India must overcome the ‘jobs challenge’ to become a higher income country


“If India’s development trajectory is to emerge faster, higher and stronger, government policies and businesses and markets operating within the environment defined by the former are of great importance,” said the President of the EAC-PM Debroy.

The Economic Advisory Council to the Prime Minister (EAC-PM) has outlined a plan to help India achieve high-income country status by 2047 through sectoral and regional policies in the “Roadmap for Competitiveness for India @ 100”, published on Tuesday. .

The roadmap is based on a framework developed by Harvard Business School professor Michael E Porter. The approach promotes the idea of ​​productivity as a driver of sustainable prosperity.

“If India’s development trajectory is to emerge faster, higher and stronger, government policies and businesses and markets operating within the environment defined by the former are of great importance,” said the President of the EAC-PM Debroy.

He mentioned that the report recommends what India should achieve in 25 years by the time we reach a per capita income of $10,000 in 2047, falling into the top income bracket.

One of the major challenges India faces in achieving its goal of falling into the upper income bracket, according to the roadmap presented by Dr. Christian Ketels of Harvard Business School, is the employment challenge.

“If we look at demographics, there are almost 10 million new entrants into the labor market each year, but employment opportunities have declined,” Ketels said.

The roadmap also lists ways to address the employment challenge. But we will explain that later. Let’s look at the problems first.

The employment challenge

According to data from the Monitoring Center of Indian Economy (CMIE), unemployment in India stood at 8.1% in February 2022. According to the Confederation of Indian Industry (CII) report, India had 900 million people of working age in 2020 and will add more than 100 million by 2030, which means an average increase of 10 million people each year.

According to data from the Ministry of Statistics and Program Implementation, the labor force participation rate – measures the number of people aged 15 and over who are employed and unemployed – in India stood at 47 .3% in the first quarter of 2022 and has either remained flat or declined further since July 2019.

Apart from this, the Competitiveness Report also mentions that existing jobs are, to a very large extent, informal and irregular. This is a challenge because these jobs do not provide the opportunity to build human capital and improve performance over time. They also offer lower incentives to invest in physical and other assets that would lead to higher productivity.

Decreasing female labor force

Another challenge facing India is the number of women in the labor force. The All-India Female Labor Force Participation Rate (LFPR) rose from 2.3% in 2021 to 25.1% from 22.8% a year ago, it said. the annual report of the Periodic Labor Force Survey (PLFS) for July 2020-June. 2021 released in June.

Despite the increase, the number is still far below that of high-income countries. World Bank data shows that India’s female labor force participation rate has fallen by nearly 30% over the past 20 years.

“This pattern is not unusual in South Asia, but India stands out for the scale of the challenge that exists. This is not the only reason for India’s low overall labor force participation rate; much of the recent decline has occurred among working-age men. But it is an important factor, and in other countries the increasing participation of women has been a key driver of growth,” Ketels said.

According to a recent study by Bloomberg, if India succeeds in closing the employment gap between men and women, the country’s gross domestic product (GDP) could increase by 2050 to around $6 trillion. .

“Only 17% of GDP in India comes from women, which is alarming given that the gross enrollment rate of women in higher education has surpassed women,” said Monisha Banerjee, CEO of Anudip Foundation.

She added that responsibility for unpaid care work – all unpaid work provided within households for members – lack of access to mobility for women and economic factors are reasons that prevent women from participate more in the labor force.

What to do to meet the challenge?

The Competitiveness Roadmap for India@100 report proposes the “4S” model for India to overcome its challenges and move towards a higher income country. The model includes social, solid, sustainable and shared growth.

“India needs to focus on creating competitive jobs for those who are not part of the active labor market. Jobs that provide pathways to higher productivity enable individuals to earn a living and become self-sufficient,” Ketels said.

“The immediate priority is to identify sectors that can provide entry opportunities for those who are not currently part of the labor force, particularly low-skilled workers and women. In these sectors, the focus must be on policy actions that can enable growth to create new jobs and modernization to create better jobs,” he said.

The report also mentions that India should focus on creating competitive jobs, as competitive jobs earn their wages in the market, support the livelihoods of employees and provide opportunities for capacity and productivity development to the over time.

To tackle women’s labor issues, the report suggests India should strive for better social policies. On this, Banerjee mentioned that for better participation of women in the labor market, India must provide women with digital literacy, a flexible business ecosystem for women to manage unpaid care work and paid work. , societal and cultural changes and strong promotion of rural entrepreneurship.

Leave a Reply