The job riddle? India’s demographic profile can solve it

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Jayan Jose Thomas

The employment crisis India faces is closely linked to the demographic transition currently under way in the country.

India has experienced very sharp increases in its working age population (aged 15-59 years) during the 2000s and the 2010s. This segment has grown at the rate of 13 million a year during these two decades.

Consider China’s case in comparison whose working-age population grew fastest -- at the rate of 17.1 million a year -- during the 1980s. By the late 1970s itself, China had achieved some degree of success in ensuring health and education for its rural population and reduction in rural inequality.

During the 1980s and the early 1990s, agricultural growth picked up and township and village enterprises (TVEs) created close to a hundred million jobs in the Chinese countryside. Thus, China had begun to take advantage of its demographic dividend even before Chinese manufacturing acquired its global character by the mid-1990s.

India has lagged China not just in fertility decline. The country has had much less success in reducing rural inequality, ensuring mass education and providing public health, and kicking off agricultural production and value addition.

Evidence from official job surveys in India shows that, from the 2000s onwards, workers have been exiting the agricultural sector on account of a number of ‘push’ and ‘pull’ factors. Enrolment in educational institutions has increased in the country, but there has been no corresponding improvement in the quality of education offered or the skills and knowledge acquired by the youth.

At the same time, it is expected that the size of the working-age population in India will continue getting bigger until 2050 while that of China has started to shrink from the 2010s onwards.

At the core of the employment problem in India is the question whether the country will be able create new and decent jobs at a fast enough rate. Fast enough to employ those freshly entering the working-age cohort and those exiting agriculture, and at the same time, meeting the rising job aspirations of the young.

Our analysis here is based on data on population from the Census of India and employment data from the National Sample Surveys conducted during 2004-05 and 2011-12, and the Periodic Labour Force Survey carried out during 2017-18.

During 2005-18, India’s population in the age group of 15-59 years went up by 216.6 million (from 636.6 million to 853.2 million) and the size of the workforce attached to agriculture and allied activities declined by 61.5 million (from 258.8 million to 197.3 million). However, during the same period, job opportunities in the non-agricultural sectors -- that is, in industry, construction, and services combined -- increased by only 75.2 million (from 198.9 million to 274.1 million).

In other words, the increase in job opportunities in the non-agricultural sectors was not adequate to absorb the rising number of people in the working-age years and those exiting agriculture. As a result, workers as proportion of population in the age group of 15-59 years declined in India from 64.5 percent in 2005 to 49.3 percent in 2018. This decline was especially sharp in the case of females (to 23 percent only in 2018) than males (to 74.5 percent in 2018).

The record of employment creation in India has been particularly slow after 2012. Between 2005 and 2012, the incremental employment created in India in industry, construction and services combined was 49.1 million, which was more than the reduction in the size of employment in agriculture and allied activities (by 34.3 million).

On the other hand, during 2012-18, new employment created in industry, construction and services combined (26.1 million) was less than the employment decline in agriculture and allied activities (27.3 million).

Construction was the main source of new employment in India during 2005-12. However, the growth of construction jobs slowed sharply after 2012. The size of the manufacturing workforce in India fell by one million during 2012-18.

For the Indian economy to be able to reap the benefits of having a young population, we need to quickly reorient the country’s policies in a number of areas, importantly agriculture, industry, education and skills. India will enjoy the demographic window of opportunity only for the next two decades or so after which the country’s population will gradually start growing old.

Jayan Jose Thomas teaches Economics at the Indian Institute of Technology, Delhi. Views are personal.