India’s demographic dividend runs out before 2040 when we are set to become an aging society. The dividend is defined as the period in the life of a nation when the share of the working-age population (15–64 years) is rising in the total population and the share of the dependent population is falling. In India, this period began in the early 1980s. It is a period that comes but once in the life of a nation; once it is over, it will never come back.
It is called a dividend because if more Indians join the working age and find productive work—especially in the industry or services sectors—it will raise their incomes beyond what they might have received had they been in agriculture. This is because productivity is higher in manufacturing, construction, and services (and hence contributes to a higher GDP growth rate).
The youth (15–29 years) are getting better educated. But because non-farm jobs are not growing rapidly enough (down from 7.5 mn per year over 2004–12 to 2.9 mn over 2013–19), youth unemployment has been rising.
For secondary graduates, unemployment rose from 11 to 16 per cent between 2011–12 to 2019–20; for graduates, 20 to 34 per cent; for post-graduates, 18 to 32 per cent; for formal vocational, 14 to 23 per cent; for technical education below graduate level, 18 to 29 per cent; and for technical graduates, 20 to 38 per cent. This recovered slightly by 2022.
There are two data of significance: first, as the education level rises, so does the unemployment rate. And second, under the current regime, even before Covid, the youth unemployment rate shot up dramatically. Despite an economic recovery, this has not recovered even post-Covid to the 2012 level. Let us examine each issue.
In industrialised countries with higher levels of education, an individual’s likelihood of being unemployed is lower. But it is the opposite in developing countries, as those with higher levels of education usually come from better-off households. The poorer you are, you can’t afford to remain unemployed. So, those with lower levels of education have lower unemployment. Of course, it also means the quality of such employment is poorer, with lower wages, and no social, job or income security.
Contrary to the government’s claims about how many jobs it generates, the sharp rise in open unemployment, even before Covid began, should have worried the government. Through a significant increase in education investments and faster GDP growth, the previous government had kept youth unemployment rates at a remarkably low 6 per cent in 2012, despite a global economic crisis just a few years earlier. And post-Covid, the youth unemployment rate has not fallen to the 2012 level, instead remaining very elevated—even though it may have fallen a little bit compared to the peak Covid years. The economy grew at 8 per cent per year on average over 2004–2014, and despite a dip in 2008–09, it recovered quickly because of the balanced monetary and fiscal policy stimuli. What is important is that not only did the repo rate drop to negative territory, but the fiscal stimulus was adequate to enable the economy to bounce back within a couple of quarters after the 2008 crisis.
Unfortunately, the Covid lockdown—needlessly sudden, unnecessarily strict, and national in scope when 80 per cent of cases even in July 2020 were in nine international airport cities—caused a contraction of the economy for the first time in half a century. A recklessly tight fiscal policy stimulus addressed it, and the economy contracted 6.6 per cent in FY 2020–21. Youth unemployment soared. Although it improved in 2022, it is still double what it was ten years ago. Total unemployment (all ages) was 10 mn in 2012 but rose to 30 mn by 2018–19. After that, it further increased to about 38 mn in 2022.
In this situation, the government feels the need to pretend that it is generating government jobs: hence the need to conduct the much-advertised ‘job melas’ and the PM giving away appointment letters for government jobs (where the appointment has already been notified!). Yet the reality of government jobs is the opposite.
Despite the economy registering the highest levels of unemployment, nearly 10 lakh sanctioned Central government jobs are vacant. Additionally, by 2022, the Union government reduced the number of sanctioned posts to its lowest levels in three years. However, the government announced with fanfare in October 2022 that it would provide 10 lakh government jobs.
According to the Annual Report on Pay & Allowances, for March 2022, the total sanctioned strength of Central government civilian regular employees (ex. Union Territories) was 3.977 mn, as against 4.035 mn in March 2021. At the same time, the number of persons in positions came down to 3.013 mn from 3.056 mn. The number of sanctioned posts is the lowest in three years, and that of persons in civilian jobs is the lowest since 2010.
Almost 92 per cent of the total workforce in the Central government is accounted for by five major ministries—Railways, Defence (Civil), Home Affairs (mainly paramilitary forces), Posts, and Revenue. The vacancies were over 3 lakh posts in Railways, 2.32 lakh in Defence (Civil), 1.2 lakh in Home Affairs, over 1 lakh in Posts, and 74,000 vacancies in Revenue. The vacancies in the Revenue department are particularly egregious because Asian Development Bank’s cross-Asia data shows that India is among the countries that have the lowest number of revenue officials per thousand of the workforce and also the total population. If the tax revenue to GDP ratio has not risen over 30 years between 1991 and 2020, despite per capita incomes having risen by over four times, why should we be surprised that the government is unable to provide the basic services a growing population expects and deserves?
Meanwhile, our youth should have a legitimate concern about the future of jobs for a growing share of the young in the working-age population, given that India’s labour force participation rate is among the lowest in the developing world. And all citizens of India should be equally worried about the so-called demographic dividend becoming a nightmare—despite India having become the world’s fifth-largest economy and fastest-growing major economy.
Santosh Mehrotra
Visiting professor of Economics, Centre for Development Studies, University of Bath, UK
(santoshmeh@gmail.com)