'India Has Only 15 More Years Left...'

'After that the burdens of an ageing population will be upon us, and the share of working age population will shrink.'

We talk about India as one of the youngest countries in the world with 65% of the population below the age of 35 with a median age of 28 years.

But the youngest countries in the world are in Africa with a median age of just 14.5. Countries like Uganda, Angola and Mali have a median age of just 16 years.

In the Middle East and the Asia-Pacific regions, the youngest countries have median ages of around 20-22 years.

The youngest countries in Europe are Kosovo at a median age of 32 years, Albania at 36 years and Iceland at 38 years.

The oldest countries in the world like Japan, Italy, Spain and Germany have median ages between 47 and 50 years!

In the case of India, has India been able to take advantage of its demographic dividend?

According to many economists, NO.

Santosh Mehrotra, the well-known development economist, writes about this and more in his latest book India Out of Work: Rethinking India's Growth Story (co-authored with Jajati Parida).

"If policies change, and more productive jobs in the non-farm sector were created for workers who want to leave agriculture to construction, for semi-skilled workers to manufacturing especially in labour-intensive manufacturing, and so on, then more jobs can in fact be generated, more than the economy is currently generating," Professor Mehrotra tells Rediff's Shobha Warrier.

In your book, India Out of Work: Rethinking India's growth story, you say that India's demographic dividend is approaching a critical turning point. How long do you think it will remain a dividend?

Only till 2040.

In fact, in chapter 2 itself we estimate that it's ending by 2040. That is, even after you take into account the fact that the Hindi belt states have not completely achieved a TFR (Total Fertility Rate) of replacement rate. They are very close to it.

There are only 2-3 states -- of course they are big states -- UP, Bihar, Jharkhand and they are at 2.4, 2.5 and 2.9 according to the latest National Family Health Survey of TFR.

So, even when you take that into account for the country as a whole, we are expecting that the working age population will begin to shrink, and the share of the elderly will rise quite significantly.

The total population will not shrink, only the working age population will shrink. It is inevitable.

The fact is that the southern states, and Punjab and Haryana and Kashmir and many other states in the west of India have achieved lower population stabilisation 20-25 years ago.

The other point is that half of our working age population is already over the age of 45. So, in 15 years, they will be very close to retirement age.

When you take these factors into account, it clearly shows that we have only 15 more years left.

After that the burdens of an ageing population will be upon us, and the share of working age population will shrink.

Therefore, it's absolutely critical that we have to create roughly 12 million jobs per annum. Remember non-farm jobs. That's what we estimate.

You write in your book that around 80 million people moved back to agriculture between 2020 and 2024.
Has it got anything to do with demonetisation, the pandemic, and the faulty implementation of the GST resulting in the closure of so many MSMEs?

It is very much to do with demonetisation.

The process begins with the policy-induced shock to the economy of demonetisation, which very adversely impacted MSMEs. And they went into a viral decline.

Six months after the demonetisation process ended, in the middle of 2017, the government introduced a poorly designed and a badly implemented GST.

And that was yet another shock to the MSMEs and to the economy as a whole because the growth rate fell all the way till the beginning of 2020.

At the beginning of 2020 came Covid. People think that Covid alone was responsible for the very sharp decline in the fortunes of the MSMEs. But that's not the case. It was a process that had begun earlier.

And more importantly, it was not Covid necessarily that adversely impacted the economy.

It was the fact that Covid was extremely badly managed.

Let me explain. In the fiscal year 2021, the global economy contracted by 3.1% but India's economy contracted by nearly twice as much, by 5.8%. Why should that have been the case?

There were some economies, not so far from ours, which actually did not contract at all. Bangladesh did not. China did not.

So, it was a very bad management of the health crisis in India.

No one asked us to impose a nationwide extremely strict lockdown at four hours' notice on the 21st of March 2020.

After all, the government itself was saying at that time that there were only 600 cases in the country. And those cases themselves were confined to nine cities in the country, which have international airports.

So, there was absolutely no reason to impose a nationwide lockdown. It could have been done gradually. It could have been done selectively.

In contrast, it was decided in New Delhi by the prime minister's office to impose this shock of a lockdown.

You may recall how much difficulty our migrant workers suffered.

Now, that was not the only thing. Millions of jobs were lost.

So, workers went back to agriculture. There were 35 million workers who got added to agriculture that year alone.

That was the year of the first Covid wave.

