers and safety concerns often hinder women’s educational and professional development; those who do enter the workforce battle biases during recruitment and on the job.
- India has a hiring problem. The recruitment process can be haphazard, riddled with corruption, and nepotistic, making it difficult to navigate without the right contacts and recommendations. Job-seekers often end up working in roles they are overqualified for just to get some security, and to pay off student loans.
Words of wisdom
“Knowledge-based industries have become more prominent, and jobs that require a higher level of skill have gone up in demand. While this [means] the perception of India as a destination for higher quality talent has become more important than [its perception as] a destination for labor arbitrage, it [also means] there are greater expectations of skilled resources. The education and training industry has struggled to keep pace with this, and there has been a clear case of an inverse relationship between quality of talent and availability.” —Anandorup Ghose, partner at Deloitte India
What to watch for next
- Evolving corporate policies… with the caveat that it will be hard to find one-size-fits-all solutions. For example, we know that blind recruitment doesn’t solve caste discrimination… but what does? Even well-meaning shifts, like the move to extend maternity leave from 12 weeks to 26 weeks, can backfire during hiring.
- Better tools for job applicants. There is a great deal of information asymmetry in the current hiring process—between job-seekers and employers, between educational institutes and job providers, between public- and private-sector stakeholders. Those disconnects could be opportunities.
- More data. When it comes to informal workers in particular, policymakers lack credible numbers to inform tailored policies. In 2021, the government started registering and tracking the workforce, but data collection has been splintered and sparse. All eyes are also on the elusive national employment policy, which promises to boost jobs in sectors ravaged by the pandemic.
- Gig economy reforms. Currently responsible for 8 million jobs, India’s gig economy has the potential to create 90 million in the next decade, but people taking those jobs remain overworked and underpaid. Besides regulation around hours and compensation, traditional employer benefits like social security and insurance will have to keep pace.
- Omicron. India has reported thousands of cases of the new variant; Delhi and Mumbai were put under curfew, and the impact on employment remains to be seen. The country’s second wave in April and May pushed the unemployment rate back up after the economy had made strides to recover.
One 📉 thing
Unemployment and underemployment aren’t the only challenges: In the worst cases, job seekers give up and exit the labor force altogether. Nothing exposed that risk more acutely than the pandemic.
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Best wishes for a hopeful weekend,
—Ananya Bhattacharya, Quartz India reporter (waiting for “vacationer” to count as a job)
—Kira Bindrim, executive editor (also wasted her youth)