The curious case of rising working age population and falling labour force in India

By: | Published: March 1, 2019 12:01 PM

The World Bank in a report released this week suggested that India focus on increasing exports. This can lead to better jobs and higher wages in India, including more formal sector employment for youth and women, World Bank said in the report.

India’s working-age population will grow to over a billion people by 2050, according to the Regional Human Development Report of the United Nations Development Programme (UNDP). However, rising joblessness is a concern as the economy needs to prevent its demographic dividend turning into demographic disaster.

The World Bank in a report released this week suggested that India focus on increasing exports. This can lead to better jobs and higher wages in India, including more formal sector employment for youth and women, World Bank said in the report.

An analysis of the available data shows that the labour force in the country is shrinking, which is an unusual phenomenon for country with growing working age population.

Labour force in a country is the sum of the employed and those who are seeking employment. CEIC data show that during 2006-17, labour force participation (LFP) has been continuously declining in India. According to it, the LFP declined from 59.499 per cent to 53.788 during this period.

Demonetisation killed labour?

Speaking of the impact of demonetisation, chief executive of Centre for Monitoring Indian Economy (CMIE) Mahesh Vyas had earlier told The Indian Express that while the job losses could have been at least 3.5 million due to note ban, the reduction in the labour force was to the tune of 15 million. That means people who were unemployed just before demonetisation stopped even looking for jobs and the labour force shrank.

The falling LFP in a economy with growing working age population is a matter of serious concern for two possible reasons. First, the government has actually not been able to create sufficient employment opportunities. Another probable reason which might have influenced the assessment is the lack of reliable data.

Modi government has planned to junk the NSSO data and, instead, use findings of the Labour Bureau survey on jobs created under the Micro Units Development and Refinance Agency (MUDRA) scheme. The announcement has come after a leaked report revealed that unemployment in India had hit a 40-year-high of 6.1 per cent in 2017-18 according to the draft report of National Sample Survey, and Centre for Monitoring Indian Economy recorded job loss of 11 million people in 2018.

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Madan Sabnavis, Chief Economist of CARE Ratings, recently said to Financial Express Online that though demonetisation had an adverse impact on the MSME and agriculture sector for a short period of time initially, those units are now getting back on track.

He also said that government is just a facilitator, but in the end, the growth has to come from the private sector which require economic buoyancy. “States and PSUs being separate entities, have to push on their side. But the private sector has to employ more which can be done only if there is real growth in the economy,” he said.

He had earlier emphasised on the need for skill development, especially for weaker section to make them better equipped to carry out the jobs.

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