The second Covid wave came in 2021. That was the Delta wave, which was much worse.

And then the third wave came at the beginning of 2022.

So, all these combined had the continuous impact of many workers returning to their villages to the arms of safety.

The result was, many of these same workers now were forced to be in agriculture, when they had no desire to be. They had either lost their jobs or the wages had fallen.

Also, women who had been leaving agriculture, rejoined agriculture. That was a bit of a problem.

So, for these reasons together, 80 million workers got added to agriculture.

The situation worsened for the MSMEs and jobs were lost in very large numbers.

That's not the only thing. There is another dimension of how Covid was managed.

The fiscal and the monetary policy response was not adequately well designed, and this is something we discussed in the book.

We also discuss the contraction of the economy, and the slowdown of the economy.

It was much weaker than most other emerging market economies. India's contraction was deeper.

For these reasons, the MSMEs suffered and jobs were lost.

A country like China was able to take advantage of its demographic dividend. But India has not been able to.
Is it because one third of our youth population is NEET (Not in Education, Employment and Training)?
Is it not the State's failure to not just create jobs but produce people who are not qualified enough to take jobs?

Well, firstly, let's not think we cannot still take advantage. After all, 15 more years are left.

So, if policies change, and more productive jobs in the non-farm sector were created for workers who want to leave agriculture to construction, for semi-skilled workers to manufacturing especially in labour-intensive manufacturing, and so on, then more jobs can in fact be generated, more than the economy is currently generating.

But you're right, it is a combination of two sets of factors. One is the demand factor and the other is the supply factor.

The demand factor is the one of job creation being less than what is required.

That is because we have about 10 million youth graduating each year from our colleges and universities, including one-and-a-half million engineers. And that's a very large number.

All this has happened because our education system saw massification, with secondary enrolment became pretty universal: From 58% secondary enrolment in 2010 to 85% secondary enrolment in 1985.

That led to upward pressure. Higher education enrolment also shot up to about 27% to 29%, which is where it is today, on a rising base of the cohort.

For these reasons, the number of entrants looking for work has also gone up.

Because of this massification, the quality of education fell dramatically.

It is a problem when you get very rapid, too quick massification.

You can then see that employability suffers.

Even the Skills Development Programmes, expanded by the government were expanded in a very poorly designed, very poorly planned way so that it was not preparing the workers enough for work in the formal sector. They still ended up joining the unorganised sector.

However, when you say that government was not able to create jobs, I would say the government is not supposed to create so many jobs.

The government can only create jobs within its own organisations in state governments, in central government, or in the public sector undertaking, or in the public sector banks, or in the railways, or in the army, or in the central police forces or in the paramilitary forces...

All these account for a relatively small number of jobs, not more than about 20 million jobs.

Firstly, the government jobs stopped growing, which is itself a problem. We need more doctors, more nurses, more teachers, more policemen in every state. Yet, sanctioned posts are not being filled.

IMAGE: Professor Santosh Mehrotra

The private sector complains that those who come out of colleges and universities into the workforce are not qualified enough...

That is because the education system has got massified, and it has not been generating young people who are well educated and trained. That's not the only problem.

The private sector can complain till the cows come home. But then, they cannot continue to complain, and yet not do anything about it themselves.

The problem is that the private sector itself has hardly done anything to do an enterprise-based training. The private sector needs to engage in scaling and improving them and upgrading the skills of the young people.

Even today the private sector has not enough confidence in investing...

Yes, that is a problem we have discussed at some length in the book.

That private investment is not grown to the levels that prevailed earlier. By earlier, I mean between the year 2003-2004 when we were growing at 7.8% or nearly 8% per annum. Then the investment to GDP ratio was between 32% and 38%.

We show that in a chapter called 'is it a structural crisis?'

But in the last 10 or 12 years, unfortunately, the investment to GDP ratio has plummeted to the 32% range.

It means the highest point that has been achieved in the last 10 years, is just the bottom end of the threshold of what was achieved when we were growing fast between 2003-2004.

That is the reason why the GDP growth rate has fallen. And also, the main reason why jobs are not growing.

It's not just the growth rate that has fallen; it's also the growth is not labour-intensive enough.

What we've seen is that the labour-intensive jobs in fact, fell in absolute terms. That is because the policies were inappropriate.

• Part II: 'Why Have The Number Of Jobs Created Fallen?'

Feature Presentation: Aslam Hunani/Rediff