By R Gopalan and MC Singhi
India has overtaken China as the most populous country in the World. Concerns of demographic dividend (DD) have been bothering us for quite some time. Currently, 25.3% of total population is below the age of 15 years.
The bulk of the population in the age group of 15-29 years and a part of those getting into this group soon will be actively looking for productive opportunities in the next five years. The DD will accrue only if gainful jobs are available to these people. Four broad factors would decide whether DD will become a boon or a curse.
India historically has had a low Labour Force Participation Rate (LFPR). During 2011-12, (the last employment/unemployment survey), the LFPR was 39.5%. Male and female LFPR stood at 55.6% and 22.5%, respectively. A decade later, in 2021-22, the LFPR stood at 41.2%, and 24.8% for females.
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The low rate of job seekers, despite low job opportunities or worker participation rate, continued to lead to direct unemployment. Thus, a large army of job-seekers could not be employed. In this decade, 84 million people were added as job-seekers but only 72 million of these could be employed. The incremental unemployment rate was 14.3% in 2021-22 with overall unemployment rate being 4.1% in that year. For persons in the age group of 15-29 years, the unemployment rate during that year was 12.4%.
Unemployment and LFPR in India are more structural as female participation is less than half of that of male participation. Further, education, assumed to improve employability, did not increase the LFPR and jobs. Only 51.2 % of people with education above secondary level were job seekers.
Surprisingly, the rate of unemployment was positively related to education levels. Less than 1% of job-seekers with education level up to primary were unemployed. The rate was as high as 15% for graduates and 11% for postgraduates.
By the decile class of monthly per capita expenditure, persons at bottom 40% of the decile had work participation rate (WPR) of close to 33%, while the top 20% had WPR of 42%. In case of females, WPR for the bottom 40% and the top 20% was 15% and 21%, respectively. Increasing LFPR, especially for females requires society spearheaded cultural change.
The second issue relates to reallocation of labour to more productive sectors. In 2021-22, while the average value added per person engaged as worker was Rs 3.9 lakh, it was Rs 1.6 lakh for agriculture and allied sectors, and Rs 1.5 lakh for persons engaged in hotels and restaurants. These two sectors employed nearly 47% of the total number of people engaged.
Against this, the value added per person exceeded Rs 15 lakh in professional services, public administration & defence, utilities, mining, and finance & banking. In construction and trade, where the required skill levels are low, it was Rs 2.6 lakh and Rs 3.7 lakh. In manufacturing, the value added per person was Rs 5.4 lakh.
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Despite our emphasis on manufacturing and infrastructure, the increase in employment in these sectors has not been substantial. Employment growth in manufacturing during 2011-12 to 2021-22 was a low of 0.55% against the overall employment growth of 1.42%.
Start Up India, Productivity Linked Incentive schemes and Make in India have touched the periphery only. The digital revolution, however, showed the highest employment growth during the decade, at 6.8%. Agriculture continues to be a mainstay and a fallback even now. Policies and enabling shifting of labour-intensive manufacturing to available places of abundant labour will help. By this and other means, 5-15% of people can be shifted from agriculture.
India has the highest number of self-employed persons. Thanks to agriculture and trade and crafts, 55.8% of the workers in the country are counted as self-employed, though about a third of them are helpers in household enterprises; 22% of workers are regular salaried employees and an equal number are casual workers.
Craft and related trade workers are, however, witnessing a declining trend and the decadal decline over 2011-12 to 2021-22 averaged 1.5% per annum. The average earnings of persons categorised as self-employed was Rs 1.40 lakh annually in 2021-22, which is lower than the average wages of salaried class (Rs 2.2 lakh).
The self-employed being the most significant component of the workforce, special measures are needed for them. It includes use of technology, marketing strategies, capital and credit, factoring services, soft skills, early settlement of bills, preferential treatment in public procurement and helping them to form viable platforms to orchestrate their issues. Each self-employed group will need an innovative approach.
The fourth issue relates to training and skill development for improved employability. No official statistics deal with employability of skilled persons. Enterprises carry out post degree training for its freshers. Our apprenticeship scheme has not delivered. The ministry of skill development has estimated an additional requirement of 103 million persons in different sectors for training. Nearly 50% of these persons were in the category of manufacturing, logistics and IT/ITeS.
Nearly 7 million were reportedly trained in their own crafts for better product designing and soft skills. The PM Kaushal Vikas Yojana has reportedly trained more than 11 million persons, though their reported placement, at around 20%, is not very high. It is important that skill-sets are updated, and requirements are assessed on regular basis because the life of products have considerably shortened and therefore skill sets tend to get outdated within a span of three years.
The writer is former secretary, department of economic affairs, GoI