India risks ‘squandering’ demographic dividend, says World Bank

Publishing date: 02 April 2024

Published in: Fin Times

India and its neighbours are not creating enough jobs to sustain their young populations, the World Bank has warned, putting the region’s demographic dividend at risk even as it enjoys the world’s fastest eco growth.
The bank said it expected the eco of south Asia, which incl Pakistan, Bangladesh and Sri Lanka, to grow faster than any other region over the next two years, at 6% in 2024 and 6.1% in 2025. India, which last yr overtook China to become the world’s most populous cty with 1.4bn people, is expected to have grown 7.5% in the fiscal yr to Mar, up from 7% a yr earlier. But the World Bank said the region’s employment ratio, or share of the working-age population in jobs, was falling, a sign that the ctys were failing to create enough roles for their young, growing populations.
▪️ “It’s a missed opportunity,” Franziska Ohnsorge, the World Bank’s chief economist for south Asia, told the Fin Times. “It’s almost like the demographic dividend is being squandered.” The employment ratio for south Asia was 59% last yr, the bank said, compared with 70% in other emerging mkts. It added that south Asia was “the only region where the share of working-age men who are employed fell over the past two decades”. Ohnsorge said pvt coys in sectors such as manufacturing and svcs had not grown enough to absorb workers leaving the agricultural sector.
▪️ The lack of jobs for women is another challenge. Female employment ratios in many south Asian ctys, incl India, are among the lowest in the world, at less than 40 %. A job is so much more than just an income,” Ohnsorge said. “At a macroeconomic lvl, job creation is also about social cohesion.” The issue of joblessness has become particularly fraught in India, which has struggled to create enough work despite its rapid eco growth. The youth unemployment rate was 45.4% in 2023, according to the Centre for Monitoring Indian Eco, a think-tk.
▪️ PM Narendra Modi’s opponents have sought to make joblessness a pol issue ahead of the gen election starting this month, with the rival Congress party on Sun accusing the govt of seeking to “cover it up”. Modi’s govt argues that it has taken imp steps to create jobs, incl reforms to promote manufacturing and spending heavily on infrastructure construction to boost growth. Ohnsorge said without more reforms to boost employment, such as increasing trade and easing access to land for private businesses, south Asian ctys will fail to reach their dev tgts. Modi has set a tgt for India to become a dev cty by 2047, while Bangladesh has said it wants to hit that milestone by 2041. “In a no-reform scenario, that ship has sailed,” Ohnsorge said. Bangladesh is expected to be the region’s second-fastest growing eco, at 5.6% in 2024, while Pakistan is expected to grow 1.8% after contracting during an economic crisis last year.