For India there are strong growth indicators. The World Bank has revised its projections for GDP growth to 7.5 percent for 2024, a whopping 1.2 percent above its earlier forecast. Coupled with a projection of 6.1 percent growth for 2025, India comes away as the fastest growing economy in South Asia over the next two years.
In tackling poverty too, NITI Aayog numbers indicate that nearly 25 crore people were lifted up from poverty since 2014, with ‘multidimensional’ poverty declining to 11.3 percent, from 29 percent a decade ago in 2014.
The Achilles heel however appears to be the growing unemployment and inequality. These speed bumps may cripple the country’s transformation into a fully developed economy. In this context, a new World Bank report ‘Jobs for Resilience’,has been highlighted by the Financial Times. The daily points out the target of becoming a developed nation by 2047 – underlined by Prime Minister Narendra Modi – may remain a ‘distant dream’ without reforms to boost employment.
No-reform scenario
The World Bank’s chief economist and author of the report, Franziska Ohnsorge,is quoted calling India a “no-reform scenario” where employment growth was exceptionally weak compared to other emerging markets and developing economies.
The report says the employment ratio in India declined by more than in any other south Asian country in the 2000-2022 period, with the exception of Nepal. ‘Employment ratio’ refers to the labour force currently employed against the total working-age population of a region.
“Employment growth has not kept pace with working-age population growth. The region (South Asia) employs only 59 percent of its working-age population compared with 70 percent in other emerging market and developing economies,” says the foreword of the report.
Calling it a “missed opportunity”, Ohnsorge said: “It’s almost like the demographic dividend is being squandered.” She was referring to the large youthful working age population that is a bonus for a country as compared to a very large ageing population which is non-productive and a drag on the economy.
It is indeed startling to learn from the UN’s International Labour Organisation (ILO), from its India Employment Report 2024, that the youths in the total unemployed pool constituted a massive 83 percent. On the other hand, the size of the elderly is set to rise to over 20 percent of the population by 2050. The point is India has a relatively small window to reap the ‘demographic dividend’ before it enters the cycle of a ageing population.
A major reason for the slow growth in employment is the lack of investment by the private sector. In his foreword to the Resilience in Jobs’ report, Marting Raiser, VP-South Asia Region, points out: “More than elsewhere, growth momentum in South Asia has been driven by the public sector while private investment growth has been weak. Without a thriving private sector, job creation is likely to continue on a weaker path than in other emerging market and developing economies.”
The latest data on private equity deals in India corroborates this. Private equity (PE) investments have fallen to a 6-year low at $24.2 billion in the financial year ending March 2024.Compared to the previous year 2022-23, investments through PE deals are down 47 percent compared to FY23, when deals worth $45.8 billion were signed. Among other reasons, geopolitical uncertainties and volatile conditions had reduced liquidity in the international markets.
Gig economy boom?
The World Bank Report, however, seems to suggest the shift to services and the growth of a large talent pool could provide the employment boost required for the country to turn the corner. “In the services sector, India’s large, well-educated, young, and English-speaking workforce, coupled with a reliable digital infrastructure, has turned the country into a global leader in computer services and business process outsourcing and a global hub for medical services.”
Anecdotal data from the hiring platform, Foundit, seems to support this view that India is witnessing a steep rise in ‘gig employment’ – a free market system in which temporary positions are common and organizations hire independent workers for short-term commitments. There was a rise of 184 percent in white-collar gig jobs this year compared to the previous year says Foundit.
However, casual employment cannot make up for sustained, long-term jobs, and current ground reports seem to point in the opposite direction. The post pandemic period has seen a crumbling of the start-up bastions especially in the edu-tech sector as risk investment has dried up.
These are some pointers that cannot be ignored. The crisis-ridden learning portal Byju’s has recently shed 2,000 employees, as it struggles to pay salaries.Earlier, Paytm, hobbled by directions by the Reserve Bank to cease key operations, has been forced to retrench 20 percent of its staff at its banking unit.
Significantly, 36 percent of IIT Bombay’s 2,000 graduates awaiting placements were not absorbed this year, and are still on the lookout for jobs. This is a slight increase of about 3 percent over the previous year. Though the IIT management has denied the findings of a Hindustan Times survey, there is no denying the job market for even the best equipped has turned sluggish.