The Indian economy is undoubtedly undergoing a paradigm shift defined by changing global economic and political environment.
The Indian economy is undoubtedly undergoing a paradigm shift defined by changing global economic and political environment. Importantly, the economy is growing towards increased digitisation and automation, which is likely to have implications for the expanding population. To be clear, India’s place as an economic superpower in the next few decades has largely been premised on its huge ‘demographic dividend’. In other words, the bulk of the expected increase in world population to 9.7 billion by 2050 will likely be centred in India and China, which currently are the world’s most populous nations. The expanding working-age population, i.e. people in the age group of 15-64 years, is expected to witness an addition of 115 million in the next decade alone, thereby presenting a massive economic opportunity. However, there is now a growing need to have a fresh perspective on the impact that a swelling population growth could have if it is not harnessed effectively.
What will become evident in the long run is a trend towards dependent population in the ‘post’ dividend period, as birth rates begin to decline. A natural corollary of this phenomenon will be a pressurised industrial growth. Earlier debates focused on the need to undertake pro-business policies to create jobs. However, job creation alone is not sufficient as a steeper addition to the labour pool may offset any increases in job availability. This, coupled with advancement in robotics and automation, can make jobs redundant, increase unemployment and hinder overall growth. Hence, there is a need to supplement job creation with upgrade of business trainings and re-skilling to achieve sustainable economic growth. At the same time, an increase in ‘dependent’ population can also be converted into an opportunity—for there will be greater need for caregivers, a bulk of which may not be automated.
Automation can provide added opportunities to the economy through mitigation of side jobs and increased scope for transfer of human capabilities to more advanced processes. As digital infrastructure and automation gain traction, Indian growth story will be redefined by its services sector. As per NASSCOM estimates, IT alone will add close to 3 million new jobs by 2025, which already boasts of a total employee base of 3.9 million. Given this, promoting entrepreneurship and upskilling the existing workforce will become crucial for growth. Necessary lessons can be learnt from Singapore, Japan and Australia where gains from digitisation have played out to some extent. Japan, in particular, has gained substantially from the innovative use of digital technologies to increase productivity and generate the surplus needed to sustain the economy.
As far as ageing population is concerned, the window of opportunity has been restricted to ‘early’ dividend economies like Japan and China, where the workforce is rapidly ageing. But this has become a business opportunity for younger Asian countries like India wherein they would be able to supply with workforce and skilled personnel. Further, an obvious change in consumption patterns among the young and the old present businesses an opportunity to reposition their business models to take advantage of the ‘growth clusters’ emerging across a range of sectors. The adjustment process for India can be smoothened through experiences of Japan, Taiwan and Hong Kong, which have made significant strides in the services sector.
The transition to an ageing society will clearly have implications for industry growth and economic development as preferences and lifestyles are likely to change. If planned at the right time, there are abundant opportunities that can result in profitable growth for the country. There can be an added bonus in the form of productivity enhancements as technological disruptions could change the very nature of jobs. With the underlying technological disruption and changing demographic pattern, industries across manufacturing, retail and services will need to adjust to this evolution in the consumer marketplace to survive. To reap the benefits of the ageing future, planning will have to be done and investments will have to be made today to sustain economic growth.
Lead Economist at Deloitte. Views are personal