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Context
- India has witnessed significant economic growth in the past few decades, positioning itself as a potential counterweight to China.
- The country is viewed as a key driver of the global economy in the coming decades.
Challenges Ahead:
Employment Scenario:
- India's demographic makeup skews young, with a median age of around 28 years.
- The low dependency ratio, with 100 workers for every 40 dependents, presents both opportunities and challenges.
Demographic Dividend:
- India's large labor pool, coupled with an annual addition of around 10 million new workers, is seen as a boon.
- However, it also poses a challenge in effectively matching these workers to productive jobs.
Complexities of India's Labor Market:
Double-Edged Sword:
- The demographic dividend offers a short window of opportunity but also poses significant challenges in job matching.
Economic Transformation:
- India's shift from agrarian to non-agrarian sectors requires skill adaptation and geographical mobility.
- Migration from rural to urban areas for non-agricultural jobs adds complexity and costs to the process.
Current State of the Labour Market:
- The labor market is exhibiting signs of failure in its functioning.
- Key indicators such as the overall unemployment rate and specific unemployment rates among different educational groups reflect this issue.
Unemployment Statistics:
- The overall unemployment rate stands at 8 percent according to Centre for Monitoring Indian Economy data.
- Disturbingly high unemployment rates are reported among graduates (29 percent) and those with secondary or higher education (18 percent).
- CMIE estimates the unemployment rate for individuals aged 20-24 years to be as high as 44 percent.
Factors Contributing to Market Constraints:
Size of Firms:
- Indian firms are comparatively smaller in terms of employment and revenue.
- Limited growth and productivity of Indian firms reduce their demand for labor.
Skill Deficit:
- Firms, especially in the white-collar service sector, face challenges in finding workers with the required skills.
- The education system in India is criticized for not adequately addressing skill development.
- Reports like ASER highlight persistent issues with student learning, affecting the labor market by restricting the pool of skilled workers.
Impact on Hiring Patterns:
Skill Mismatch:
- Inability to find workers with necessary skills leads to reluctance in hiring.
- High unemployment rates are particularly acute among graduates and high-school degree holders in the white-collar segment.
- Addressing these issues, including enhancing firm productivity, bridging skill gaps, and reforming the education system, is crucial for revitalizing the labor market and fostering sustainable economic growth.
Clash of Aspirations:
- The labor market scenario in India reflects a clash between entrepreneurial aspirations and available opportunities.
- While some firms aim for growth and expansion, many remain small-scale, limiting their competitiveness in global markets.
Entrepreneurial Landscape:
Limited Growth Aspirations:
- Many entrepreneurs and firms opt to stay small, despite potential constraints from tax or regulatory policies.
- Lack of ambition among small entrepreneurs hampers their ability to compete effectively against larger, agile competitors from countries like Vietnam, China, and Bangladesh.
Worker Aspirations:
Growing Workforce:
- India's labor force adds around 10 million new workers annually, many of whom are more educated than previous generations.
- Young workers harbor high aspirations for meaningful employment opportunities, driven by the country's macroeconomic success indicators such as GDP growth.
Way Ahead: Need for Ambitious Solutions:
Incentivizing Export-Oriented Growth:
- Encouraging private manufacturing firms to scale up ambitions can be a self-sustaining solution.
- Export-oriented policies can stimulate growth, as evidenced by larger and more productive firms engaging in export activities.
Transforming the Entrepreneurial Mindset:
Shift from Domestic Market Focus:
- Domestic market protection tends to favor smaller, less productive firms, exacerbating labor market challenges.
- Export orientation can foster a shift in entrepreneurial mindset towards growth and competitiveness.
Addressing the Clash of Aspirations:
- Tackling the clash of aspirations between workers and entrepreneurs is imperative to leverage India's demographic dividend effectively.
- Prioritizing solutions to address unemployment and underemployment should be a key focus for the next government agenda.
- Navigating this clash of aspirations is essential to prevent India's demographic dividend from turning into a demographic curse, highlighting the urgency for proactive measures to align labor market opportunities with the aspirations of its burgeoning workforce.
MUST READ ARTICLE: https://www.iasgyan.in/daily-current-affairs/global-employment-trends-for-youth-2022-report
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PRACTICE QUESTION
Q. Discuss the implications of disturbingly high unemployment rates among India's youth and propose viable strategies for addressing this critical issue.
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SOURCE: INDIAN EXPRESS
